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									                                                           L’Institut
 Assemblée générale 2007


                                       Canadian
  2007 General Meeting




                                        Institute          canadien
                                               of          des
                                       Actuaries           actuaires

                                    2007 General Meeting
30/11/2007am               Assemblée générale 2007 Montréal, Québec
                              Actuaries without Borders
 Assemblée générale 2007
  2007 General Meeting




                           A Canadian Experience for Group
                                       Actuaries
                                         By
                            Denis Garand and Firozali Hirji



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                2007 General Meeting




30/11/2007am
               Assemblée générale 2007
                2007 General Meeting




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               Assemblée générale 2007
                               “Micro credit has helped millions of poor people in
                                developing countries, but they remain at the
                                mercy of a death or serious injury of a family
                                member, the loss of a crop or livestock, or a
                                natural disaster such as the recent tsunami. The
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                                assets of borrowers, accumulated through great
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                                effort over many years, can be destroyed
                                overnight. Families are then forced to make the
                                same difficult climb out of poverty a second or
                                even a third time. By creating a wider range of
                                better targeted products such as micro-
                                insurance, the poor will have the ability to
                                protect their assets."

                           His Highness the Aga Khan, Geneva, 22 February 2005



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                              Actuaries without Borders
                           A Canadian Experience for Group
                                      Actuaries
 Assemblée générale 2007
  2007 General Meeting




                               • Micro Health Insurance -- a primer

                               • Micro Health Insurance – an example




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                           Four Models of Micro Health Insurance
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                                • Full Service or Insurer Model
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                                    • Partner Agent Model

                                      • Provider Model

                                     • Community Model




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                             Four Models of Micro Health Insurance

                           Full Service or Insurer Model
                           • In the full service model, a single entity,
                             usually an insurer, assumes all the risk and
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                             is responsible for all aspects of the
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                             insurance product –including market
                             research, product design, marketing and
                             selling and administration

                           • Tata-AIG using this model in India. They
                             have developed their own network of
                             ‘micro-agents’ to sell health and life micro
                             insurance directly instead of through an
                             MFI or other agent

                           References for models and their benefits and limitations are from:
                           CGAP. MicroInsurance: Improving Risk Management for the Poor. Newsletter No. 8. Nov
                              2005


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                           Full Service or Insurer Model

                           Benefits
                           • Insurer is centrally managed and responsible for all aspects
                             of insurance (costs, profits, losses, etc.);
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                           • Insurer has an interest in disease prevention and health
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                             promotion services and early treatment.


                           Limitations
                           • Neither insured nor providers have an incentive to keep
                             costs low.
                           • Waiting periods for claims may be long (i.e., from
                             submitting the claim to receiving payment);
                           • It is not community-based or participatory; the insurer is
                             centrally managed;
                           • Generally insurers don’t have access to in depth health
                             information to make good risk assessments;
                           • Insurer needs to build distribution structures which add to
                             product cost

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                               Four Models of Micro Health Insurance

                             Partner Agent Model

                           • In this model, the insurer takes on the risk of
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                             developing the insurance product but utilizes the
                             agent’s distribution network. The agent can be a
                             micro finance institution (MFI) or a health services
                             provider or any other organization that has experience
                             in social mobilization.

                           • It is the agent that sells the insurance, collects, the
                             premiums and even processes the claims. TPA?
                             TPA? TPA?

                           • Example: FINCA Uganda (agent) with AIG (insurer)

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                           Partner Agent Model
                              Benefits
                              • The insurer benefits by gaining access to the MFI client base and
                                distribution network;
                              • The MFI benefits with the objective to improve borrower retention and
                                portfolio quality through better health (and with no risk and limited
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                                administrative burden);
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                              • The MFI benefits by having an additional revenue stream and additional
                                products it can provide to its customers;


                              Limitations
                              • The community is not very involved in the insurance structure (unless the
                                community assumes responsibility for collecting premiums and
                                depositing them to the Bank);
                              • The service provider wants more visits and therefore may discourage
                                health prevention, promotion and early treatment of illness;
                              • Adverse selection and moral hazard are quite common as neither the
                                insured nor the providers have an incentive to keep costs low;
                              • Generally this works well for life micro insurance and tertiary care health
                                micro insurance, but does not work well for coverage of primary care..

