The Large-scale Impact of Small-scale Financing Innovation on the Healthcare in India

Healthcare is BIG business, and as costs skyrocket worldwide, many are being left behind. While current healthcare spending in India exceeds Rs. 5 lakh crore, according to estimates by Technopak Healthcare, healthcare spending in India is due to reach $323 billion in 2023.  Indian’s pay on average 60% to 70% of healthcare costs out of pocket andthe insurance market is growing steadily, revenue from insurance premiums in India still only amounts to about Rs. 15,000 crore. Though healthcare costs in India pale in comparison to many other countries, they are still prohibitive for much of the 90% of Indians excluded from insurance coverage. Healthcare costs remains one of the primary forces keeping India’s economically fragile population stuck in a vicious cycle of poverty. Without access to protective financial services, poor Indian families have no means to mitigate the risk of even minor health issues, and illness of a primary earner can easily set a family further onto a path of debt and poverty.

Microinsurance Empowers Underserved Communities to ‘Own’ their Health

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In the final post of our healthcare series I explore the advent of microinsurance schemes in India which are, in many ways, changing the business of healthcare for underserved communities (for more on healthcare innovation in India
read blog 1, 2, and 3 of the series). With a variety of low-cost protective products and services, microinsurance offers marginalized communities, otherwise excluded from such financial protection, the opportunity to mitigate risk and protect their families from unforeseen events like health, weather, and even death of a primary earner. Products included in many microinsurance schemes include community health funds, mutual health schemes, rural health insurance, and revolving drug funds.

Though the social potential of microinsurance is quite clear, the financial possibilities of the microinsurance model is equally impressive According to a 2009 UNDP report, the potential size of the Indian microinsurance market is estimated at INR 62-84 billion as the sheer volume of families that could benefit from such a model is more than enough to justify the small monetary transactions and tight margins of such a model. While the innovations I’ve explored in the last posts are improving access to healthcare for India’s underserved populations, without innovations in financing many of these communities cannot afford to benefit from new technologies and improved healthcare delivery. In this post I will highlight some of the innovative initiatives in microinsurance that are creating change and making money by empowering India’s poor communities to take control of their own health and their own lives.

The Indian Government: A Key Innovator in Microinsurance Innovation

In the arena of microinsurance, the Government of India stands out as a key innovator. One of the first microinsurance schemes in India, Rashtriya Swasthya Bima Yojana (RSBY) was launched in April of 2008 by the Ministry of Labour and Employment to provide high quality, affordable health protection to India’s most underserved populations. Under the RSBY scheme, insurance premiums are paid in full by the State and Central
Government, and with a Rs. 30 registration fee, low-income beneficiaries and their families can avail cashless health benefits at network enrolled public and private hospitals across the country. Furthering the RSBY model, Yeshasvini Cooperative Farmer’s Healthcare Scheme (YCFHCS), provides affordable health insurance to farmers across Karnataka, many of whom live at the whims of weather, money-lenders, and fluctuating crop prices. Through YCFHCS, any farmer registered with one of Karnataka’s State recognized cooperatives is eligible to receive comprehensive insurance coverage for a nominal annual premium of Rs. 210. By piggybacking on the existing cooperative infrastructure, YCFHCS can effectively and efficiently market and sell affordable insurance products to vulnerable farmer communities across the State. A beneficiary funded scheme, YCFHCS has taken the RSBY scheme to a more sustainable end, creating value for, and empowering their beneficiaries to “own” their own health.

Although government-sponsored schemes have had amazing success in achieving coverage, there has been some question about their lack of emphasis on client education, delivery mechanism, as well as long-term sustainability.  As we have seen with other disruptive healthcare innovation, providing low-cost, high quality products and services is not always enough to ensure adoption and long-term impact, and microinsurance is no exception. Education, awareness building, and technical support to ensure community buy-in emerge as critical components of effective microinsurance schemes.

Creating an Ecosystem of Support to give Microinsurance a Macro-Impact

Micro Insurance Academy (MIA) is a one such organization that has taken on the challenge of building an ecosystem of support to help ensure the success microinsurance schemes. A non-profit organization, Micro Insurance Academy helps vulnerable communities across India design, implement, and scale their own microinsurance schemes. Because
MIA often works with communities that have NEVER been insured, education and awareness form a key component of their offering. MIA provides technical expertise and guidance, helping participants learn to assess risk and use data to calculate benefit options and premiums for a variety of insurance products. Once the community has identified an insurance package most aligned with their needs, MIA trains the community to operate the scheme from end to end, helping set up a claims committee, appoint an insurance coordinator, select community members to conduct awareness campaigns, as well as find local support partners. In addition to working at the grassroots level to co-create “pro-poor insurance schemes” with the community, MIA also partners with other local institutions to serve as microinsurance resource centers that support underserved communities as they learn to navigate the complexities of microinsurance.

Microinsurance has immense potential for both social as well as financial impact, but a strong ecosystem of support is required to help low-income communities absorb and benefit from these schemes. The government has done much to set the foundation for this ecosystem, but continued efforts to shift mindsets around health and risk are required. Microinsurance can empower communities, making them less risk averse and putting control back into their hands, but education, awareness, and technical support and guidance will be critical to ensure this success.

As we have explored over the last few posts, India has made great strides in innovating for affordable healthcare, but the extend of India’s frugal innovation is not limited to this space.  In the next installment of our Friday Reads posts, I will be looking at how India is applying frugal innovation to the area of nutrition, tackling the challenge from multiple angles including maternal and pre-natal health, agriculture and food security, fortification and food treatment, as well as education and awareness.  Over the next few posts we will meet several organizations at the forefront of this challenge and explore their biggest challenges and greatest victories in the fight against malnutrition.

Stay tuned!

 About the Author: Research & Project Manager at Innovation Alchemy, Hannah Rosenfeld explores the intersection of design and social impact & supports entrepreneurs in thoughtfully crafting products and services to transform under served communities.

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