Karuna Trust, Karnataka - ZEF

Good and Bad Practices in MicroinsuranceKaruna Trust, IndiaLessons: Marketing• Never subsidize it all: Full subsidy of the insurance premium enables providers to coverlarge numbers quickly, however many are not aware that they are insured. By chargingeven a modest premium, clients would be more aware of the services they have paid for.• Invest in marketing: Insurance does not come naturally to most people; information andeducation is needed. Karuna Trust only had a marketing budget in the first year ofoperations. This is partly compensated through the personal contact Karuna has with thetarget group but some marketing spending would help.• Pay premiums during periods of cash surplus: When Karuna introduced premiumpayments, it was an inappropriate time for the collection because it was during themonths when little employment was available.Lessons: Claim Settlement• Settle claims quickly: Quick settlement of claims prevents households from economichardship. Karuna Trust usually manages to settle claims before patients leave the hospital.• Identify the policyholder: Karuna Trust requires clients to submit their receipt ofpremium payment when claiming benefits, but this receipt does not contain a photo of thepolicyholder. Although many clients are known to Karuna’s staff, this is not the case forall clients. A proper mechanism to identify policyholders needs to be introduced.Lessons: Organizational• Do not underestimate fraud: Having many people handle relatively small amounts ofmoney makes it difficult for Karuna Trust to monitor effectively. Fraud is likely to bepresent at the provider side, within Karuna’s structures and can be expected among theclients as well. And many small amounts can quickly sum up to high numbers.• Make use of the client base: More involvement of clients might increase ownership andcan be a valuable mechanism to help in reducing misuse of the system. But for this, somerisk might need to be shifted to the clients (which means that some profit remains withthem in good years).vi