Date: 14 – 15 October 2005

 Jointly Conducted by:

Insurance Regulatory and Development Authority of India (IRDA)Institute of Insurance and Risk Management (IIRM)

United States Agency for International Development (USAID) 

Supported by:BearingPoint

Workshop on

Micro Insurance

Dr. G. GandhiFaculty Member

National Insurance Academy, Pune

Presented on 15TH OCTOBER 2005

MICRO INSURANCE FINANCING & DISTRIBUTION – ISSUES AND CHALLENGES

HEALTH FINANCING – INDIA’S POSITION

By the `degree of risk sharing’, India is one among those countries of `Medium Risk Sharing’ category of health financing system.----According to World Bank’s econometric study in 191 countries and its analysis based on :

…. Whether an “universal coverage system” achieved

….. Financed in a social health insurance & general taxation system ………….less-developed coverage system (Ref : www.who.int/country-profiles/main.cfm)

Among 61 medium risk sharing countries… – three following variants are observed –

1. Health Insurance covers all employees / self-employed ?

2. Only employees?3. Specific groups only, using for instance,

Mutual health funds and enterprise based Health Ins.

for particular workers groups?

HEALTH FINANCING – INDIA’S POSITION

Five indicators of Health System Attainment :1. DALE Idx (Disability Adjusted Life Expectancy), 2. IR Index ( Level of Responsiveness), 3. IFFC Index( Fairness of Financial Contribution)4. IRD Index( Distribution of Responsiveness)5. IECS Index (Equality of Child Survival)

These 5 variables indicate “Countries with a health financing organisation in

the advanced or medium-risk sharing categories are seen to have significant impact.”

HEALTH FINANCING – INDIA’S POSITION

`Micro insurance – especially Micro Health Insurance for the poorest of poor’-ie `BPL’ -has only attained just a tip of the ice-berg.

Out of app.300 million BPL, < 5 million are covered under some health ins. Scheme.

HEALTH FINANCING – INDIA’S POSITION

POOR , THE MOST VULNERABLE It is always the poor who are more

vulnerable to all different kinds of risks, and hence suffer the most.

Therefore, this aspect needs deeper

analysis and ‘responsible research study’ in order to profile the risk properly in order to serve the very poor.

And poor not to be equated with other segments of society.

 

STOP LOSS COVER Where smaller claims are numerous) it is based on premium vs. claims incurred %.contribution by respective stakeholdersIf it is to be assumed Rs.100 , is the premium contribution needed to raise the financial capital required to support `Health Insurance risk sharing for attainment of its goals’, it can be raised as below :

HEALTH FINANCING – Reinsurance/ Social Re/ ART Model

HEALTH FINANCING – Reinsurance/ Social Re/ ART

Model

20%

20%

30%

30%

Risk Profiles : Mass co-variant

Risk of global scale- recent TSUNAMI

National Calamity-Cyclone, Flood,Drought,Epidemics,man –made disasters

Referrals -high hosptl.Expenenses

Regular Hospitalization &Wellness Cover

10% ART (Alternative RiskTransfer Mechanism) --------------------10% Social RePool

Commercial Reinsurance

(Regular) CommercialInsurers - (3% of annl.net profit.)+ Private Insurers 1%

Micro insurance Units (MIUs)

ILOUNOUSAIDWBDisaster

PoolGIC Donors-

Central/State Govt.

Traditional `Business Models’ of LIC & GIC companies

Are they fit enough to have the `Reach’ or `scale of operations’ in Micro Insurance?Do they have to restructure themselves?Do they have to find new channels to partner with?Are the regulations or Acts , if we are to introduce these new `models’ (business models which already proved effective for micro insurance ), need to be reformed or amended?

WHAT ARE NEW CHANNELS ?(POST IRDA)

We‘ve seen already a plethora of tie up partners:

Bank assurance partners Corporate Agents Co.op. partners- Mutuality Society(new avatars) NGO partners- MFIs ( new avatars )SHWGs-Micro insurance (micro health) agentsOthers –Direct marketing agents,brokers,

Internet(web world )Rural KIOSKS

WHAT ARE NEW CHANNELS ?E-marketing Channels:New Technology Extension Outreach

Internet(web world –Reliance) Rural ‘Info-KIOSKS’ - (ITC(e- choupal), EID Parry,

RAJiv Internet centres) On line (web enabled) marketing of all insurersCall CentresToll free IVR System in vernacular interface(interactive voice response ) Simuter- a PDA (personal access device) - cost effective for extending outreach in remote areasSmart KCC (Kissan credit card)…4.25 croresComputer “Munshies”(CM)-To serve 100-300 SHGs in a specific ‘geo-span’ and that can be accessed by all stakeholders & social intermediaries.

