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