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The Value of Bundling Microfinance and Microinsurance Preliminary Assessment

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Administrative data on insurance roll out, matched with baseline ... to those for whom we have baseline data, and look at the stock as of December 07 ... – PowerPoint PPT presentation

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Title: The Value of Bundling Microfinance and Microinsurance Preliminary Assessment


1
The Value of Bundling Microfinance and
Microinsurance Preliminary Assessment
  • Esther Duflo, Abhijit Banerjee,
  • Rachel Glennerster
  • A joint project between
  • CMF, SKS, and J-PAL

SKS Client in Gulbarga District
2
Introduction
  • The poor are facing substantial un-insured risk.
  • Health is one of them Catastrophic health
    episode can have devastating financial
    consequences
  • There is thus a need for health insurance for the
    poor
  • The challenge is to find effective ways to offer
    health insurance on a large scale.

Government Hospital in Jewargi, Gulbarga District
3
Bundling microfinance and health insurance
  • Several MFI are now experimenting with products
    that bundle health insurance and microfinance
  • Potential
  • Microfinance organizations often operate on a
    large scale large clientele
  • Reduce administrative costs since they can be
    shared with the cost of providing credit
  • Mitigate adverse selection problems because
    clients join the organization to get a loan, not
    to get insurance

Villager waiting for medical services in a Public
Health Clinic (PHC)
4
Potential Risks
  • If there is no demand for health insurance, this
    may affect the client base for the main product
  • If demand for health insurance is concentrated
    amongst the sickest, the adverse selection may
    spread to the client pool (selective drop out
    select clients join)
  • If microfinance clients are not aware of the
    products, they may not use it.

Child at PHC, Gulbarga District
5
Evaluation of the SKS catastrophic health
insurance project
  • Intervention Health insurance mandatory with
    every new loan
  • Goal of the SKS program Insure MF clients and
    their households against risks of catastrophic
    health shocks
  • Goal of the research program
  • Evaluate microfinance as a channel for delivery
    of insurance services
  • Evaluate impact of providing health insurance on
    health and financial status of rural households
    and
  • In this talk, we will focus on two points
  • The need for insurance
  • Operational challenge does insurance lead to
    drop out and adverse selection?

SKS client in Gulbarga District
6
Outline
  • Description of the Health insurance product and
    research design
  • The need for insurance baseline findings
  • Does insurance affect SKS client base
  • Renewal Rates
  • Characteristics of those who renew

SKS client in Gulbarga District
7
Details of the insurance product
  • Offered by ICICI Lombard, nationwide insurance
    company
  • Catastrophic health insurance Covers
    hospitalizations and surgeries, accidents, and
    maternity (covers maternity and pre-existing
    conditions from day 1), up to Rs 20,000
  • Insurance cover available for member, spouse,
    and up to two children
  • Premium varies between Rs 375 and Rs 525
    depending on the number of family members covered
  • Claims processed by SKS and insurer
  • Some facilities are networked, and are cashless
  • In other hospitals, client is reimbursed

SKS clients in Gulbarga District
8
The roll out
  • SKS piloted the insurance product in 2 districts
    in Karnataka Bidar and Gulbarga
  • Loan officers and the branch staff conducted
    meetings to explain product, to show videos, etc.
  • Members paid premiums and received coverage at
    the time of signing up for a new loan
  • Pre-tested product in February 07. Roll out of
    product started in May (in and outside the
    research area)
  • Currently over 50,000 lives insured

SKS clients in Gulbarga District
9
Area Background
  • Gulbarga Bidar Districts
  • Total Population 3.35 million (Gulbarga) 1.58
    million (Bidar)
  • Amongst the poorest and least developed districts
    of Karnataka
  • Montly consumption per capita Rs 706

Out of 27 Districts in Karnataka
SKS Client in Gulbarga District
10
Research Design
  • SKS selected 201 villages in Bidar and Gulbarga
    districts.
  • Randomized phase in We selected
  • 100 villages, at random, where insurance is
    provided in phase one,
  • 101 control villages where insurance will not be
    provided until the end of the study period (it
    will be offered at that point)
  • Data will be collected in treatment and control
    villages during the study period (2 years total,
    a minimum of one year for each client since they
    obtained the change to sign up for insurance)