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                              Four Models of Micro Health Insurance

                           Provider Model
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                           • Health services provider and insurer are the
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                             same
                           • The provider assumes all the risk and takes
                             care of management and administration
                             responsibilities.
                           • The provider may use its staff or dedicated
                             micro agents to sell its insurance package.
                           • Examples: Grameen-Kalyan and BRAC-
                             MHIB in Bangladesh

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                           Provider Model


                               Benefits:
                           •    The scheme is centralized to the provider;
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                           •    Service provider (as insurer) wants fewer visits and therefore encourages
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                                health prevention, promotion and early treatment;
                           •    Provider has an interest in quality assured services to increase its target
                                population base.



                               Limitations:
                           •    The provider can respond to the needs of the community only up to and
                                covering the services available by the provider (unless partnership
                                arrangements are made with other service providers);
                           •    The provider may not be in a position to take on the additional financial risk;
                           •    The provider may be put into a conflict of interest position as it tries to keep
                                its costs down yet provide good care.


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                               Four Models of Micro Health Insurance

                           Community Based Model
                           • The community organizes itself as a health
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                             services purchaser.
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                           • The community elects a group of volunteer
                             managers and directs all aspects of the micro
                             insurance, including negotiating with the
                             external health services provider and
                             collecting premiums from members of the
                             community.
                           • Example: Cooperative Health Care for the
                             Informal
                           • Sector of Dar es Salaam, Tanzania
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                           Community Based Model

                           Benefits:
                           •   The community is actively involved and ensures the maximum number of
                               people participate –to maximize risk pooling and minimize adverse selection;
                           •   The volunteer managers negotiate insurance coverage based on the needs of the
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                               population;
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                           •   There is a lot of capacity building that can benefit the community in other
                               domains.


                           Limitations:
                           •   The model requires significant investments in capacity building and training
                               for volunteer managers to learn the various aspects of risk pooling and
                               coverage and to promote it accordingly;
                           •   The managers may engage in fraud and abuse of premiums collected in the
                               community if accountability structures are limited to community structures;
                           •   The external health services provider may not provide quality-assured services;
                           •   There may not be an adequate emphasis on awareness-raising about prevention
                               practices (the service provider benefits with a greater number of visits and
                               therefore may discourage prevention and promotion visits).

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                           Questions, Questions, Questions……………

                           • Had they heard of insurance in particular health
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                             insurance
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                           • What are the needs of the people with respect to
                             insurance protection
                           • Would they buy health insurance if it had the
                             benefits they were looking for
                           • How much would they pay for these benefits
                           • How would they pay for it –monthly or annually –
                             when during the year


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                           Questions, Questions, Questions……
                           • Who would take the risk
                           • How would the insurance regulator treat this
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                             scheme
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                           • How would the scheme be sold
                           • Who would collect the premiums.
                           • Who would adjudicate the claims and how would
                             the claims be paid
                           • Who would provide the health services
                           • Where i.e. which villages/towns will the health
                             scheme be sold.


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                                 Sahet Hifazat -Health Protection

                           Scheme Benefits:
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                           • Hospitalization as inpatient with annual maximum of
                             25,000PKR

                           • Maternity coverage

                           • C-Section coverage

                           • Death benefit of 25,000PKR for the designated bread
                             winner between age 18 and 60
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                              Sahet Hifazat -Health Protection

                           • Risk control – all household members
                             must sign up
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                           • Risk control – at least 50% of the
                             village must sign up

                           • Risk control – use of smart card for
                             insured identity

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                              Sahet Hifazat -Health Protection
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                           • Preferred provider –Aga Khan Health Services
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                             Pakistan

                           • Cashless claims if insured uses AKHSP

                           • No out of area coverage




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                           Sahet Hifazat -Health Protection
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                              • Claims on reimbursement basis if
                                preferred provider not used

                              • Using chip based smart card technology
                                to store medical information




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                                Sahet Hifazat -Health Protection

                                        Latest Developments:
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                           •
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                               Management structure in place
                           •   Pilot enrolment completed
                           •   55% signup rate
                           •   11,000 lives
                           •   Paper based cards for now
                           •   Coverage effective Nov 1st
                           •   Treatment protocols still under review



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                           Sahet Hifazat -Health Protection
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                                What is the model used?
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                                         INSURER-

                                     PARTNER AGENT-

                                        PROVIDER-

                                       COMMUNITY


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30/11/2007am
               Assemblée générale 2007




                              THE OF PRESENTATION

								
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