Recent estimates suggest that roughly one in seven people globally experience financial strain due to out-of-pocket health spending. Public health insurance remains the cornerstone of universal health coverage (UHC), yet in many low- and middle-income countries (LMICs) it does not fully reach informal workers, women, and other underserved groups. At the same time, traditional private health insurance providers, including commercial and cooperative or mutuals, have struggled to serve these segments at scale.
This leaves a persistent coverage gap affecting informal and underserved households that are insufficiently protected by public schemes but cannot access or afford conventional private insurance. This gap will not be closed by the public sector alone—at least not at the pace or scale required. As countries pursue universal health coverage under real fiscal and delivery constraints, the question is no longer whether commercial health insurance has a role in advancing UHC — but under what conditions it can expand access, affordability, and financial protection for underserved populations.
As countries pursue universal health coverage under real fiscal and delivery constraints, the question is no longer whether commercial health insurance has a role in advancing UHC — but under what conditions it can expand access, affordability, and financial protection for underserved populations.
Commercially provided and socially motivated health insurance—designed explicitly for inclusion—can play a complementary role in several ways. For one, it can provide financial protection against shocks where public coverage is incomplete. By helping crowd-in private delivery capacity, it can improve service availability and responsiveness, especially in underserved areas. Also, private actors often lead in innovation—experimenting with product design, distribution channels, and digital infrastructure to extend reach and reduce costs—which can strengthen inclusion and the system’s sustainability.
While not a substitute for public healthcare, private solutions can help close coverage gaps, crowd in service delivery, and catalyze innovation in how health insurance is designed and delivered.
Why commercial health insurance struggles to scale
Despite this potential to support utilization of health services and contribute to the sustainability of health systems, particularly in contexts where public resources are under pressure, challenges remain. Commercially provided health insurance has rarely achieved scale among low-income and informal populations. Voluntary schemes often suffer from low enrollment, fragmented risk pools, and limited financial protection, reflecting several structural challenges:
- Many products are poorly adapted to the needs, incomes, and risk profiles of informal households, undermining perceived value.
- Requirements for upfront payment at the point of care weaken the core promise of insurance and discourage use of services.
- Weak coordination between public and private actors can lead to duplication, gaps in coverage, and inefficient provider contracting.
- For clients, high prices, hidden fees, and unpredictable copayments erode affordability and trust.
- For insurers, thin margins, adverse selection, and high administrative costs undermine the business case.
Addressing these challenges requires more than marginal tweaks. It calls for innovation across products, channels, partnerships, and regulatory approaches.
Where innovation is showing promise
Encouragingly, innovation is already emerging—driven by both public and private actors—to make health insurance more relevant, affordable, and scalable for underserved groups.
Product innovation is moving beyond incremental benefit design toward new types of coverage that respond to emerging risks and constraints faced by low-income and informal households. Parametric and event-based health products, for example, are designed to trigger rapid payouts based on predefined indicators (such as extreme heat) rather than clinical claims, allowing households to manage health-related shocks quickly and with minimal administrative burden. A leading example is SEWA’s parametric heat insurance, which responds to the growing intersection of climate and health risks by providing support during heatwaves.
Distribution remains critical. Embedded and group-based models are also gaining traction. By integrating health micro-covers into existing platforms—such as savings products, loans, agricultural value chains, or gig workers platforms—insurers can aggregate demand, reduce distribution costs, and mitigate adverse selection. These kinds of models leverage existing trust relationships and transaction data, making it easier to reach scale while keeping premiums affordable. Moreover, newer distribution models are emerging that push embedded insurance even closer to everyday points of care and consumption. In Nigeria, for example, AXA Mansard’s Kampé Model embeds low-cost health coverage directly within community pharmacies, allowing customers to access primary care, diagnostics, and medicines through simple, prepaid mechanisms. By anchoring insurance at trusted local service points and minimizing enrollment and claims friction, such models illustrate how embedded distribution can move beyond digital platforms to reach informal households at scale while preserving affordability and ease of use.
Linking insurance with value-added services can further strengthen the value proposition. Combining financial protection with care navigation, telemedicine, medicine benefits, or chronic disease management can improve utilization and outcomes—especially for noncommunicable diseases and maternal and child health. These services can also enhance customer engagement and retention. In Kenya, for example, Britam’s partnership with FSD Kenya and Jacaranda Health integrates health coverage with digital care navigation and proactive maternal health support throughout pregnancy and the postnatal period. By pairing insurance with tailored health messaging, referral support, and coordinated prenatal and postnatal care, the model illustrates how value-added services can improve continuity of care and health outcomes for mothers and newborns.
The role of public–private collaboration and supervision
Private innovation is most effective when it is aligned with public objectives and supported by a conducive policy and supervisory environment. Public–private collaboration can enable shared infrastructure for enrollment, payments, and data exchange, reducing duplication and improving efficiency. Partnerships that also address provider-side constraints—such as access to finance and quality improvement—can help clinics participate sustainably in insurance networks. PharmAccess has been a pioneer in that respect through its leveraging of digital solutions.
Supervisors have a critical role to play. Proportionate, risk-based regulation can protect consumers while allowing space for experimentation. Regulatory sandboxes with clear graduation paths can support innovation in areas such as micro-health insurance, embedded products, and parametric approaches. At the same time, stronger supervision around pricing transparency, claims settlement, and data protection is essential to maintain trust.
Operational efficiencies matter as well. Shifting contracts toward quality and outcome metrics can better align incentives across insurers, providers, and pharmacies. Open APIs and data portability—implemented with robust privacy safeguards—can lower barriers to entry, enable product bundling, and support consumer choice and portability.
“Start private to grow public.” – Nicole Spieker, CEO PharmAccess Foundation
From scaling coverage to shaping markets
Commercially provided health insurance will not replace public schemes, nor should it. But when designed for inclusion and anchored in strong supervision, it can be a powerful complement—helping to close coverage gaps, mobilize additional resources, and accelerate innovation in service delivery.
For policymakers, supervisors, and market builders, the implication is clear: the challenge is not to expand private coverage indiscriminately, but to shape insurance markets so they advance UHC objectives. This means focusing less on insurance as a narrow financing instrument and more on how product design, partnerships, and regulation can influence provider behavior, improve utilization, and protect households from financial shock. When these elements align, commercial insurance can contribute meaningfully to more resilient, inclusive health systems.
The Inclusive Insurance Innovation lab (iii-lab) of the Access to Insurance Initiative (A2ii), convened by CGAP, is working with supervisors in Guatemala and Namibia to bring together diverse insurance sector stakeholders to design solutions that help vulnerable populations better manage health risks. Stay tuned for new insights and learning from these innovation efforts.
