1. D Sattaiah VP Corporate HR & Insurance
Risks faced by Rural Households and Private Sector Insurance Initiatives in India A paper presented on Aug 10, 2007 at Policy Forum of Agriculture and Rural Development for reduction of poverty and hunger in Asia: In pursuit of inclusive growth and excellence
D Sattaiah
VP Corporate HR & Insurance

2. Indian Scenario 72.4% Population is engaged in Agriculture
72.3% Households live in Rural Areas
28.3% Rural poverty (27.5% overall poverty)
Entire rural sector is un-organized
99% rural HH in un-organized sector
Overall 92% in unorganized sector and
Unorginsed sector contributes 40% of GDP
Literacy over 64%

3. Indian Workforce Workers Total Main Rural Urban 401 (100%) 312 (78%)
Marginal
Rural
Urban
401
(100%)
312
(78%) 89
(22%)
308
(77%) 93
(23%)
Farmers
32%
26% 6%
31% 1%
Agri Labour
27%
16%
11%
HH Industries 4% 3%
Others
38%
33% 5%
18%
20%

4. Vulnerability to risks is higher for those in the lower economic rungs
Households Income/Assets
Poverty Line
A dose of micro-credit/ Ag-BDS
Risk event
Time
Hence poor household insurance needs are obvious

5. Risk coping mechanism of rural poor
Covariance .
Asset sale,
Migration
Borrowings,
Asset Pledging
Savings –
Self Insurance
Severity

6. Indian Insurance Sector
Public Insurers Monopoly till year Today 24 private insurers in market
Penetration is < 3% insurable population as per GTZ study
Ranks 19 in aggregate premium and 54 in penetration
Mandated target to reach under
Rural sector business Life - 7% polices in year 1 to 18% in year 6; General 2% in year 1 to 5% in year 3 and so on
Social Sector – 5,000 polices in year 1 to 25, 000 in year 6 for both Life & General
IRDA Micro Insurance Guidelines
Products limits defined – commission for agents enhanced – given additional roles to mediators
Micro Finance Institutions given a vital role

7. Insurable Risks Faced by Rural Households
Occupation
(% rural workers)
Means of Income
Risks faced
Possible Insurance Products
Farmers
(31% )
Farming
Yield Risk
Crop Insurance, Weather insurance
Price Risk
Produce damage
Implements damage
Asset Insurance
Livestock
Death & Disability
Livestock Insurance
Labourers (26%)
Human Body
Illness, Accidental injuries, Scarcity of wage employment
Health Insurance,
Rainfall Insurance
Artisans
Machines/Tools
Breakdown & Damage
Asset Insurance, Accident insurance
Traders
Stock
Theft, damage
Fire Policy
For all households
Life Insurance, Health, Disability Insurance

8. There are two types of products available
Group Products
Designed and delivered to an existing group of people
Such groups availability is limited
Most of the time they are linked to along with other services
Operating costs are low
Retail Products
Voluntary - Sold
Cost of selling and servicing is disproportionately high

9. Rural household common insurance needs – and retail products available
Possible Insurance Products
Public Insurers (1)
Private Insurers (15)
Term Life Insurance including accidental death benefits
Only one product – Jana Shree Yojana – funded by Social Security Fund
Most of the Companies have such nominal products but with very limited out reach to poor
Health Insurance,
All the 4 companies offer Universal Health Insurance Product funded by the Union Government – but with very limited out reach
- Nil-
Household item Insurance
Not being offered currently.
There were few products

10. Farmer Insurance needs & retail products available
Possible Insurance Products
Public Insurers
Private Insurers
Crop Insurance
Offered by only AIC
- Nil-
Weather Insurance
Offered by AIC
Only 2 companies offer (ICICI Lombard & IFFCO Tokyo)
Electrical Electric Pump Insurance
Available but not sold actively
Only 2 or 3 companies offer this product
Livestock Insurance
Offered by all 4 companies but with limited out reach
Only 2 to 3 companies offer this product (Royal Sundaram)

