[Microinsurancefocus] Microcare in financial crisis

Thu Apr 2 11:42:31 CEST 2009

Dear Jim

I also received it through a web-search that sends me articles relating to
"micro" insurance generally. It was an article published in the New Vision
news paper which is one of the big national daily papers in Uganda. The
article was on the front page of the paper I believe a week or so ago. I
have no doubt that there are always two sides to a story and I also have no
doubt that editors globally tend to print stories that highlight issues in
the worst light possible because that is how they sell newspapers!

Putting the specifics to one side, I do think that the Micro Insurance
Network steering committee might put some thought into what the role of the
MiN is in the public arena. It is inevitable that in the future there will
be some bad press about micro insurance and the way that the industry body
responds at that time will be critical and it will need to be timely so
having something ready to go which states industry facts will be critical.

Thanks

Richard Leftley

President & CEO

Telephone: +1 630 687 1950
Mobile: +44 (0)7800 593 604
Skype: richard.leftley
Email:  <mailto:richard.leftley at microensure.com>
richard.leftley at microensure.com
Web:  <http://www.microensure.com> www.microensure.com

http://www.microinsuranceagency.com/brandstationary/emailgen/microensure_log
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From: microinsurancefocus-bounces at microfinance.lu
[mailto:microinsurancefocus-bounces at microfinance.lu] On Behalf Of Jim Roth
Sent: 01 April 2009 23:21
To: microinsurancefocus at microfinance.lu
Subject: Re: [Microinsurancefocus] Microcare in financial crisis

I received earlier today an unsolicited letter from "Fnu Snu" with a
negative newspaper article from New Vision attached. I sent a reply asking
who Fnu Snu is and why they sent me this unsolicited email. I received no
response. My suspicion is that this letter and its contents are malicious. I
am reasonably well acquainted with Microcare and the information contained
in the newspaper is considerably at variance with my own knowledge of
Microcare and its status. I look forward to reading Microcare's reply to
what appears to be the systematic, unsolicited and anonymous spreading of
dubious information. I should add that I don't have a lot of knowledge about
the local papers in Uganda; but I am not inclined to believe in the
verification procedures or propensities of a newspaper that today moved on
to campaign for outing gay priests.

2009/4/1 Fnu Snu <snu_fnu at yahoo.com>

Microcare in financial crisis

By Barbara Among, New Vision Uganda

MICROCARE, Uganda's biggest health insurance company, has been struck off
the list of licensed insurance companies. The company, that covers 70,000
people in a network of 157 health facilities across the country, is facing a
financial crisis, in which over a dozen health service providers are
demanding over sh2bn in unpaid bills. 

The health providers on Wednesday filed a case in the High Court, seeking to
wind up the company.

In a public announcement on February 27, 2009, the Uganda Insurance
Commission drew a list of authorised insurance companies and warned the
public against dealing with unlicensed insurers, insurance brokers, agents,
loss adjusters, assessors and insurance surveyors. 

The commission listed five life insurance companies, 18 life insurance
brokers as well as 19 non-life insurance companies, non-life insurance
brokers. Microcare Insurance Limited never featured on any of the lists.

The Commission's acting boss, Evelyn Nkalubo-Muwemba, said Microcare,
incorporated in Uganda in June 2004, had failed to meet some licensing
requirements. "But as soon as the company meets this, we will licence it,"
she said.

For a company to be licensed, Nkalubo-Muwemba explained, it should have met
criteria such as the sh1b security deposit with Bank of Uganda, sh2.5b in
case of reinsurance business, approval by the insurance association, the
COMESA yellow card requirement, authorised share capital and paid up share
capital. 

Microcare however insisted that they have complied with all the Commission's
requirements for the renewal of their license.

"The Uganda Insurance Commission has not revoked or stopped Microcare from
transacting insurance business," said the marketing manager, Clare
Tumwesigye.

"It should be noted that it is normal for a company not to be advertised if
the regulatory body is still pursing some administrative processes. We are
in touch with the commission regarding our license of 2009 and would not
like to divulge the details of our discussions but you are free to inquire
from it (the commission) if we have been stopped from transacting insurance
business," she added.

Tumwesigye dismissed allegations that they owe health service providers
billions of shillings.

She said: "Microcare handles volumes of data processed every day and this is
bound to cause friction some times, which leads to reconciliation meetings
of accounts, which is what we are doing with some clinics. We do not want to
discuss our service providers' business in the press. 

Investigations by Saturday Vision however revealed that some of the health
service providers have suspended their services to patients under the
Microcare health insurance scheme. Some of the clinics have also either
taken legal action or are planning to do so to recover the money the health
insurance owes them.

