Households in developing countries spent $148 billion out-of-pocket for healthcare expenses in 2015, and each year 100 million people are pushed into extreme poverty because of the high cost of healthcare. Particularly for major inpatient expenses, health insurance is the most effective way for people to reduce their out-of-pocket costs and avoid having a major medical emergency plunge them deeper into poverty. However, insurance providers often have difficulty convincing low-income customers to pay insurance premiums now for needs that may or may not arise later. Fortunately, digital financial services (DFS) has made it easier to bundle insurance with other financial products in ways that address a range of inpatient and outpatient health services and that introduce people to the benefits of insurance.
As discussed in a previous CGAP blog post, “A Digital Finance Prescription for Universal Health Coverage,” various DFS are helping patients pay for medical treatment in many developing countries. Digital credit is enabling patients to obtain instant loans for healthcare, even in remote areas. In fact, CGAP research in Kenya found that paying medical bills was one of the most common reasons people cited for borrowing from digital lending platform m-Shwari. Digital savings is another example. Savings products allow people to save and easily withdraw funds from dedicated health savings accounts.
Still, obtaining insurance is the best way to prepare for major health expenses, yet too few low-income people are insured. About 75 percent of the world’s population is not adequately protected by insurance, and 40 percent have no coverage at all. While there are many reasons for this, paying monthly premiums is a significant challenge to consumers with irregular sources of income. Another key issue is that low-income consumers value liquidity, so they hesitate to commit funds to any one destination ahead of immediate need. This makes insurance a difficult sell on its own. But digital channels enable providers to more effectively bundle insurance with other services that meet a wider range of short- and long-term healthcare needs.
MicroEnsure’s Fearless Health product in Kenya is a good example of bundling’s potential. MicroEnsure has more than 50 million registered users in 15 countries. The company provides free basic life, accident and hospital insurance via mobile phone to many of its customers, through partnerships with mobile network operators. However, these models are only able to cover catastrophic needs, rather than the day-to-day risk events that are more tangible for consumers. To provide a solution that addresses a broader range of potential health events, MicroEnsure designed Fearless Health, which integrates insurance with other products designed to help customers get the inpatient and outpatient care they need without delaying treatment because of the costs.
The Fearless Health pilot launched in 2016 with three key features: on-demand loans for primary healthcare at outpatient clinics, medical advice by phone (whereby customers text their health questions by SMS and receive a call from a doctor) and insurance for inpatient care that provides a cash payout if a customer or family member suffers a health emergency requiring three or more nights at a hospital. Limiting the insurance component to inpatient care only, while offering loans for outpatient needs, allowed MicroEnsure to keep premiums low because administrative costs related to outpatient claims tend to drive up premiums. By bundling financial products in this way, MicroEnsure hoped customers could experience the benefits of insurance without having to make costly, separate insurance premium payments.
MicroEnsure viewed the loans as the key way to introduce customers to Fearless Health’s other features. It marketed the loans at participating clinics to help patients cover the cost of their treatments. During borrowers’ loan repayment periods, they were insured and had access to the telephone health information service. Mobile money was essential to Fearless Health, and all payments to and from customers were digital. From MicroEnsure’s perspective, cash was not viable given the potential for multiple payouts per client in addition to receiving loan repayments on a regular basis. For customers, receiving loans and hospital cash payouts quickly via digital channels was critical so they could pay for immediate expenses.
The Fearless Health pilot confirmed that there is a high demand for the product among customers who do not have enough funds for outpatient care. Further, Fearless Health customers spent more at the clinics than noncustomers, providing a business case for clinics to welcome the product and reducing the potential negative impacts of undertreatment due to patient liquidity constraints. However, it also showed that MicroEnsure’s plan to offer the credit to patients when they were at the clinics and needed it most should be reconsidered. Most patients at clinics had already brought enough cash to cover minor outpatient expenses. The target market for Fearless Health did not bother coming to clinics because they lacked funds. The pilot suggested that MicroEnsure would need to find ways to market the product outside of clinics.
To understand the features of Fearless Health that were most valued by customers, researchers from CGAP and Busara Center for Behavioral Economics asked them what mattered most to them: amount of coverage, duration of coverage or the number of family members covered. Customers indicated that duration of insurance coverage was the most important. The other factors were also considered important, however, and a desirable combination of all three increased people’s willingness to pay for the Fearless product. This suggests that the preferred solution should cover family members and offer a reasonable coverage amount, but that extending the duration of coverage should be emphasized.
MicroEnsure’s Fearless Health is an example of how providers can approach health insurance for poor people. Although our research uncovered areas where the product could be improved, it is clear that digital channels have an important role to play for insurance providers looking to create microinsurance products that are scalable and sustainable but also add real value to customers’ lives.
Insurance still remains a mystery to many in the sub-sahara. The increase in number is mainly on statutory based policy's and more so to cover 'Bank financed Assets". Research has shown that after the release of asset to owner, chances of renewing the policy too decreases.
Underwriters should look into ways of bundling health covers to the general policies with clear CVP so as to increase the appetite on value based reasons.