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

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

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  1. 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

  2. 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

  3. 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

  4. 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

  5. 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

  6. 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

  7. 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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