The first client to drag Microcare to court was Kadic Hospital in Bukoto,
for non payment of up to sh150m, allegedly accumulated over three years.
Microcare has since paid sh60m, leaving a balance of sh90m. The company also
owes Case Clinic, sh700m, Paragon Hospital, sh770m, Mulago Hospital private
wing, sh180m and Kampala Family clinic sh60m. 

Others are Gulu Independent Hospital, sh150m, Mbarara Community Hospital,
sh67m, St. Catherine Clinic, sh108m, Byansi Clinic, Masaka, sh8m and Rubaga
Hospital, sh30m. Gulu Independent Hospital is the latest on the list to
serve the company with a notice to sue. 

Also owed unspecified amounts are Nsambya hospital, Bugolobi nursing home,
SAS clinic, Mayanja Memorial Hospital, Pan Dental Surgery, Victoria Medical
Centre and Nakasero Hospital among others. The other service providers that
have suspended their services with the company over unpaid bills include
Abii Clinic and Laboratory Services, Victoria Medical Centre and Friecca
Pharmacy in Wandegeya.

The Microcare financial crisis comes at a time when the Government is
planning to introduce a Social Health Insurance Scheme. 

Ten of the affected health service providers have engaged Kizito, Lumu and
Company advocates of Kampala seeking protection from the Uganda Insurance
Commission. The health service providers have also filed a case at the High
Court seeking to wind up Microcare.

Five companies acting as one 

Health service providers are complaining that there are five companies using
the name Microcare and acting as one entity. A look through the letters sent
or agreement signed between several companies and Microcare, spells
different names. There is Microcare, Microcare Health, Microcare Health Ltd,
Microcare Insurance and Microcare Insurance Ltd. 

The health service providers now fear that the company could easily close
shop without paying what is due to them. "The Uganda Insurance Commission
should inform us and the general public which company is registered under
the laws of this country with the Insurance Commission to offer insurance
cover to the public so that the public and other companies are protected
from becoming victims as our clients are, currently," the lawyers demanded.

To compound their worry further, the service providers said they  do not
know whether it is a registered insurance company since its files went
missing from the registrar of companies.  Further complicating matters are
clauses in the agreement signed between health service providers with
Microcare, which prevents them from directly reaching to Microcare clients.
It also stipulates that Microcare has the right to reject a bill if the drug
provided for is not agreeable to them, if doctor exaggerates a bill and when
a hospital treats congenital illness. 

"In accordance with the agreements, our clients have fulfilled their part
and to their dismay, the insurance company has consistently failed to honour
their part," the lawyers complained to the Commission. 

They claimed that Microcare has placed the bills under quarantine, instead
of paying them. This, they said, was a breach of contract. 

However, Microcare blames the delay in settling bills on incorrect or
exaggerated bills. The hospitals dismissed this accusation. They said the
Microcare desk at hospitals and clinics verifies the bills before any
treatment is provided. 

Affecting Operations 

Saturday Vision has learnt that a number of private health centres wallow in
debt, some of them resulting from heavy borrowing forced on them after
insurance firms delayed to settle medical bills. Some facilities have either
scaled-down their operations, are contemplating shutting down, or are
shopping for investors to re-capitalise and resuscitate the businesses.

The Microcare mess is just one of the troubles facing health service
providers. Several botched medical insurance schemes and expensive bank
loans have pushed a number of up market private hospitals into financial
difficulties. 

For instance, the Uganda Revenue Authority (URA) recently almost closed down
Kadic Hospital in Bukoto. The URA also raided the accounts of Paragon
Hospital due to non-remittance of PAYE, exceeding sh79m. 

"You send a bill of sh15m, they give you only sh8m. Each time you send them
a bill, they retain a certain fee and eventually you find the bill
accumulating," said an executive director of a hospital. 

Hospitals and clinics complained that these companies take several months,
at times years, before settling their bills. The general contract with
insurance companies is that they pay within 30 days of submitting an
invoice, but many insurance companies take as long as 4-6 months before
paying. 

In turn, the hospitals borrow from banks at high interest rates to meet
operational costs. 

Weak health insurance sector 

The scrapping of Microcare leaves only two companies, Medicare (under East
African Underwriters) and Liberty (under Standard Bank Group of South Africa
that trades here as Stanbic)  licensed to provide medical insurance. 

There are also Health Maintenance Organisations (HMOs) that operate in a way
similar to health insurance companies - taking funds from individuals and
companies to provide medical services in the long-term. Currently there are
five HMOs in Uganda: Africa Air Rescue (AAR), International Health Network
(IHN), International Air Ambulance (IAA), Kadic Health Foundation (KHF) and
Case Medicare. However, their services are not regulated by any law. 

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Dr. Jim Roth
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e-mail: jimroth at leapfroginvest.com

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