Around 40 micro health insurance schemes covering several million clients are active in India and the numbers are on the rise. India clearly emerges as the world’s leader in the development of low-cost health insurance through micro health insurance units for poor and for rural population-segments.

Micro health insurance schemes, which are non-commercial and mutual, are striking because the members can retain part of their profits. It is also an efficient way to cut down free riding, moral hazards and adverse selection as well as keeps a check on insurance frauds.

As the package required by the rural poor was not met by the commercial insurance companies there was an understandable reluctance among rural communities and the poor to add to profits of commercial insurance companies. This factor enabled the existing micro health insurance schemes to run their own independent insurance and cater to the burgeoning needs of India’s rural poor.

The significant factor is the modus operandi of the schemes’ which involves the clients in some important aspects of the business cycle. Greater, cheaper and better information flows, which can be used to augment broad-based affiliation and renewal, and also monitor outlier utilization was feasible due to the prevalent intensive contacts among community members.

Moreover by reducing moral hazards, adverse selection and free riding, rural communities in India in turn reduced the costs of health insurance and thereby paved the way for a health cover for all the rural communities.