Sometimes, the risks that an insurance (or micro-insurance) scheme has to deal with become too large to be assumed through one entity. In addition, if micro-insurance schemes group people with different income levels and risk profiles under one pool, it is expected that there will be different micro-insurance units with different average income levels and different collective risk profiles. Re-insurance pools these different average incomes and risk profiles of the micro-insurance units for an added layer of risk-pooling, inter-communities’ cross-subsidy and national-scale solidarity. Reinsurance, simply defined, is the transfer of liability from the primary insurer (the company that issued the insurance contract) to another insurer (the reinsurance company).
One single, non-profit, publicly owned re-insurance entity should be created with the goal of diversifying risk of micro-insurance units and with a mandatory enrollment by all of the established micro-insurance units.
By devising a proportionate re-insurance premium collection model, the risk-pool that was atomized through the micro-insurance schemes for the sake of consumer choice, community management and improved quality of care, is re-instated through a national, collective, mandatory re-insurance scheme that allows cross-subsidy between rich micro-insurance schemes and poorer-ones and between high-risk profile communities and lower-risk ones.
Although independent from government, this re-insurance entity should be run on a non-profit base and should be entirely publicly owned.
In addition, this re-insurance entity should play an additional, critical role in sustaining micro-insurance units. Simply stated, operating re-insurance would entail not only developing the financial instrument but also enhancing considerably micro-insurers’ capacity to register, analyze and transmit data.
This role should revolve around four distinctive components that the re-insurance facility should play as shown in.
Components of an integrated reinsurance-based approach for micro-insurance sustainability
|
|
Component |
Areas of Coverage |
|
1 |
Reinsurance |
Financing, Program-management capacity, Stabilization against fluctuations, Catastrophe protection |
|
2 |
Package Enhancement |
Improving the “packaging” of the services presented through the re-insurance scheme to counteract the technical complexity and difficulty in explaining its value to the public |
|
3 |
Knowledge transfer and consultancy |
Providing the micro-insurers with better information management tools, capacity building, expert assistance and consultancy |
|
4 |
Connection with the national health financing and service providers |
By bridging the gap between the informal and the formal sectors through maintaining communication and creation of public private partnerships that would benefit the micro-insurers |
However, re-insurance alone will not be a remedy for all problems of micro-insurance if implemented in Egypt. The private resources spent through individuals’ contributions to their micro-insurance units will not suffice for all inpatients services, catastrophic illnesses and in case of epidemics. In addition, the model only addresses areas of stated individual needs of services. It does not cover most public health concerns, preventive services or other components of healthcare provision that cannot be addressed through the informal sector. This is where the government should play a role.
Sources:
E. Morelli, G.A. Onnis, W.L. Ammann, C. Sutter (Eds), Micro insurance – An Innovative tool for risk and disaster management, Global Risk Form GRF Davos, Davos, 2010
The Ottawa Charter: Health promotion, 1st International conference on Health promotion, Ottawa, World Health Organization,1986
D. Dror, C. Jacquier, Micro-insurance: Extending health insurance to the excluded, International Social Security Review, 2001, P. 15
The Bamako Initiative, Women’s and children’s health through funding and management of essential drugs at community level, World Health Organization, 1986
J.F. Outreville, The health insurance sector: Market segmentation & international trade in health services, 1998, P. 111-124