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Research to Design a Product that suited the poor: BASIX’s Experience . International Conference on Rural Finance Research Moving Results into Policies and Proctices Rome, 19-21 March 2007. Need for crop insurance…. We recognized that rural poor face high risk in agriculture

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research to design a product that suited the poor basix s experience

Research to Design a Productthat suited the poor: BASIX’s Experience

International Conference on Rural Finance Research Moving Results into Policies and Proctices

Rome, 19-21 March 2007

need for crop insurance
Need for crop insurance…
  • We recognized that rural poor face high risk in agriculture
  • Inquired about possibility of insurance
  • Review of literature and discussion with Insurance companies revealed:
    • Has not worked almost anywhere
    • Dispersed production: High cost of delivery
    • High cost of assessing risk
    • High Covariant risk
going back to people
Going back to people…
  • Wanted people to administer insurance
  • People were willing to pay 1/6th of the production as premium
  • Were not willing to assess losses
  • Three elements of the risk:
    • Price Risk
    • Risk arising from factor conditions
    • Risk arising from inadequate effort, skills
new thoughts on design
New thoughts on design…
  • Segregate the different risks
  • Insure for those that can be measured
  • Most significant factors that could affect production:
    • Rainfall
    • Pest control
  • Looking at the measurability and mixing with the effort variable, we decided to work on Rainfall
research to design product
Research to design product
  • 30 year Rainfall and Agricultural Production data collected and analyzed along with the actuarial team of ICICI Lombard introduced to us by World Bank – Commodity Risk Management Group
  • Established relationship between
    • rainfall
    • in different geographical area
    • for different crops
  • Pilot testing in 12 villages in one district
scaling up
Scaling up
  • Encouraging Result: Insurance claims of 154 farmers settled in the year
  • Second year: offered the package in 3 districts
    • New crop-rainfall relations had to be studied
    • Rainfall measurement stations not there: Explored new but affordable weather-stations
  • Claim Pay-outs of ICICI Lombard was met from the premium collected: Right pricing
  • Third year: Offered in 30 locations including with Non-BASIX partners covering 100,000 farmers
thereafter
Thereafter…
  • This product had to be approved by IRDA
  • Nine other ‘poor friendly’ products designed by BASIX in collaboration with 3 insurance companies: covering risks of Life, Health, Agriculture, Livestock, Non-farm Enterprises
  • Membership in the Board of IRDA, the countries top regulatory authority
  • Today there are 500,000 farmers insured: Not solely bundled with our loan products
  • 7,000+ insurance claims settled till now
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