Why you should CARE about microinsurance

We have written about microinsurance before, including SKS’s Vikram Akula’s decision to develop a product for his customers. Now, Bajaj-Allianz and CARE India will be developing a product of their own. In an interesting partnership between the charity and a commercial company, this venture will aim to help individuals substantially improve livelihoods through the safety net insurance can provide. On Allianz’s site there is a great interview with RN Mohanty, Chief Operating Officer, CARE India, speaking to this new partnership. Here is an excerpt:

The biggest challenge was definitely educating people that risk protection is an important part of their lives. We do this because we want to inculcate a culture of savings with the community, not just insuring for the time being. The general mindset in rural India is that unless you get something out of it immediately it is not worth investing. If you look at our client list, close to 90 percent are first-time insurers.

The rest of the interview can be read here.

Evolution of microfinance through lens of human resources

One of the most recognizable names in Indian microfinance has decided to step down from his role as CEO. Vikram Akula, the visionary founder and leader of SKS Microfinance will step down.

Mr. Akula says that this change will allow him to focus on a new initiative – microinsurance.  As MicroCapital reported earlier this year, SKS partnered with Bajaj Allianz Life Insurance Company to offer insurance products toclients.  This announcement comes amid rapid growth in the company. Suresh Gurumani, Director, Barclays Bank, will take over as SKS Microfinance’s CEO.  An official transition date was not given.  

This event marks a point of evolution for the microfinance industry at large as entrepreneurs are now looking to the next big financial product to develop for their contstituencies. As microfinance becomes increasingly commoditized and regulated, risk-takers like Akula are now pushing the envelope further to find other services that are in need. TC-I wishes Akuka the best in his new endeavor(s).

[Source: Microcapital.org]

[Guest Post]: Health Microinsurance Models

Editor’s Note: Aparna Dalal works with the Financial Access Initiative, a research consortium between New York University, Harvard, Yale, and Innovations for Poverty Action. FAI is focused on finding answers to how financial services can better meet the needs of poor households. FAI aims to provide rigorous research on the impacts of financial access and on innovative ways to improve access.

In India, it is claimed that 35 million households fall below the poverty line every year because of a health shock – consequently, health (micro)insurance is considered the most important protection mechanism for low income households that are particularly susceptible to health shocks because of their low saving buffer and poor living conditions. Unfortunately, health insurance is also considered the most complex type of insurance to administer because traditional economic problems of moral hazard and adverse selection are compounded by the need for a quality, reliable health service provider. The dominant health microinsurance delivery approach in India (partly due to regulation) is the partner-agent model. The idea is for mainstream insurance companies (like ICICI Lombard) to partner with microfinance institutions (MFIs) and NGOs. The insurance companies design the products and bear the actuarial risks while the NGOs and MFIs act as the delivery channel and earn a commission for their effort.

An alternate approach is community-based insurance. On a recent trip to India, I met two institutions implementing distinct community-based insurance models. Micro Insurance Academy (MIA), a Delhi-based institution, has developed a tool called CHAT (Choosing Healthplans Together) which allows communities to design their own insurance packages by involving them during the product design phase. Through CHAT community members can understand the trade-offs between covering illnesses within the plan and the associated costs. Uplift , a Pune-based association of organizations, involves the community differently. In their model, the insurance product is pre-determined and standardized across communities. Community involvement occurs at the claims settlement stage where community representatives (and not the insurance company) decide on the payout for each claim during a monthly meeting. Both models present interesting (and, thus far, unanswered) questions around transaction costs, client satisfaction, and scalability. But for a sector like health microinsurance, where the need and demand is substantial, diverse approaches should always be welcome.


Here are some major headlines with regard to microfinance in India:

A new technology platform designed specifically for microinsurance providers has been launched

ICICI and others have banded together to create a rating system for MFIs

A recent study indicates that microfinance is focusing more on the urban areas than before

NABARD sponsors trip for banking representatives to observe microfinance in Sri Lanka

[All articles from Microcapital.org]

Using Regulation to promote Social Business: The case of IRDA

Livemint reports that India’s insurance companies (private and state-owned) are expanding rapidly in rural markets, and have topped the IRDA’s mandatory rural targets.

Insurance Regulatory and Development Authority (IRDA) is Government of India body set-up to regulate the insurance sector, which has gone through significant liberalization in the last decade. IRDA has continuously emphasized the importance of covering under-served markets, especially in rural areas and has established strict annual rural sales targets for companies. Turns out companies see this mandate as an opportunity:

An analysis of data from seven life insurers for 2007-08 (data from previous years was not made available by the companies) accounting for at least 80% of the market, reveals that all of them topped their individual targets laid down by Irda. The targets vary every year.

Significantly, insurance firms did even better in terms of their so-called social sector objectives. The “rural business“ of these firms includes policies sold to both rich and poor people in rural areas. “Social business” includes only the number of policies sold to poor and
economically backward people.

Clearly, access to insurance products would provide much needed economic stability to the rural poor. It can be argued that IRDA is a example of a unique model – using regulatory mechanisms to promote ‘social business’. The Telecom Regulatory Authority of India (TRAI) also has pursued a similar strategy, by mandating cellphone companies to focus on rural markets. Of course, we have covered the social impact of cellphones in this space before.

[Graphic Credit: Livemint]

Tsunami Microinsurance

From PSD Blog — World Bank Group:

A new health insurance plan will enable the poor in India to buy health insurance for less than 10 cents a month, and it will cover natural disasters including Tsunamis.

The new program is a partnership between and aid group, CARE International, and a private insurer, Allianz. It is expected that over 200,000 customers will buy insurance within a year. According to Allianz, the communities have been involved in designing the new policies, which will cover death, medical treatment for injuries in accidents, help with funeral and hospital expenses, as well as paying wages during illness.