Can financial solutions like epidemic bonds, pandemic funds, and insurance mitigate the impact of outbreaks in India?
By Dr KS Uplabdh Gopal and Dr K Madan Gopal,
India has recorded its first case of Mpox, a viral disease that, until now, had largely bypassed the country. The infection, imported by a traveller from an affected nation, involved the less virulent clade two strain, a relative of the more dangerous clade 1b found in parts of Africa. Though the immediate risk of a large-scale outbreak remains low, and there is no need to panic, the episode serves as a stark reminder of how quickly viral threats can emerge. It raises a more pressing question: Is India financially prepared for the next pandemic? The time for action is now.
As the World Health Organisation (WHO) frequently reminds us, pandemics are not just public health crises but also economic disasters. The COVID-19 pandemic vividly illustrated how a viral outbreak can weaken economies, pushing millions into poverty and derailing development gains. With the scars of that pandemic still fresh, India has an opportunity to lead in crafting financial mechanisms that could shield it from the worst economic impacts of future outbreaks. If implemented effectively, these solutions could pave the way for a more resilient and prosperous India.
The Case for Epidemic Insurance
India’s public health infrastructure was severely tested during the COVID-19 crisis. Hospitals buckled under the strain, supplies were scarce, and economic livelihoods were shattered. The pandemic exposed the vulnerabilities of a system that has also been forced to contend with periodic outbreaks of dengue, chikungunya, and Nipah virus. COVID-19, however, was the tipping point.
The COVID-19 pandemic has been a harsh teacher, particularly in financial preparedness. India’s government was forced to inject emergency funds into health systems, launch economic stimulus packages, and stabilise a faltering economy. The announced ₹20 lakh crore in stimulus measures during COVID-19, equivalent to nearly 10% of its GDP, were reactive measures—improvised, often delayed, and, in many cases, insufficient. This experience underscores the need for proactive financial solutions such as epidemic insurance, pandemic bonds, and fintech-powered risk pools—measures that provide liquidity at the outbreak’s onset rather than in its aftermath.
Epidemic insurance is the first line of defence in such scenarios. Much like auto insurance that pays out after an accident, epidemic insurance would release funds immediately when predefined outbreak conditions are met. In a public health emergency, this could mean the difference between a minor outbreak and a full-blown national crisis.
Addressing Mpox Through Health Insurance Coverage
India’s first Mpox case also raises important questions about health insurance coverage for emerging diseases. Health insurance plans in India typically include coverage for viral infections like Mpox under the standard provisions for infectious diseases. However, with treatment costs rising sharply, especially in metro areas, people are advised to review their policies to ensure sufficient coverage for hospitalisation, diagnostic tests, and treatments. Additional financial protection during outbreaks could be achieved through riders for quarantine or specific infectious disease policies.
Financial Tools in Epidemic Preparedness: Bonds, Funds, and Insurance
Epidemic bonds are financial instruments designed to trigger payouts once an outbreak reaches a certain threshold. They operate like a nation’s insurance policy, providing funds when public health emergencies threaten to overwhelm national resources. The World Bank’s Pandemic Emergency Financing Facility (PEF) launched such bonds in 2017, intending to release rapid liquidity to low-income countries facing epidemics.
During the COVID-19 crisis, epidemic bonds were found to have significant limitations. The delayed payouts due to overly restrictive criteria limited their effectiveness. The World Bank issued $195.8 million in pandemic bond payouts during the crisis, but many of these funds were released only after the peak of outbreaks. If India opts for epidemic bonds, it must ensure that payout triggers are designed to be timely and flexible, responding quickly when funds are needed most.
Pandemic funds are tools—preemptively set aside by governments, international organisations, or the private sector—to ensure immediate access to money during health crises. These dedicated pools are essential for financial preparedness, sparing governments the need for emergency fundraising amid a disaster. The potential challenges or obstacles in implementing epidemic insurance, pandemic bonds, and other financial solutions in India could include establishing practical payout triggers, ensuring timely and flexible disbursement of funds, and securing collaboration and resources from the government and the private sector.
India could take cues from the Indian Pandemic Risk Pool proposal, which suggested the creation of a risk pool akin to the National Agriculture Insurance Scheme (NAIS) but geared towards health emergencies. Such a fund would pool government and private sector resources, providing immediate liquidity to hospitals and local authorities and ensuring rapid response capabilities during an outbreak. The establishment of a pandemic fund could also draw on global experience. For example, Gavi’s COVAX facility pooled funds to ensure equitable access to COVID-19 vaccines worldwide, a model that India can localise to finance pandemic responses. This underscores the importance of international cooperation in pandemic preparedness.
NITI Aayog and the PHEMA Initiative
India’s national planning body, NITI Aayog, has been at the forefront of proposing solutions for pandemic preparedness. Its recent initiative, the Public Health Emergency Management Agency (PHEMA), envisions a centralised institution responsible for managing public health emergencies, including the financial aspects of pandemic responses. A newly released report by NITI Aayog recommends the creation of a “Zero-Day Fund,” which would be triggered the moment an outbreak is declared. The PHEMA initiative and this fund could create the institutional architecture necessary for coordinating rapid disbursements and managing funds across states and sectors.
