Estimating capital requirements to scale health microinsurance serving rural poor populations

David Dror, Atanu Majumdar () and Nihar Jangle ()
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Atanu Majumdar: Social Re Consultancy Pvt. Ltd./Micro Insurance Academy
Nihar Jangle: Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH

The Geneva Papers on Risk and Insurance - Issues and Practice, 2019, vol. 44, issue 3, No 4, 410-444

Abstract: Abstract Our objective is to estimate the capital required to launch, scale and sustain the operation of health microinsurance plans. We develop algorithms to estimate operating costs, capital or loan requirements, interest earned, repayments, and scaling projections. We check the plausibility of assumptions using the data of two CBHI plans. A prototype plan covering 40,000 persons in India requires USD 62,477 to offset deficits in the initial years if its long-term operating costs are not to exceed 20% of the premium and the claims ratio is to stabilise at around 70%. Capital requirements drop significantly when confidence levels are lower than 99.9. Fifteen years are required (after a five-year moratorium) to repay the loan in full plus interest at 5% p.a. in USD (10.96% in Indian rupees). It is possible to attain sustainability of health microinsurance schemes by providing the necessary initial capital as a loan and being very attentive to five parameters: enrolments, premiums, operating costs, renewal rates, and claims ratio.

Keywords: Health insurance; Capital requirements; Sustainability; Business case (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1057/s41288-019-00126-w

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