Estimating Capital Requirements to Scale Health Microinsurance

Alexander S. Preker and David Dror

Chapter 7 in Health Microinsurance:Implementing Universal Health Coverage in the Informal Sector, 2020, pp 135-181 from World Scientific Publishing Co. Pte. Ltd.

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 stabilize at around 70%. The probability of bankruptcy is fixed at 0.1% (i.e., 1 in 1,000). 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: enrollments, premiums, operating costs, renewal rates, and claims ratio.

Keywords: Microinsurance; Health Insurance; CBHI; Community-Based Health Insurance; Health Financing; Insurance for Poor; Universal Health Coverage; Rural; Education (search for similar items in EconPapers)
JEL-codes: G22 I11 I13 I15 (search for similar items in EconPapers)
Date: 2020
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