Microinsurance: Breaking through Demand Side Barriers to Reach the World’s Uninsured

Financial catastrophe, backsliding into poverty, or even failing to seek care until it’s too late- these are just a few of the enormous risks medical expenses create for the world’s poor.  There is a long history of the private sector addressing financial barriers for individuals through micro insurance, or targeting health insurance for low-income households in developing countries.

The Center for Health Market Innovations profiles 145 programs that are providing micro insurance to the world’s poor.  These innovators are working to meet the demand for low-cost, quality healthcare through the provision of insurance.

But is this demand real?  Recent research and third party evaluations have come to a surprising conclusion—although microinsurance meets a tremendous need, consumer demand remains surprisingly low

Studies have found two primary causes for this perceived lack of demand.

  1. The Knowledge Gap - Studies have consistently found that low-income consumers do not understand the concepts behind health insurance, or how it can protect them.  In fact, insurance is often considered a scam!
  2. An Inability to Pay - Even when micro insurance companies subsidize their premiums to reach low-income consumers, potential clients are incredibly price sensitive. Striking a balance between achieving financial sustainability and gaining customers is a challenge.

Micro insurance programs around the world face similar challenges when starting their operations, but they are also adapting their business models to address this trend. 

Creating Trust through Community Engagement

Programs in the CHMI database are launching consumer education programs to teach potential customers about the benefits of micro insurance and build trust in an unfamiliar system.

The Cambodian Organisation for Assistance to Families and Widows (CAAFW) launched a social marketing program at the village level to identify potential enrollees and educate communities. CAAFW holds village meetings where village chiefs, local volunteers and CAAFW promoters encourage new communities to join the micro insurance scheme; after the group meetings, promoters follow up with individual house calls. Communities that participated in the social marketing campaign reported high enrollment rates and a positive perception of CAAFW. From 2009-2011, the program measured a decrease in child mortality, lowered per capita health expenditures and higher incidence of mid-wife attended births in members.

Similarly, the Nyakibale Insurance Scheme in Uganda uses a community-based approach to mobilize and sensitize potential customers regarding the importance of health insurance.  The community votes on appropriate, quarterly premiums and is responsible for collecting them; un-used funds are allocated to income-generating projects.  The insurance scheme recruits enrollees through microfinance institutions, schools, religious groups and Ngozi (burial) groups. 

Modifying Payment Schedules

Many micro insurance programs target the very poorest families, which poses challenges for enrollees to pay premiums. Innovators are changing the payment mechanisms of premiums to smooth out the risk of paying up-front premiums.

For example, the Bwamanda Insurance Scheme collects its yearly premium directly after the local agricultural cooperative purchases crops from the community, thereby lessening the financial shock of paying an up-front premium.

The Association d’Entraide des Femmes (AssEF) in Benin found that customers were able to pay monthly premiums, but not an annual fee.  After discovering that customers were having trouble paying the monthly fee at the end of the year, AssEF encouraged members to pay an additional portion at the beginning of the year, which prevented members from missing their end-of-year premium payments.

Narrowing Coverage to Reduce Premiums

Many innovators in the database began their program by offering a wide range of services with a higher premium or a higher out-of-pocket cost for members. But after noticing weak demand and low enrollment, many programs have narrowed the scope of services or illnesses covered, thereby making the insurance scheme more attractive. 

For example, Aseguradora Rural in Guatemala used extensive market research to design their health insurance plan around low-income, rural women’s most pressing health needs. They found that cervical cancer was the top concern for over 70% of women, while clients were not interested in paying premiums for maternity coverage. Aseguradora designed a specific package of care around these defined needs.

MicroEnsure, a large health insurance intermediary operating in fifteen countries, tailors its health insurance packages to each country’s market. In Tanzania, for example, a consumer study illustrated that the majority of potential customers would rather purchase insurance that provided unlimited coverage for Tanzanian’s five main causes of illness (malaria, maternity, diarrheal disease, pneumonia, and acute respiratory infection) as opposed to having treatment caps for all health risks. MicroEnsure negotiated with hospitals to cover only the five conditions and a reduced rate—thereby lowering premiums—and sold the product through the Anglican Church to build consumer’s trust.

These programs show that even when faced with unexpected challenges, innovators continually adapt to meet the needs of the world’s poor. To explore more microinsurance innovators profiled by CHMI, click here