Sara Irshad is a summer associate on the portfolio team in the Pakistan office. She is a Babson MBA graduate, Class of 2009. At Babson her focus was on social entrepreneurship. Prior to Babson, she worked for two years at an educational institute as a Marketing Manager and launched SP Jain’s Global MBA program in Pakistan. During this time she also taught A-level Economics. She has a Bachelor in Business Administration from the Institute of Business Administration, Karachi.
I have lived all my life in Karachi so even though I am very aware of the plight of the people in my country, a visit to the ‘Katchi Abadi’ in Malir, Karachi, reminded me of how millions of people struggle to get through each day. As a summer associate at Acumen, I am working on providing management assistance to one of our investees, First Micro-insurance Agency (FMiA) and the visit was part of an effort to understand the company’s clients, their perceptions and thoughts on FMiA’s health insurance product. One of the clients we met was Rehana.
25-year-old Rehana is a charming young girl with dark hair, big brown eyes and a vibrant smile. She lives in Malir with her husband, children, brothers and their families. Rehana makes a living making shirt buttonholes and in an effort to establish her own small business took a loan from the First Micro Finance Bank (FMFB). With the loan came the mandatory micro-health insurance (FMiA’s product) for herself, her spouse and children. At the time of the purchase the $12 family insurance product did not seem to make sense on a loan amount of $190 however something about the concept resonated with her.
Rehana and her husband work from morning to dusk and struggle to make ends meet. They are paid daily wages, therefore one day of sickness means no income for that day. A week after her loan was approved, Rehana fell ill. Rehana was pregnant for the third time and something wasn’t right. The doctor told her that she must have an operation immediately or she risked losing her life. The insurance policy saved Rehana’s life and her family from falling into debt traps.
Risk is ever present in the lives of the poor. Unexpected health issues can push poor people under the poverty line. The wealthy and the poor can suffer from the same illness but their experiences can be very different. For example, an appendectomy, which can cost around $250, is a minor surgery by western standards but for the poor it can increase their debt load and push them further into the poverty trap.
FMiA introduced micro-health insurance in Pakistan two years ago and since then has made progress in terms of creating awareness within various communities in Pakistan. Insurance, particularly micro-insurance is in its infancy as an industry in Pakistan. Therefore it is no surprise that increasing awareness among the BoP market about the policies and coverage requires a herculean effort, which FMiA has undertaken under the leadership of Project Manager, John Pott.
Last month, Acumen Fund Pakistan held a Quarterly Tea event, “Micro-insurance: Pioneering Access to Quality Healthcare for the Poor,” to share insights from the FMiA health insurance pilot program. The focus was on sharing best practices and identifying areas where more innovation is needed. Aga Khan Agency for Microfinance (AKAM) Project Manager, John Pott spoke to an audience of around 70 people including Acumen’s advisors, partners and members of the larger business community about the risk of illness to the poor and the important role for micro-insurance.
The brief presentation and Q & A that followed demonstrated the need for FMiA to continue to address this social need. John shared some interesting facts about the state of health care in Pakistan and the fears among the target market. According to a global survey, the number one cause for concern for poor families is illness. Another research paper by Steadman and Associates in Tanzania revealed that if people were given 1000 Tanzanian Shillings (approximately 1 U.S. dollar) to insure one of life’s risk, almost 60% would chose to spend it on health and medical coverage. With this information one would assume that individuals in developing countries would spend more on insuring their health. However this is not the case; in Pakistan health expenditure per capita is around $48 on purchasing power parity bases as compared to $6,096 in the United States.
As an example of why selling health insurance in Pakistan is difficult, John spoke about the inability of people to pay $5/year/person for their policy. For people in developed countries this amount might seem ridiculously low, whereas for a poor man in Pakistan this is a large investment. John also emphasized the need for innovative product development and building partnerships to further micro-health insurance in Pakistan.
Dr. Mariam, an FMiA employee is the gatekeeper for Karachi, who verifies all the claims made against hospitalization and makes sure that the patients are given appropriate treatment. She also runs a one-person 24/7 tele-health service for FMiA customers in Karachi. In a conversation with her, she highlighted some challenges faced by FMiA’s clients. For example, Illiteracy makes it difficult for clients who call in for medical advice to write down the name of over the counter drugs. As a result she sometimes has to speak to the pharmacists to make sure they get the right drugs. The problems don’t end there; corruption is so wide spread that pharmacists often take advantage of patients who are illiterate sometimes selling them the wrong medicines.
The most interesting takeaway for me from the event was the determination of the employees of FMiA and the optimism of the greater business community. Both groups are committed to not only working together on solutions to BoP challenges like healthcare financing, but also are willing to partner on outreach and innovation. The kind of change that is being catalyzed by Acumen, FMiA and AKAM is sure to affect the healthcare industry in Pakistan.
It is interesting to note that at a time when the healthcare reform debate is raging in the US, Acumen is mobilizing the micro-health insurance market in Pakistan. This effort has not only started impacting the policy holders but is also developing a market that did not exist two years ago. More insurance providers are entering this market, which will eventually lead to greater awareness and a better quality of life.