BRAC's Social Innovation Lab Innovation Forum #14: Addressing vulnerability through microinsurance

1. Addressing Vulnerability through Micro
Insurance?
Stories of impact and viability
BRAC,
15th July, 2013
By Rupalee Ruchismita, Director
CIRM-Design and Research Labs

2. Improving financial protection
for Preserving and Productive activities
Focus on:
- Products and Process
- Life, Health, Agriculture and Livestock
- Role of Intermediaries
- Showcasing Innovation

3. Defining the Microinsurance Space
1. MiM relies on Industry data reported under IRDA regulation (as under MI Act 2005 and under the Rural and Social
Obligations)
2. Under the IRDA regulations, reported data includes products served to RED PLUS GREEN
3. Hence, Microinsurance Maps also presents data for RED PLUS GREEN
4. Ideally it should report for products offered to GREEN
* LIG: Low Income Groups
* IRDA: Insurance Regulatory and Development Authority
1. MiM relies on Industry data reported under IRDA regulation (as under MI Act 2005 and under the Rural and Social
Obligations)
2. Under the IRDA regulations, reported data includes products served to RED PLUS GREEN
3. Hence, Microinsurance Maps also presents data for RED PLUS GREEN
4. Ideally it should report for products offered to GREEN
* LIG: Low Income Groups
* IRDA: Insurance Regulatory and Development Authority

4. State and Center supported health insurance schemes have
contributed to the portfolio increase
Has the insurance industry discovered a sustainable business case for
the rural and social sector?
Tracking impact of Rural and Social Sector Targets

5. • Life Insurers: The rural portfolio has grown steadily exceeding
regulatory targets!
• Whereas, the MI portfolio remains insignificant
Need for revisiting MI Act 2005?
Tracking impact of Micro Insurance Act, 2005

6. • General Insurance: Sudden growth in overall rural and social
business from 2008-09 to 2009-10 even though number of
insurance companies has remained
• The rural portfolio has grown steadily exceeding regulatory
targets!
Tracking impact of Rural and Social Sector Targets

7. • MI Act,2005: Maximum MI products registered in 2007-08
• Sharp fall in Life MI product registration since then!
Tracking impact of Micro Insurance Act, 2005

8. Facilitative Infrastructure

9. Microinsurance Map: Product Comparision Table

10. Microinsurance Map: NAIS vs WBCIS Schemes

11. Microinsurance Map: NAIS across States

12. RSBY Scheme: State-wise outreach

13. Microinsurance Map: Agriculture Insurance Company of
India

14. Market Potential: No. of rain gauges state-
wise

15. Microinsurance Map: MFI Snapshot

16. Microinsurance Map: MFI (Grameen Koota) across
states

17. Learning from the States
.
Ruchismita and Churchill,, 2012

18. Mass health insurance
The Story of scale
Features
Name of the Scheme
Yeshasvini Co-operative
Farmers Health care
Scheme (Karnataka) 2003
Aarogyasri Community
Health Insurance scheme
(AP) 2007
Rashtriya Swasthya Bima
Yojana (RSBY) 2008
Kalaignar's Insurance
Scheme for Life saving
Treatments (TN) 2009
Unit of enrolment (families,
individuals, etc.)
Individuals Families
Sources of Funds
Contribution: Beneficiary
58% + Government 42% (in
2009-10)
by State
$0.6 by beneficiary
+75% by Centre and
25% by State
government
by State
Premium Rate in 2009-10 $3.3 per person $6 per family Avg. $12 per family $10 per family
Maximum insurance cover $4444 per person
$3333 per family with
additional buffer of $1111
$666 per family
$2222 over 4 years, per
family
Commonest procedures
Cardiac, ENT, General
Surgery, Paediatric,
Obstetric, Ophthalmic
procedures.
Oncology, CVS, Polytrauma,
Genitourinary surgeries,
General surgeries
Medical Treatment,
Ophthalmic
procedures, Neurology,
Infectious Diseases,
Gynae & Obstetric
procedures.
Orthopaedic, Oncology,
urology, ENT,
Cardiology,
Hysterectomy and
Ophthalmology

