The last time I wrote about micro-insurance in an online forum, I had profiled various micro-insurance initiatives in India. Theses initiatives can be broadly divided into two categories: community-driven co-operative models and private enterprise-driven for-profit models.

One of the finest examples of the community-driven co-operative model is the Yeshasvini scheme, which provides health insurance cover to poor farmers in the my home state of Karnataka. The scheme was initiated by an enterprising heart surgeon from Bangalore, Dr. Devi Shetty. The scheme has been actively supported by the Karnataka state Government Co-operative Department and offers quality healthcare to more than 2 million farmers, at a small annual premium.

At the other end of the spectrum are commercial insurance companies, such as the state-owned Life Insurance Corporation of India, Bajaj Allianz and Tata AIG, which are also entering the micro-insurance space. Here, a for-profit corporate model, which typically operates through designated individual insurance agents, comes into play.

My article in the online forum attracted a strong comment from the Director of Delhi-based Micro Insurance Academy, who is of the opinion that co-operative models have dual advantage: the community gets health insurance cover and the profits are distributed to stakeholders within the community. He expressed his concern about the entry of private players into the micro-insurance space.

While I agree with the Director’s opinion, I also believe in the power of private enterprise. Each model has its own pros and cons. Co-operative models typically face the problem of scalability. They require support from the Government for this, as in the Yeshasvini scheme, but this support is not always an option. Also, co-operative models find it difficult to partner with quality healthcare service providers. Private insurance companies, on the other hand, can achieve scalability more easily and they also come with tremendous contacts in the healthcare industry. But there is always the risk of private models being driven more by profits and less by the concern to provide quality healthcare to the poor.

What could be interesting is a hybrid model, wherein a private player takes care of scalability and partnerships and a co-operative society, working closely with the private player, takes care of the healthcare needs of the community. The co-operative society can also act as an insurance agent for the private enterprise. Profits can be shared between the private player and the co-operative society.