Opinion

Felix Salmon

How microinsurance fights AIDS

By Felix Salmon
June 6, 2012

What’s one of the best ways to improve the life expectancy of HIV-positive South Africans? Pay them if they die!

Tina Rosenberg has a great piece today about microinsurance in general, and a South African firm called AllLife in particular, which is playing an important role in changing attitudes to HIV — turning it from a perceived death sentence to something much more manageable:

Ross Beerman, AllLife’s managing director, says that clients average a 15 percent improvement in their CD4 count — an immune system marker — six months after buying insurance, whether or not they are taking antiretrovirals (the majority of clients have not yet reached that stage). That improvement may partly be the psychology of seeing their disease in a different way: “If you think you have a terminal disease, you don’t care how you eat and exercise,” said Beerman.

There’s still a stigma attached to HIV in pretty much every country in the world, and South Africa is no exception. AllLife is a way of dragging people out of denial — which is medically disastrous — and giving them an incentive to get tested and really start looking after themselves.

It’s not cheap. In a country where antiretroviral drugs are free, a life-insurance policy paying out $62,500 at death costs $225 per month, which is $2,700 a year. Still, that pricing sends a clear message to the person being insured: we, the for-profit insurance company, don’t expect you to die any time soon. Because if you die any time in the next couple of decades, we risk losing money.

Being HIV-positive can be lonely, and it’s great to have your insurer checking in with you and following up, as AllLife does.

On the other hand, for a typical South African, paying $225 a month, month in and month out, is not easy. And if you have the discipline and resources to do that, maybe you have the discipline and resources to look after yourself on your own, without needing an insurance-company cheerleader. What I worry about, in this model, is the degree to which AllLife’s business model is predicated on the idea that many if not most of its customers will eventually give up paying their premiums, and will never see any payout when they die. Especially since the people who are less good at looking after themselves are precisely the people who are going to be less good at paying premiums, too.

Overall, however, I’m a fan of microinsurance in general and AllLife in particular. Rosenberg’s article ends on just the right note, I think:

One happy side effect of AllLife’s establishment is its impact on the stigma of AIDS. Nongovernment groups can explain over and over that H.I.V. is not a death sentence. But it’s a more persuasive message when a company bets its own money. “We’re saying you don’t have a terminal illness,” said Beerman. “You have a chronic, manageable disease. You’re going to live a long time. And we’ll help you.”

In order to be successful, AllLife needs to send that message not only to its insureds, but to a very broad swath of South Africans who might be persuaded to buy its product. Most of them won’t sign up — but all of them will get the message. And when for-profit companies have a strong incentive to propagate this kind of message, that has to be a good thing, whether the insurers end up succeeding or not.

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It’s important to note that South Africa is a particularly good test bed for micro-life insurance because one of the major cultural expenses in any individual’s life is holding the funeral for immediate family members. In “Portfolios of the Poor” the authors point out that many informal savings mechanisms in South Africa are burial societies to share the risk of a family death among a larger group.

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