The prevailing Western NGO view of how we should solve problems such as lack of health and education provision in very poor countries is that we expect the government to provide or finance such provision. If the governments of poor countries cannot make provision, then we expect our own governments to finance it through development aid. Quite apart from any economic arguments about the usefulness or otherwise of foreign aid, this point of view ignores the lack of capacity of government to deliver. The governments of very poor countries are generally not able to provide sophisticated systems of health and education, even if it were desirable. Still less can development be “done” to poor countries by Western countries.

It was most gratifying to see at the Institute of Actuaries last night a presentation on health provision in the Indian slums through small-scale mutual insurance. The model is very similar to the Friendly Society movement that did so much to bring insurance to the formerly uninsurable in the UK in the nineteenth and early twentieth centuries. Eamon Kelly described how 40,000 very poor slum dwellers (there are high hopes that the scheme will expand to cover many, many more, quite quickly) under the umbrella of the Uplift Health Mutual Fund form a series of micro-insurance units. The members pay premiums and can make claims when they need medical treatment. Each unit has a claims management committee that decides how to prioritise claims, but there was no evidence of valid claims not being met. The model has many subsidiary benefits that one does not get from either state-provided healthcare or from policies provided by proprietary insurance businesses. The group has a strong incentive to ensure that people are well educated about maintaining their own health; there is peer pressure to prevent frivolous claims; and the group is much more effective at purchasing healthcare services at good prices than individuals who were self-funding could ever be. And, of course, there is the incentive to be efficient, that is completely absent in state-provided healthcare.

Interestingly, Eamon Kelly mentioned that, if the state should become involved, it will help pay the premiums or meet some of the running costs of the organisations. In other words, it will build on these spontaneous systems rather than supplant them – thus avoiding the huge mistake that we made in the UK in 1948.

Philip Booth 154x154

Academic and Research Director, IEA

Philip Booth is Academic and Research Director at the Institute of Economic Affairs and Professor of Finance, Public Policy and Ethics at St. Mary's University, Twickenham. From 2002-2015 he was Professor of Insurance and Risk Management at Cass Business School. Previously, Philip Booth worked for the Bank of England as an advisor on financial stability issues and he was also Associate Dean of Cass Business School and held various other academic positions at City University. He has written widely, including a number of books, on investment, finance, social insurance and pensions as well as on the relationship between Catholic social teaching and economics. He is Deputy Editor of Economic Affairs and on the editorial boards of various other academic journals. Philip is a Fellow of the Royal Statistical Society, a Fellow of the Institute of Actuaries and an honorary member of the Society of Actuaries of Poland. He has previously worked in the investment department of Axa Equity and Law and was been involved in a number of projects to help develop actuarial professions and actuarial, finance and investment professional teaching programmes in Central and Eastern Europe. Philip has a BA in Economics from the University of Durham and a PhD from City University.

3 thoughts on “Mutual health insurance in India”

  1. Posted 04/09/2008 at 09:01 | Permalink

    Hi Philip,thanks for sharing your great contribution.

  2. Posted 04/09/2008 at 09:01 | Permalink

    Hi Philip,thanks for sharing your great contribution.

  3. Posted 24/04/2013 at 11:22 | Permalink

    Excellent post. Your post affects many urgent issues in our society. We can not be untouched to these problems. Your article gives the light in which we are able to observe the life. Not everyday I can read something like this.

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