Micro-entrepreneur in Gulbarga
11
Data collection
  • Baseline survey survey of 6000 households (SKS
    clients) during Jan-March 2007 in 201 villages
  • Economic welfare
  • Health expenditure
  • Health events
  • Business activities
  • Administrative data on insurance roll out,
    matched with baseline
  • A continuous health survey to track health events
    among households in the study villages and usage
    of insurance will be conducted
  • End survey to be conducted in 2008-2009 on the
    same clients.

SKS Client in Gulbarga District
12
Outline
  • Description of the Health insurance product and
    research design
  • The need for insurance baseline findings
  • Does insurance affect SKS client base
  • Renewal Rates
  • Characteristics of those who renew

Government Hospital in Jewargi, Gulbarga District
13
The need for insurance
  • Baseline results indicate that
  • 14 of household were ever offered health
    insurance Only 0.6 have health insurance
  • Health shocks are frequent

Villager waiting for medical services in a Public
Health Clinic (PHC)
14
SKS Client in Gulbarga District
15
Preliminary Results
  • Baseline results indicate that
  • Health shock are expensive a single serious)
    episode costs Rs 1,900 on average (monthly per
    capita expenditure in sample Rs 708).
  • Distribution of these costs is very skewed 5 of
    the households spend 87 of the money
  • Household spend about 7 of their budget on
    institutional care, on average, 19 of their
    budget on health
  • They are most often financed by loans (43 of the
    cases) and these loans are often taken from money
    lenders (33 of those loans)

Child at PHC, Gulbarga District
16
SKS client in Gulbarga District
17
SKS client in Gulbarga District
18
Outline
  • Description of the Health insurance product and
    research design
  • The need for insurance baseline findings
  • Does insurance affect SKS client base
  • Renewal Rates
  • Characteristics of those who renew

SKS clients in Gulbarga District
19
Insurance Take up
  • Health insurance is bundled with loan product
  • Number of clients
  • On the plus side this allows to serve a large
    number of clients quickly
  • On the minus side if people do not want the
    insurance, this will negatively impact SKS
    lending business.
  • Selection of clients
  • On the plus side demand for credit minimizes
    adverse selection
  • On the minus side demand for health insurance
    may lead to adverse selection on the client side.

SKS clients in Gulbarga District
20
Results Impacts on the bottom line?
  • Insurance is mandatory at the renewal of the
    second loan
  • Fraction of clients eligible for a second loan
    and who took one up (June-August 2007)
  • Treatment centers 96
  • Comparison centers 95
  • If we limit to those for whom we have baseline
    data, and look at the stock as of December 07
  • Treatment centers 94
  • Comparison centers 96
  • Not significantly different from each other
  • No evidence that insurance discourages renewal

Micro-entrepreneur in Gulbarga
21
Results Adverse Selection?
  • Is the mix of clients adversely affected in
    villages where insurance is offered?
  • Illustration Renewal rate

SKS Client in Gulbarga District
22
Results
  • No difference for
  • Economic welfare (consumption per capita)
  • Education
  • Basic demographics
  • For health variables, no difference in
  • Occurrence of major health events last year
  • Total health spending last year
  • Chronic illness and disability
  • Self reported health status
  • Conditions in the last months

Government Hospital in Jewargi, Gulbarga Districtc
23
Conclusion
  • There is a great need for catastrophic health
    insurance
  • Bundling health insurance with microcredit
    potentially allows
  • Dealing in large number
  • Mitigating health insurance
  • In practice, our research so far shows that
    health insurance does not lead to a drop in the
    number of clients or in adverse changes in their
    composition.
  • Bundling insurance and microcredit thus appears
    extremely promising. Next step is to check that
    it is used, and that it mitigates adverse
    consequences of health events (in terms of
    health welfare business activities)

Villager waiting for medical services in a Public
Health Clinic (PHC)
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