Community Health Insurance Network CHIN
Vol 1 Issue 3 Mar 2005
This is the third instalment of this newsletter. It is a pleasure publishing this newsletter, especially considering some of the positive feedback that I have received. In fact some of the readers have been wondering why they do not receive it more frequently. Unfortunately I do not have enough material or time to write more often. This would only be possible if youll the readers can share some of your experiences, your doubts and your views.
This version of the newsletter is mainly dedicated to the topic of IRDA regulation. We also share some of the latest developments in our country regarding health insurance / community health insurance. I hope that all of you find it useful. Would appreciate your responses.
Dr. N. Devadasan
Round Table on Micro-insurance Regulation
Hyderabad, February 19th, 2005
Organisors FICCI, IRDA
All insurance activities in our country are regulated by the Insurance Regulatory and Development Authority. This is an autonomous body set up by the government of India and is located in Hyderabad. For those interested, further details can be obtained from their website www.irdaindia.org/
The main objective of the IRDA is to protect the customers (that is you and me) from insurance companies. So they check the policies issued by companies to ensure that it is designed and priced properly. The IRDA has been targeting its activities mainly to formal insurance companies. However, they realised that there are many NGOs and other organisations that are providing insurance products to local communities. In order to explore how these organisations can come under regulations, the IRDA released a discussion paper in August 2004 on a proposed regulation for micro insurance. This paper is available at the CHIN website www.comhealthins.org
The main issues raised by the IRDA in this paper were:
q All organisations involved with micro-insurance should only sell policies of formal insurance companies. Any product not linked with a formal insurance company would be deemed illegal.
q Insurance companies will be asked to help NGOs / SHGs to develop their micro-insurance activities. This help would be in the form of training, help in marketing and also sharing the financial costs. Thus insurance companies would be expected to share their agents commission with the NGOs / SHGs.
q Definite packages for micro-insurance were developed by the IRDA and it was expected that only these policies would be sold.
Various NGOs and academicians responded to this concept paper and to consolidate this feedback, a half a day workshop was held at Hyderabad on the 19th of February. Those invited included micro-insurance organisations, academicians, government and insurance company representatives. More than 65 representatives attended the meeting. There were a total of 5 presentations followed by discussions from the floor. Mr TK Banerjee, Member IRDA opened the meeting with a special address. He explained the position of the IRDA, mainly that given the heterogeneous nature of the micro insurance groups in India, it was necessary to regulate them. While many are doing good work, some others are abusing the freedom. Hence it is necessary to link them with existing insurance companies. This way the insurance companies would be able to keep an eye on these micro insurance groups. To enable this interaction, the IRDA has removed some of the hurdles, for example there is no need to any training for the micro-insurance groups. Once recruited by the insurance companies, they would automatically become the company agents for micro insurance products. He welcomed any feedback on the concept paper. One primary disclosure made by Mr Banerjee was that community health insurance programmes will not currently come under the ambit of IRDA regulation. Apparently the main reason for this was the lack of clarity on how to regulate health insurance products. So this is a temporary reprieve for all of us who are implementing CHIs.
Prof David Dror from Erasmus University then made a presentation. While praising the IRDA for being one of the first regulators to bring micro-insurance under regulation, he cautioned that limiting all micro-insurance products to the linked model would be very restrictive. Secondly he exhorted the IRDA to ensure that there was adequate data collection so that there was informed decision making. And finally he requested the IRDA not to regulate the micro-insurance products; just the broad processes. This would give the insurance companies and the micro-insurance groups the flexibility to develop their own products.
Dennis Garand, an acturial from Canada then shared various country experiences. He stated how usually micro-insurance programmes are not regulated as they are small and varied in design and complexity. The main risk is for the community who may be cheated by the micro-insurance group by not meeting the promises and giving the benefits. In his experience, there is a strong need for training the micro-insurance groups in managing insurance programme, which is very different from managing micro-credit. Along with this there is a need for sound administrative procedures. He then shared some of the key indicators of success of a micro insurance programme. These include high coverage, high renewal rates, high claims ratio while low administrative load. And finally the community is satisfied with the product. He concluded stating that micro-insurance is technically complicated and requires technical support to make it successful.
Ms Smita Agarwal from ICICI Lombard General Insurance company gave a presentation about their insurance products that could be used by micro-insurance groups.
The final speaker Dr. N. Devadasan made a presentation about existing CHIs in India and the lessons that can be learnt from them. The main ones are that in the flurry of numbers one shouldnt forget that micro-insurance is mainly targeted at the weaker sections of society. So sustainability, coverage, etc should be seen in that perspective. The fact that there are more than 30 CHIs in the country serving the poorer sections of society itself is a measure of the viability of this strategy. And if they have to be regulated, then have a separate strategy / cell rather than clubbing them with the commercial companies. This is because one is dealing with service organisations, and not profit making companies. He concluded that CHI is much more than economics, it is about people.
During the discussion, various issues were raised. Some of them are as follows:
q The IRDA prefers the linked model
q The IRDA is open to remove service tax from micro-insurance products.
q The IRDA cannot regulate providers as it is a state subject and comes under the purview of the state governments
q The IRDA should increase the administrative compensation to the micro-insurance groups as they shoulder most of the administrative load
The meeting concluded with the recognition that there are many micro-insurance programmes in the country. Because they are so varied, it will be difficult to regulate them. Currently the IRDA will prefer all these programmes to adopt the linked model, though it should consider other designs also. Community health insurance programmes will not be regulated currently.
All the presentations are available at the website www.comhealthins.org for your information.
Useful links
q IRDA site www.irdaindia.org
This site has the latest rules and also free online copies of the IRDA journal (current + archives).
q EU-India www.microhealthinsurance-india.org
This is a new site that gives information about the research activities of Erasmus University and Cologne University on Indian CHIs.
q And of course our own site
This is being updated with new information and links. Please do visit it. We would of course appreciate any feedback.
New ventures in health insurance in India.
q Punjab – A proposed health insurance cover for women in the reproductive age group. This will include cover deliveries also.
q Tamil Nadu A proposed health insurance cover for the Tsunami victims.
q Assam Health insurance cover for the state government staff
q Karnataka Health insurance for the informal sector in Anekal taluk. A collaboration between Narayana Hrudalaya, ICICI Lombard, Karuna Trust and Biocon.
Inviting
All you practitioners of CHI, please do write about your experiences. This forum is meant to share so that others can learn. Let us demystify CHI.
Concluding with many thanks and hoping to hear from all of you, either directly or via the egroup.
Dr. N. Devadasan.
March 2005.