Fintech’s Role in Pandemic Preparedness
The role of financial technology, or Fintech, in epidemic preparedness cannot be overstated. India’s digital payments infrastructure proved invaluable during the COVID-19 crisis, enabling the rapid distribution of emergency funds through the Public Financial Management System (PFMS). Fintech has the potential to do much more.
Digital Insurance Platforms
As epidemic insurance becomes a key pillar of preparedness, Fintech could power the infrastructure that delivers rapid payouts to hospitals and health workers. By digitising insurance claims and payouts, fintech platforms could ensure that resources flow immediately where needed most, reducing bureaucratic delays.
Furthermore, fintech firms could develop insurance products tailored for health crises. In countries such as Singapore and Thailand, insurers have already rolled out policies covering specific treatments related to COVID-19. Fintech could democratise access to similar products in India, ensuring more comprehensive coverage during future pandemics.
Blockchain for Accountability
A perennial problem with pandemic funds and bonds is ensuring transparency and accountability. Blockchain technology offers a solution by creating a tamper-proof ledger of transactions, verifying that funds are reaching the intended recipients. This could be particularly useful in ensuring that funds are not misappropriated or misused during health emergencies—a common issue in large-scale relief operations. By deploying blockchain to track the disbursement of epidemic bond payouts and pandemic funds, India could strengthen trust in these financial tools, ensuring they serve their intended purpose.
Public-Private Partnerships: Strengthening India’s Pandemic Defences
No epidemic insurance scheme can function in a vacuum. Public-private partnerships (PPPs) are essential to ensuring success. India has already demonstrated the effectiveness of PPPs in healthcare through the Pradhan Mantri Jan Arogya Yojana (PM-JAY), which involves private hospitals in delivering care to low-income families. This model could be expanded to include epidemic insurance.
The government could underwrite portions of epidemic insurance policies, making them affordable for private sector participants. Meanwhile, private insurers could be incentivised to develop products tailored for epidemic coverage. Countries such as Singapore and Thailand have successfully rolled out COVID-19-specific policies, reimbursing patients for medical costs associated with treatment. In India, such models ease the financial burden on individuals while ensuring private hospitals remain financially viable during public health crises.
India could also partner with global organisations like the World Bank to establish a pandemic bond system, providing immediate funds for outbreaks. Such a partnership would create a financial buffer, allowing India to respond swiftly to future health emergencies.
International Cooperation and Vaccine Diplomacy
India’s participation in global health initiatives, such as its Vaccine Maitri programme, has demonstrated its commitment to global pandemic preparedness. During COVID-19, India supplied over 66 million vaccines to nearly 100 countries, many of which were in Africa and Asia. By leading global vaccination efforts, India positioned itself as a critical player in pandemic diplomacy.
In future pandemics, India could leverage its international relationships to form partnerships with institutions such as the World Bank, Gavi, and CEPI to co-finance pandemic preparedness measures.
Urban-Rural Divide and Cold Chain Challenges
India’s preparedness for pandemics must also address the stark urban-rural divide in healthcare infrastructure. While urban centres have advanced medical facilities, rural areas often need more basic healthcare services. Any epidemic insurance scheme must be designed with this disparity in mind, ensuring that funds and resources are allocated equitably.
Additionally, India’s cold chain infrastructure—the system for storing and transporting vaccines—must be strengthened to ensure the timely delivery of vaccines in both urban and rural settings. Lessons from COVID-19 highlight the critical role of an efficient cold chain in vaccine distribution, and pandemic insurance should include provisions for upgrading and maintaining this infrastructure.
Epidemic Insurance: A National Security Imperative
While often framed as a public health issue, pandemic preparedness is, at its core, a matter of national security. Epidemics can destabilise economies, overwhelm healthcare systems, and sow social unrest. The misinformation spread during COVID-19 is a stark reminder of the chaos that can follow an unchecked public health emergency. Epidemic insurance is, in effect, a national defence strategy—a financial safety net that ensures India can respond swiftly to future outbreaks without risking economic collapse. Just as India invests in military defences against external threats, it must invest in financial defences against the next viral pandemic.
While international collaboration is often hailed as essential for pandemic preparedness, there are valid concerns about the influence of foreign interests on India’s domestic policies. In the rush to secure international funding and support from institutions like the World Bank or Gavi, India risks becoming overly reliant on external agencies, potentially compromising its autonomy in decision-making. The conditions attached to international aid or loans may prioritise the interests of donor countries or organisations over India’s specific public health needs. Additionally, global pharmaceutical companies, in their pursuit of profit, may pressure India to adopt solutions that favour their business models, such as high-cost vaccines or treatments, rather than focussing on affordable, scalable solutions tailored to India’s population, exacerbating health inequities, particularly between urban and rural areas. To safeguard its public health, India must balance leveraging global resources and maintaining sovereignty over its pandemic response strategies, ensuring that national interests remain the top priority.
The stakes are clear: building a robust system of epidemic insurance will protect India’s health and economic future. In doing so, India could become a global leader in pandemic preparedness, charting other nations’ paths.
Dr. K. S. Uplabdh Gopal is an Associate Fellow at the Observer Research Foundation, focusing on health policy. Dr. K. Madan Gopal is Advisor of the Public Health Administration at the National Health Systems Resource Centre (NHSRC)—MoHFW, Government of India, specialising in public health reforms and resilient health systems.
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