11. Labour insurance needs and retail products available
Possible Insurance Products
Public Insurers
Private Insurers
Rainfall Insurance – for wage loss compensation; community assets like ponds for fishing
Nil-
-Nil -
Accident Policy – particularly to cover the prominent risks coming out of the nature of labour engaged in
Janata Accident Policy available but wit limited reach
- Nil-

12. Artisans/enterprise holder – retail products available
Possible Insurance Products
Public Insurers
Private Insurers
Asset Insurance for traders, service providers and petty manufacturers
Nil –
Has shop keepers policy where the deduction is minimum Rs 10,000, hence excludes all the tiny enterprisers
Only one company is offering the product – Royal Sundram Alliance General Insurance Company( Royal Sundaram)
Sheep insurance
Nil-
Though used to be available
One company is offering but very insignificant reach
(Royal Sundaram)

13. Mission of BASIX
Is to promote large number of sustainable livelihoods, including for the rural poor and women, through the provision of financial services and technical assistance in an integrated manner.
BASIX will strive to yield a competitive rate of return to its investors so as to be able to access mainstream capital markets and human resources on a continuous basis.

14. Our Strategy IDS Livelihood Triad LFS Ag/BDS
(Institutional Development Services)
Livelihood
Triad
LFS
(Livelihood Financial Services)
Ag/BDS
(Agriculture/ Business Development Services)

15. BASIX’s Approach to insurance services
Offer products
Distribute Insurance
Insurer
BASIX
Rural Customer
Inputs for products
Feedback on needs

16. BASIX collaborations in insurance
Life Insurance -AVIVA
Health Insurance-Royal Sundaram
Livestock Insurance –Royal Sundaram
Micro-Enterprise-Royal Sundaram
Rainfall Insurance- ICICI Lombard
BASIX
Equity for Equity

17. Products performance as on 31-03-2007
Since
Coverage (cum) person/policy years
Claims (cum)
Premium outgo current and cumulative
Life – Group
Oct-2002
500,000
1,487
93% (68%)
Health
May-2005
335,000
4,033
31% (24%)
Livestock
34,000
1,005
98% (95%)
Rainfall
June-2003
18,500
3,716
144% (87%)
M. Enterprise
Mar-2006
4,500 7
144% -Too early to assess
10,248

18. Technology use Use software for insurance transactions
Se up Rural BPO for efficient transactions
Use online training facility
On line premium and claim transactions between BASIX and Insurer

19. Key Innovations … Life Group product Life retail product
Non exclusion of suicide for benefit
Life retail product
Coverage starts from 10th day of premium payment
1 year grace period for premium payment
Limited Health Insurance – Group product
BASIX deployed claim facilitators who help insured to get medical care and build claim form

20. …. Key Innovations Livestock –retail product Rainfall – retail product
Overcome the constraint of lack of veterinarian by
Insurability certification by BASIX staff – (Non veterinarians)
Claims certification by surveyor
Rainfall – retail product
Product structure based on local crops, customer choice on trigger points and premium sizes
Facilitate set up the rain gauge stations by private company NCSML
Micro enterprise – retail product
Deduction of 10% of SI or 500 whichever is maximum

21. Insurance –Challenges & Possible responses
Sell insurance concept to poor
Educate on insurance utility
Sell protection products first
Demonstrate the effect of insurance; Exempt from taxes
Efficient distribution
Collaborate with alternate channels and share expertise
Pay remunerative commissions – a minimum level of commission to be allowed
Come out with appropriate product and process
Rationalize products ,
Simplify process and
Adopt technology support,

22. Potential Strategy for Insurers
Product Needs order of priority
Premium to cover
Investment + Savings + Term
Risk, Expenses & profit
through product differentiation
Higher Income
Risk, Expenses &marginal profit
Protection+ Savings
Middle Income
Lower Income 26%
Risk to begin with and costs increasingly
Protection

23. Thank you dsattaiah@basixindia.com www.basixindia.com