19. Mass health insurance
The Story of scale
Management
Name of the
Scheme
Yeshasvini Co-operative
Farmers Scheme
Aarogyasri
Rashtriya Swasthya Bima
Yogna (RSBY)
Kalaignar's for Life saving
Treatments (TN)
IT tools used
Electronic claims submission
software in all network
hospitals, linked to TPA's
systems.
Comprehensive MIS,,
electronic operation and
payments, Digital signature
for all users, electronic claims
process including
requirement for patient
photographs pre and post
procedure et
Photos and biometric data
of families collected on
smart chip at enrolment,
Smart cards enable offline
authorization and batch
transfer of data
Web based pre authorization
and claim submission Digital
smart card to identify the
beneficiary. Web cams for co-
ordination and monitoring of
Liaison Officers in network
hospitals
Cost containment
measures
Scrutiny and second opinion
are obtained before giving
Preauthorization.
Verification of High-end
surgeries, Scrutiny by TPA as
well CA of Trust
Prior authorization, package
rates, MIS, monitoring
Surveillance and medical
vigilance teams,
Aarogyamithras in hospitals
Smart card for identity
verification and prior
authorisation closed ended
package rates for common
procedures. In-depth
analysis of claim
experience
Pre-authorization, screening
through health camps,
package cost, In-depth analysis
of claims, discharge planning
with LO's
Utilization rate Avg Claims ration is 157%
Claims frequency is about
1.6% perfamily, claim ratio is
between 69.6% to 128.3%
(89%)
Avg Claim ratio was about
80% in 2009-10
80% Claims Ratio

20. Mass health insurance
The Story of scale
Performance
Name of the Scheme
Yeshasvini Co-
operative Farmers
Scheme
Aarogyasri
Rashtriya Swasthya Bima
Yogna (RSBY)
Kalaignar's for Life saving
Treatments (TN)
Avg. Cost per
Hospitalization
8240 27848 4262 33720
Number of
Hospitalization per
1000 person
22 5 25 4
Utilization rate
Avg Claims ratio is
157%
Claims frequency is about
1.6% perfamily, claim ratio
is between 69.6% to 128.3%
(89%)
Avg Claim ratio was about
80% in 2009-10
80% Claims Ratio

21. RSBY
Key characteristics
• RSBY is the Indian Central Government’s in-patient health insurance
scheme that covers secondary care for Below Poverty Line families
launched in 2008
• Premiums range from USD 7-15 for a sum assured of USD 666 per
family
• Enrolment occurs in camps, where beneficiaries are issued a smart
card and a policy. Customers pay Rs30 for the policy
• Premium of USD 222 million has been paid by the Government, with
insurers paying out close to USD 200 million for 1.5 Million
hospitalization cases
• Phased roll out of RSBY's impact on KPIs
• Conversion ratio, Hospitalisation ratio,Total Expense Ratio
• Followed it with a out-of pocket health expenditure with difference in
difference approach with matching-Used NSSO data.
3

22. RSBY
Key characteristics: Outreach
• As of May 2011, RSBY has reached
• 18 million smart cards covering approximately 47 million individuals
• Since inception in 2008,
• The scheme has been launched in 229 districts in 22 states,
• With 47 districts having completed two years of operation
• Average amount claimed per year the hospitalized: USD 100
• By Feb , 2012,RSBY reached
27 million households in 24 states (396 districts) and 32
million

23. Spreading the risk through partnership :
Multiple insurance and TPA partners
• Insurers:
• Eight insurers bid on year 1,
with three public insurers.
• Out of 8 insurers operating,
ICICI Lombard, New India
and Oriental account for
over 75% of the districts
covered.
• TPAs:
• Sixteen TPAs with FINO
having the largest followed
by E-Meditek and MD India.
1 17
91
58
31
3
10
18
Apollo Munich
Cholamandalam MS GIC
ICICI Lombard
New India Assurance Co. Ltd.
Oriental Insurance Company Ltd.
Royal Sundaram
Tata AIG
United India Insurance

24. Localised pricing:
District specific premiums through bidding
• Insurers:
• Eight insurers bid in Year
1, with three public
insurers.
• Out of 8 insurers
operating, ICICI Lombard,
New India and Oriental
account for over 75% of
the districts covered.
• TPAs:
• Sixteen TPAs with FINO
having the largest
followed by E-Meditek and
MD India.
516
623
554
626
596
537
0 200 400 600
Premium(Rs.)
RoyalSundaram
OrientalInsuranceCompanyLtd.
NewIndiaAssuranceCo. Ltd.
ICICILombard
Cholamandalam MS GeneralIns.Co. Ltd.
ApolloMunich
5

