Index Based Insurance BASIX Experience

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Index Based InsuranceBASIX Experience

• I4 workshop, Addis Ababa
• July 2010

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Approach to Risk Mitigation
Risk Mitigation Approach


Non Financial Interventions
Financial Interventions
Offer Livestock Insurance
Preventive Vet Care for Livestock
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Insurance Product Suite
BASIX strives to offer complete risk management
services to its customers and its journey to
develop appropriate solutions still continues.
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Weather Based Crop Insurance
Background
The Current Product

• Eco System

• Experience so far

• Challenges Ahead

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Background

• Risk management particularly for rain
  fed-agriculture was identified as an important
  credit plus service to be offered to its
  customers
• Between 1999-2001, BASIX carried out research and
  pilots in testing the insurance concept for crop
  loss
• Which culminated in the first weather insurance
  pilot in 2003, in collaboration with ICICI
  Lombard and World Bank covering 230 farmers from
  7 villages

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The Current Product
Sample Product Configuration
Cover Phase I II III
Duration 35 days 35 days 40 days
PUT PUT PUT PUT
Strike (mm) lt 45 55 -
Exit (mm) lt 5 5 -
Notional (Rs / mm) 10.00 10.00 -
Policy Limit (Rs) 1,000 1,000 -
Phase premium (Rs) 110 100  
CALL CALL CALL CALL
Strike (mm) gt - - 500
Exit (mm) gt - - 570
Notional (Rs / mm) - - 10.00
Policy Limit (Rs) - - 1,000
Phase premium (Rs) - - 90
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The Current Product (Continued)

• Weather conditions at a weather station treated
  as proxy to assess the expected economic loss of
  farmer
• Sum insured unitized _at_ Rs. 1,000/-.
• Farmer to choose appropriate cover depending on
  his exposure and his attitude towards risk
• Policy starts on the day when cumulative rainfall
  reaches 50 mm- enough for sowing
• Three phases Sowing, Flowering, and Harvest
• Each phase pays out or not separately

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Eco System for Weather Insurance
Insurance Co ICICI Lombard
Re-Insurance Co Swiss Re
BASIX
Customer
Facilitators World Bank (CRMG) Indian Met
Dept NCMSL/INGEN (Pvt met data
provider) ICRISAT (crop research inst) ILRI
(Lac research inst) State Agri Dept
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Experience so far
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Experience so far (Continued)
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Experience so far (Continued)

• Implementing a contract with Development
  International Desjardins (DID) and FADQDI for
  replicating index based crop insurance in Sri
  Lanka.
• Worked with World Bank and the Asian Development
  Bank in transferring a part of the knowledge and
  experience gained in India to other stakeholders
  at
• Bangkok, Thailand in May-06 for Bank for
  Agriculture and Agricultural Cooperatives (BAAC)
• Dhaka, Bangladesh in Apr-07 for the MFIs in
  Bangladesh
• Addis Ababa, Ethiopia in May-07 for various
  stakeholders in Ethiopia including Insurance
  companies and government ministries.

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Challenges ahead

• Need to reduce basis risk through
• Deepening the network of weather stations to make
  the weather data more relevant to farms that are
  scattered over a wide geography
• Improved design of the product to increase the
  correlation of the indices to crop requirements
• yet simple enough for the easy comprehension of
  the majority of farmers, who are illiterate
• Product pricing has to be in an affordable range
  to be able attract a larger number of farmers

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Areas of our work related to IBLI

• We currently offer
• Livestock Insurance
• Index Based Insurance
• Experience from the same may be relevant to this
  project

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How can we interact with current project

• Setting up our operation in Ethiopia
• Will act as TA providers to MFIs
• Can assist by acting as distribution partners
  through our partner MFIs
• Can overcome some of the limitations of the
  current products in India and pilot IBLI even in
  India
• With the new technology
• With the new experience

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Challenges or issues we perceive would impact on
the research or collaboration in this project

• We currently have
• People
• Process
• Experience in Index and Livestock Insurance
• But we lack experience in IBLI

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Thank Youvatsaljoshi_at_basixindia.com
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Agri-Business development services
LSA travel to village
Credit
Insurance
Interacts, assesses and provides
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Financials
  2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-2010 Cumulative
No of customers 230 402 6,689 11,716 4,545 7,334 8,948 39,864
Claims settled 154 319 864 2379 537 1003 6694 11,950
of farmers who received claims 67 79 13 2 12 8 74.81 30
Premium Collected (Rs) 88,685 824,681 1,703,098 1,430,171 1,539,175 1,867,780 2,084,252 9,537,842
Claim amount Paid (Rs) 41,860 471,485 950,000 2,063,160 298,922 692,100 9,312,880 13,830,407
Loss Ratio 47 57 56 144 20 22 447 145
Weather Stations 1 5 36 50 45 40 11