Karuna Trust, Karnataka - ZEF

Good and Bad Practices in MicroinsuranceKaruna Trust, India6. Product DevelopmentOn behalf of Karuna Trust and financed by UNDP, the Centre for Population Dynamicsconducted a baseline study. This study intended to give a detailed picture of thesocioeconomic situation among the target group, their health seeking behaviour, as well astheir knowledge about insurance. Information on spending for health was included as well asavailability of the health services.Although treatment in public facilities is free in theory, the study revealed that manyhouseholds have to pay for drugs and some other services. This led to the inclusion of drugsinto the benefit package. Including compensation of wage loss into the benefit package ishoped to overcome the observed economic problems faced by households in case of illness.Based on this research, the price and the specific benefits were determined. These were thenproposed to NIC, which was extremely sceptical about the viability of the scheme. To takeaccount of their concerns, a maximum loss ratio of 150% was defined and the collaborationbetween NIC and Karuna Trust was fixed in a MoU.From 2002-2004/05, the insurance product was tested. It was introduced as a subsidizedscheme and every person in direct contact with one of Karuna’s other activities was insured(i.e., not mandatory but for free anyway). The experience was monitored and evaluated. Aftertwo years, insurance subsidies were removed and since 2005 clients have to pay forinsurance.The Endline Evaluation Report revealed an increased understanding about insurance.Policyholders, including those who had not claimed benefits, were aware of the benefits andhow to claim them. Making the clients pay for insurance was the challenge in 2005.During the pilot testing, two changes in the benefit package were introduced: 1) the numberof days covered in case of hospitalisation was increased from 25 to 30 days for thecompensation of wage loss and for the drug fund; and 2) the mechanism for providing drugbenefits was changed. In the initial phase, drugs were purchased by the patient from outsidethe designated facility. In order to not put a financial burden on the client through paying thedrugs upfront, the client received the money in advance and provided the bill after purchasingthe drugs. If the person spent less than eligible for the money was paid back to the drug fundfor later use of other patients; if the patient spent more, it was on her expense. This resulted inhigh costs for branded drugs and so it was decided to supply generic drugs directly to thedesignated health facilities.The total costs of developing the product, implementing it and subsidising the premiums inthe first two years (2002 & 2004) in T. Narsipur and other taluka is estimated to amount to$450,000. CPD’s baseline study cost around Rs. 200,000 ($4,545). UNDP provided thefunding for the development and the initial test phase.39