25. Examining RSBY
Key Performance Indicators against Social Demographic realities
as on May 2011
CIRM uses:
•RSBY: Year 1 and Year 2 (as of May, 2011)
• District level administrative data
• Client level utilisation data
•Secondary Socio Demographic:
• National Sample Survey and
• District Level Household Survey
25

26. Examining RSBY
Conversion Ratio:
Households enrolled into RSBY against total BPL families per district
• Modest Conversion ratio
at 51.2% in Year 1
• Significant variation across
states and districts
• Ranges from over 80% in
Tripura and Himachal
Pradesh to less than 35% in
Assam, Jharkhand, and
Tamil Nadu
Factors like poor habitation to
road ratio in rural regions
and high commuter and
seasonal migrants could be
the cause in urban regions
68
46
53
87
33
39
56
79
54
47
44
47
35
60
83
56
50
53
68
56
11
0 20 40 60 80
Average Conversion Ratio (%)
West Bengal
Uttarakhand
U.P.
Tripura
Tamil Nadu
Punjab
Orissa
Nagaland
Meghalaya
Maharashtra
Kerala
Karnataka
Jharkhand
Haryana
HP
Gujarat
Goa
Chhattisgarh
Chandigarh
Bihar
Assam

27. Examining RSBY
Conversion Ratio: What affects it
Correlation with socio demographic and programmatic factors
• Higher Conversion correlated to:
• Literacy and education rates in the
district: While the ratio is 45%
amongst districts in the lower
percentile by literacy, this rises to 56%
amongst the more educated districts
• More males than females
• Year 1 male to female conversion is
169% not correlated to district sex
ratio
• Choice of TPA matters more than
insurer: Management not capital
• Significant variation in conversion
rates, implying “Ability and effort of
TPA accounts for part of the
variation in conversion ratios” 16
3
7
11
13
4
3
17
2
1
91
1
10
34
1
7
0 20 40 60 80 100
TPAs in Round 1
Vipul Med
TTK
Smartchip
Safeway
Medsave
Medicare
Mediassist
MD India
Kyros
Genins India
Fino
Family Health Plan
Eagle
E-Meditek
Dedicated Health Service
Alankit

28. Examining RSBY
Incidence rate: Recommendations
• Conversion Ratios decrease with the size of the district :
• May be due to increased difficulty for the TPA to manage a larger district
• Wait times may have been higher in more crowded camps
• Bigger districts are most often geographically more spread out
There is a case for :
• Subdividing larger districts
• Allowing more enrolment time and
• Greater incentives to TPAs and Insurers to increase conversion rates

29. Examining RSBY
Hospitalisation ratio or Incidence rate
• Hospitalization or Incidence rate is
2.4% in Year 1, implying low
utilisation:
• Opposed to 2.3% historically for all income
groups and without insurance
• Significant variation across states and
districts: Ranging from 5.2% in Kerala to
less than 0.1% in Assam and Chandigarh
• Variation high between insurers:
• Not statistically significant,
Suggesting other socio demographic
factors driving variation in Incidence Rate
1.2
1.4
3.5
2.7
2.6
.99
.69
2.8
.63
1.8
5.2
.93
1.1
2.8
1.4
4.3
.11
3.6
.92
.077
1.4
.094
0 1 2 3 4 5
Hospitalization Ratio - Year 1 (%)
West Bengal
Uttarakhand
U.P.
Tripura
Tamil Nadu
Punjab
Orissa
Nagaland
Meghalaya
Maharashtra
Kerala
Karnataka
Jharkhand
Haryana
HP
Gujarat
Goa
Delhi
Chhattisgarh
Chandigarh
Bihar
Assam

30. Examining RSBY
Hospitalisation ratio or Incidence rate: What affects it
Incidence rate is correlated to:
• TPAs matter
• Higher Literacy levels in a district imply
greater incidence rate
• Greater percentage of private hospitals
imply higher Incidence rate: This may be
due to:
• The perceived better quality as well as actual
availability of doctors and consumables in
private facilities
•Gender:
• A greater percentage of enrolled women are
using RSBY services
•Use of good primary care appears to
reduce hospitalization rate
• There is a 0.02% decrease in hospitalization in a
district if there is a 1% increase in per capita
Primary Care usage
2.3
4.9
1.4
1.9
2.5
.93
1.3
3.4
1.6
1
3.2
.63
2
1.3
6.5
2.4
0 2 4 6
Hospitalization Ratio - Year 1 (%)
VipulMed
TTK
Smartchip
Safeway
Medsave
Medicare
Mediassist
MD India
Kyros
Genins India
Fino
Family Health Plan
Eagle
E-Meditek
Dedicated HealthService
Alankit

