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Centre weighs 1 trillion pandemic pool to bail out the uninsured

Curbs in various states have severely affected the livelihoods of those who depend on services and small businesses.bloombergPremium
Curbs in various states have severely affected the livelihoods of those who depend on services and small businesses.bloomberg

Stung by the severity of the second wave of the pandemic, India is considering setting up a covid-19 pandemic pool worth at least 1 trillion to financially help uninsured citizens whose incomes or health get hit by covid or any other pandemic in future, said three people with direct knowledge of the matter

Stung by the severity of the second wave of the pandemic, India is considering setting up a covid-19 pandemic pool worth at least 1 trillion to financially help uninsured citizens whose incomes or health get hit by covid or any other pandemic in future, said three people with direct knowledge of the matter.

This is aimed at helping the country’s large population of uninsured people handle losses in incomes and offer them financial support to handle hospitalization costs. Just 4-5% of India’s population is covered under health insurance.

“We are working on the creation of a pandemic pool for the uninsured population. At present, the work is at an assessment stage," said a government official and one of the three people cited above on condition of anonymity. The official said talks are on with the Insurance Regulatory and Development Authority of India (Irdai) and the Reserve Bank of India (RBI) on the issue.

“The key parameters for the creation of the pool include the number of positive cases; the proportion of hospitalization cases; the proportion of recovery; costs involved at various stages of infection; demographics of the population most affected by the virus; average cost of their living; impact on their incomes; nature of their livelihood; sustainability of their businesses or source of income; medical infrastructure available to them; general comorbidities among them; age group of the most-affected low-income population etc.," said the official.

“Once we are able to assess the range of these parameters, the pricing of the pool can be done; and the quantum of contribution to be made by the government, health insurance companies, and other public stakeholders can be calculated; and then the pool can be launched," the official said.

All the people cited above said the government will initially contribute at least half of the pool’s corpus, and the rest will come initially from health insurers and from life insurers at a later stage.

The plans come as more than 400,000 coronavirus cases continue to be recorded each day in India, severely stretching its creaky healthcare infrastructure. Meanwhile, lockdowns in various states have severely affected the livelihoods of those who depend on services and small businesses.

After the launch of the government’s health insurance scheme—Ayushman Bharat—for the extremely poor, around 100 million have been covered under basic health insurance cover, for which the states and health insurers jointly bear the costs of claims since the premiums collected for such a scheme is very small. However, a major part of India’s 1.38 billion population still remains uninsured.

“At present, at least 2 lakh is required on an average if a patient gets hospitalized due to covid-19. Unfortunately, a large part of India’s population is neither able to insure their health nor their small businesses and, therefore, when a pandemic hits, lakhs of such citizens not only lose their basic source income but also are pushed into acute distress in case someone from the family gets hospitalized. The pandemic pool targets to address this major issue," said the second person cited above.

To be sure, last September, Irdai floated a proposal to create a pandemic pool. It was, however, shelved as the government was not too keen to support the plan following a decline in the number of covid cases. Irdai had formed a working group with representatives from the insurance and reinsurance industry to explore the option of creating an Indian pandemic risk pool focusing on risk considerations of business continuity.

According to the Irdai panel’s suggestion, the pool could cater to around 40 million MSME workers and lead to a capacity of 75,000 crore initially, including the provision of a government backstop. The backstop would be triggered only in the event of a pandemic and if payouts exceed capacity.

Recently, governments of several developed nations have proposed to create a pandemic pool amid the pandemic’s second wave. In India, so far, only nuclear pool and terrorism pool exist, which are meant to take care of unwarranted losses caused due to nuclear accidents or terrorist attacks. Typically, in a pool structure, there is a lead entity that commits the largest portion of the corpus, while insurers contribute a certain portion out of their premium collections every year to grow the size of the pool. It takes several years for the pool to become self-sustainable, after which no contribution is required.

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