Karuna Trust, Karnataka India
CGAP Working Group on Microinsurance: Good and Bad Practices, Case Study No. 19, 2005
54 Pages Posted: 18 Oct 2007
Karuna Trust is an NGO that has been working successfully on health and development issues for nearly two decades. In 2002, Karuna Trust, in a partnership with the United Nations Development Programme (UNDP), decided to implement a pilot health insurance scheme for its target population. The non-governmental organization (NGO) collaborated with the state-owned National Insurance Company (NIC) in designing a health insurance product that complements the public healthcare infrastructure and compensates for some of its weaknesses. Karuna Trust acts as an agent for NIC. The insurance product compensates the insured for the loss of income in case of hospitalization at a public health facility. Furthermore, a drug fund was set up to supply medicines that are unavailable in public facilities. People with income around the poverty line receive treatment in public health facilities free-of-charge. A tight network between the insurance scheme and the public infrastructure has evolved.
A baseline study conducted before the implementation of the scheme revealed that the target group had low understanding and knowledge of health insurance. It was therefore decided to fully subsidize the premium for the very poor. UNDP provided the funding for two years and NIC still accepts a claim ratio of up to 150% because of the social nature of the scheme. It was assumed that, with time, acceptance of insurance and willingness to join and pay would rise among people experiencing the insurance benefits. Extensive information and education was given during the pilot phase. In 2005, premiums were collected from all insured for the first time. About half the members of the subsidized scheme paid to renew their membership. "We know we get value for our money" was a common reason for re-enrollment. However, others complained about having to pay for benefits that were free in the previous years.
The experience of Karuna Trust is a very interesting example of creating complementarities between insurance and existing public structures, and how subsidies help familiarize clients with insurance principles. However, this costly awareness building process was affordable only because external funding was available.
Keywords: micro health insurance, social insurance, insurance for the poor, community based health insurance, health financing
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