31. Examining RSBY
Incidence rate: Recommendations
There is an encouraging case for :
•Governments to improve primary care facilities as it contributes to longer
term sustainability of inpatient insurance programmes
•Insurance programme seems to address household level neglect of
women health needs
•Greater incentives to public hospitals to improve perceived perception
among users

32. Examining RSBY
Incentive alignment for insurers
• Year 1 was profitable for insurers:
• Average burn-out ratio of 77% (Claims of 49%,
smart card costs of 17%, service tax of 11%)
• 23% of the total premium remained with the
insurer
32 78
50
85
65
47
57
37
136
39
64
100
56
64
82
78
128
28
116
48
33
70
28
0 50 100 150
Burn Out Ratio - Year 1 (%)
West Bengal
Uttarakhand
U.P.
Tripura
Tamil Nadu
Punjab
Orissa
Nagaland
Meghalaya
Maharashtra
Kerala
Karnataka
Jharkhand
Haryana
HP
Gujarat
Goa
Delhi
Chhattisgarh
Chandigarh
Bihar
Assam
• There is however large variations
between state and districts and
between insurers
• Districts with burn-out ratio of more than
100% have marginally lower premium
(USD 12vsUSD 13) but considerably
higher hospitalization rates (5.6%
compared to 1.6%)

33. RSBY :

34. Stakeholder Value: Solutions for Policy
Makers
Use
• Monitor impact of regulation on providers and products
Benefit
• Create industry benchmarks on product, process and
service quality
• Identify early trends (sectors trends and also for specific
providers and risk categories) to respond accordingly
• Make proactive regulation and policy for underserved
regions and track its impact on the market

35. Stakeholder Value: Solutions for Insurers
Use
• Disaggregated region specific risk data to develop actuarially sound
product pricing
• Market insight for development of outreach strategies – competitor
and profitability analysis, exposure to innovative product and
processes
Benefit
• Public platform to market products, find potential intermediaries, new
relations (IT providers, TPAs)
• Plan market entry based on a range of factors- geographical,
distribution models, risk specific and competitor based analysis
• Market assessment – Updated about ‘sector news’; Trend analyses
(over years, regions, risk type and market players)
• Own portfolio monitoring, analysis and tracking

36. Stakeholder Value: Solutions for
Intermediaries (Co-ops, NGOs, MFI)
Use
• Reports to compare pricing and features of own product
by various criteria (region, risk type and insurer, premium
and claims)
Benefit
• Use sector best practices to measure own and partner’s
(insurer) service quality
• Improve own visibility to find partners
• Assess insurers based on products and performance

37. Centre for Insurance and Risk Management
• Established in 2006 as a specialized design and research centre at the
Institute of Financial Management and Research (IFMR)
• Committed to undertaking product design and action research to
facilitate greater market outreach of risk management solutions among
vulnerable households
Focus areas
• Product Innovation
 Action Research
Product Development
• Market Making
Data Warehousing
Training
Policy Advocacy
Verticals
• Agriculture
• Livestock
• Health
• Catastrophe
• Life
• Life term Savings/Annuities
Safety Nets for All

38. Data Sources
Market Data
• Regulator (IRDA)
• Industry Associations
• Insurers - public and private, life and general
• Mutual and intermediaries - MFIs, Cooperatives, NGOs, input and output
suppliers (on going)
Risk data on regional basis
• Indian Meteorological Department, Central Water Commission, Actuaries
Association of India, Govt. Dept. of Agriculture, National Remote Sensing Centre,
Agriculture Universities
• Veterinary Universities

41. rupalee.ruchismita@cirm.in
Thank You

42. Next Steps
• Technical Content
•
• Event microsite and Publications
• Event Report
• Photos and Videos
• Video Interviews
Keeping the discussion going:
• Group mail
• Blog, Linkedin, Facebook
Safety Nets for All

43. Next Steps
Technical Content
• Event microsite
Safety Nets for All

44. Technical content

45. Discussions
Email group (till September end) Transitioning to Blog
Pre event

46. Discussions
• Blog

47. Discussions: Blog

48. Discussions: Blog Field visit

49. Platforms: Linkedin and Facebook