Creating a purple patch: Social Security for poor
March 17, 2010Financial Inclusion & Responsible Microfinance New Delhi
Needs pyramid
Source : National sample survey organization (NSSO), Government of India, FINCA’s poverty pyramid
People who have few (if any) assets – very limited chances to earn money
Credit
Savings
Entrepreneurial Poor
Self Employed Poor
Laboring Poor
Very Poor
People who are slightly below the poverty line
Insurance
Poor people who are meeting their basic needs by running micro-businesses
Farm laborers, domestics and unemployed workers
Safety Net Program
Income increasing across socioeconomic classes
Availability of credit restricted to lesser categories
Most of the other classes still dependant on savings
Making them very vulnerable to risks and uncertainties
Impact of risk and response
CONSEQUENCES• Income Loss• Asset Loss• Need for Lump sum Cash
RESPONSE• Use Savings• Borrow: Informal/Formal sources• Sells assets
SECONDARY IMPACTS• Diversion of household resources• Depleted financial reserves• Indebted for future income• Loss of income• Loss of access to financial markets
RISK
Protection :Affordability+Availability+Awareness
Protection tools: Current landscape General Insurance penetration is 0.6% of GDP as
compared to world average of 2.14% Despite rising rural prosperity Attributed to low consumer preference,
untapped rural markets and constrained distribution channels
A survey conducted among urban and rural below poverty line showed 67% of the respondents had used private
healthcare Spent Rs.100 to 250 per family per year on out
patient services Approximately 45% of the families borrowed
money for health needs Nearly 94% of the families had borrowed less
than Rs.5000
Source :SKS Survey, 2005-2006; Health insurance trends
Micro-insurance fundamentals . . .
Illiterate population
• Simple Products
• Transparent process
• Quantification of Benefits
• Simple Products
• Transparent process
• Quantification of Benefits
Infrastructure
• Online – Offline solutions, Smart cards
• Over the counter enrolment
• Door step service at villages
• Online – Offline solutions, Smart cards
• Over the counter enrolment
• Door step service at villages
Products
• Index based weather products
• Limited access healthcare -Micro Health Insurance
• Protecting income generation assets -2W, Shops, Pumps
• Index based weather products
• Limited access healthcare -Micro Health Insurance
• Protecting income generation assets -2W, Shops, Pumps
Admin
• Direct Sales Model- Rural Agents
• Kiosks
• Use of alternate channels- Rural financial institutions, MFIs, SHGs, Rural Retail chains
• Direct Sales Model- Rural Agents
• Kiosks
• Use of alternate channels- Rural financial institutions, MFIs, SHGs, Rural Retail chains
Universal insurance solution
Need for integrated coverage
Life, Accident, Health, Property, Weather
Simple and easy language
Flexible payment options
Ex. Sampoorna Suraksha program launched with a NBFC, awarded with Golden Peacock Award for Service in Jan 2010
Packaged offering: Major illness, Accident, Life, Shop cover
Multi lingual policy wordings Premium linked with loan installments
Adverse selection
Moral hazard
High operationcosts
Product understanding
Mandatory/Minimum Enrolment, Fixed Window periods
Renewal linked to loan Renewal, Pre-authorization, Co-paymentsOptimal use of Technology, simpler documentation Marketing initiatives at village level and doorstep education
Out Patient Clinics, Mapping of Health Seeking behavior and referrals
Effective grievance, re-dressal in public meetings, Timely payments Biometric Identification, Audits and Analysis of claims
Networking of Credible Providers, Audits
Inadequate infrastructure
Lack of trust
Fraud
Quality
Essentials at solution design stage
•Multi- channel approach•Multi- channel approach
Last Mile ConnectivityReaching the target Audience
•Creating basic visibility
•Mass media used to reach wider groups
•Focused discussions with groups at the villages
•Marketing initiatives at village level
•Health camps
•Capacity building measures undertaken
•Creating basic visibility
•Mass media used to reach wider groups
•Focused discussions with groups at the villages
•Marketing initiatives at village level
•Health camps
•Capacity building measures undertaken
Awareness
Availability Distribution
Rural agentsRural agents
E-enabled kiosksE-enabled kiosks
Micro-finance InstitutionsMicro-finance InstitutionsGovt. subsidized/ funded schemes
Govt. subsidized/ funded schemes
Distribution channels
Myth : Rural markets are expensive Truth : Rural insurance is not only commercially
viable but also profitable TRUST is the key success factor
Improving the lives of the billions of people at the bottom of the pyramid is a noble endeavour. It can also be a lucrative one…C.K. Prahalad
Fairly priced & a relevant productFairly priced & a relevant product
Cost effective distributionCost effective distribution
Administration using technology Administration using technology
Assuring accessibility & quality Assuring accessibility & quality
Experimentation
Innovation
Time
Flexible Policy
In conclusion
Thank you