4. What is the IT infrastructure available with Radiant to offer to Service Channel Partners?

Radiant is building a State of the Art IT infrastructure for the 5550 kiosks to connect to and provide services of business entities who become Service Channel Partners of Radiant

This will consists of a state of the art Data Centre, Disaster Recovery Centre, Call Centre & a Portal

World-class technologies from IBM will be employed to create a Stable Secure and Scalable Infrastructure

Suitable Application Software to manage the transactions will be developed as per business requirements or alternatively Application software solutions already developed by Service Channel Partners can be loaded on to our system

The kiosks at all the locations will have access to our IT infrastructure and deliver world class service

5. Who is a Service Channel Partner?

A Service Channel Partner is any business entity who has a product or service to offer to the rural markets and is interested in using the IT infrastructure and network of 5550 Internet enabled

Centres managed by Radiant to expand their business

6. What are the benefits to the Service Channel Partners?

A business entity that intends to register as a Service Channel Partner can enjoy many benefits such as:

Saving of huge costs involved in setting up similar IT infrastructure required and the associated costs of the software and personnel required for management and maintenance.Reach out to a huge geographical area of 2/3 rd of the state of Andhra Pradesh and 50 million people.

Building a retail network for the productsAdvantage of the physical presence of the Kiosk operators in 5550 villages Utilize the premises of the Internet centre for stocking goods retail sales Utilize the premises for brand building and marketing campaigns Advertise in the premises by means of Posters and Banners Project /business development for :

a. Contract Farming b. Fisheries c. Poultry Farming d. Forestry

e. Animal Husbandry f. Commodity Exchange g. Distance Education h.Computer Education

I. Training j.Data Acquisition k. Research l.Information Gathering

m. Bio Mass Power n.Wasteland Development & Many Others….

NEW CHANNELS & CHALLENGES?New Technology Extension Outreach!- IT IS

POSSIBLE REMOTELYTo have a one -to-one contact physically……. “Creating a huge infrastructure of our own”

– Impossible !!

Can we utilize an already existing one ?– Yes! like for example the PDS (Public Distribution

System)–Largest retail network in India Govt. of Maharastra already decided to hand over to the SHGs /NGOs the handling of affairs of PDS - Local self governance-empowering women to

manage themselves under private cos.(ITC) platform for logistics and back end support.

ROLE OF VARIOUS GOVT./ NON-GOVT./ AGENCIES/ INTERMEDIARIES

I. Role of gram panchayats/ block/ disctirct level – DRDAsVarious Govt. Depts. & development corps – Tribal development corps

Women & Child WelfareSC/ ST/ BC Dev. Corps.Social welfare dept.Slum clearances –ex. THADCO for Housing development for weaker section.

II Co-operatives (segmental)Fishermen cos.

FISHCOFEDPalm gur co-opsArtisans & Handicrafts co.ops.Handloom weavers co.ops.Grape growers co-operativesSugarcane growers co-op.Dairy co-operativesMarketing co-operatives

Role of Various Govt./ Non-Govt./ agencies/ intermediaries

Role of Various Govt./ Non-Govt./ agencies/ intermediaries

Banking & non-banking financial institutionsNABARD thro’ MFIsPublic sector Banks & private sector BanksRRBs & Branches(lowest NPAs,highest recovery rates,creating volumes)

Primarily creating the major “missing link”’

i.e. access to credits

for entering into livelihood enterprises

IV. Role of NGOs/ Non-formal institutions/ trusts (based on trust created for building

sustainable civic institutions)FacilitationCapacity building-leadership trainingOrganizationalAll sorts of Micro finance interventions. ….

micro savings Creating forward & backward linkages-for micro credit delivery & servbices.

Role of Various Govt./ Non-Govt./ agencies/ intermediaries

HLL – Sakthi (consumer goods) ITC- E-CHOUPAL(soya choupal) EID Parrys- Rural Kiosk-Agri. Info.

Role of Various Corporates co.s/ MNCs (Corporate Social

Responsibility)

State/ Central Govt.’s Role1. Provide necessary budgetary allocation

to provide the subsidy.2. To facilitate passing of bills /

amendments of Acts.3. Provides the required `infrastructural’

development in Rural Areas1. Road network access2. Telecommunication & IT3. Health4. Education5. Food processing/ cold storage chains like

that of Dairy industry

4. Cross subsidizing from other segments like

1. Health tourism- Health Bonds2. IT Dept.-VDS- Investing in health bonds

– while proceeds go & subsidise – rural health insurance

5. Create a kind of “social re” : all the stakeholders right from

grass root level SHGs.to Global Leaders/Institutions to contribute for creating the ‘social –re pool.

State/ Central Govt.’s Role

Donor agencies Role in Micro Insurance

To develop their skills before involvement1. Knowledge to develop low income markets2. Technical expertise in insurance3. Access to local market knowledge4. To look for right `operator-support’SOLUTION :1. To encourage commercial insurer to work

with MFIs2. To limit self funding of donors3. Encash on “MDG” of Donor agencies &

Govts.

Issues and Challenges

1. Pricing – sustainable low-cost are suitable to lowest income group15 – 20% - set aside on commission15 – 20% - operational cost5 - 10% - policy taxes10% - towards frauds, reinsurance cost friction costs (inefficiencies)45% - set aside for claim payout

2. SHGs & NGOs – Legally fit ?3. Other informal & socially backward

segments … Who would organise them?……. (contd.)

Issues and Challenges…contd.

4.Recommendation & transaction costs “simplification of products and procedures

5.Affordability issues – needs are growing?6.Financials – cross subsidization & its

administration – big example – Uni Health Insurance

7.Corporate social responsibility of regular insurers – “can it be pure commercial business models”

8.Self regulatory organisations-issues.