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Risk modelling for microinsurance

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Workshop on Micro Insurance Date: 14 15 October 2005 Jointly Conducted by: Insurance Regulatory and Development Authority of India (IRDA) Institute of Insurance ... – PowerPoint PPT presentation

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Title: Risk modelling for microinsurance


1
Workshop on Micro Insurance
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
2
MICRO INSURANCE FINANCING DISTRIBUTION ISSUES
AND CHALLENGES
  • Dr. G. Gandhi
  • Faculty Member
  • National Insurance Academy, Pune
  • Presented on
  • 15TH OCTOBER 2005

3
HEALTH FINANCING INDIAS 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 Banks 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)

4
HEALTH FINANCING INDIAS POSITION
  • Among 61 medium risk sharing countries
  • three following variants are observed
  • Health Insurance covers all employees /
    self-employed ?
  • Only employees?
  • Specific groups only, using for instance, Mutual
    health funds and enterprise based Health Ins.
  • for particular workers groups?

5
HEALTH FINANCING INDIAS POSITION
  • Five indicators of Health System Attainment
  • 1. DALE Idx (Disability Adjusted Life
    Expectancy),
  • IR Index ( Level of Responsiveness),
  • IFFC Index( Fairness of Financial Contribution)
  • IRD Index( Distribution of Responsiveness)
  • 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.

6
HEALTH FINANCING INDIAS 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, lt 5 million are
    covered under some health ins. Scheme.

7
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.
  •  

8
HEALTH FINANCING Reinsurance/ Social Re/ ART
Model
  • STOP LOSS COVER Where smaller claims are
    numerous) it is based on premium vs. claims
    incurred .
  • contribution by respective stakeholders
  • If 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

9
HEALTH FINANCING Reinsurance/ Social Re/ ART
Model
Risk Profiles Mass co-variant
Risk of global scale-
recent TSUNAMI
10 ART (Alternative Risk Transfer Mechanism)
-------------------- 10 Social Re Pool
20
20
30
30
ILO UNO USAID WB
National Calamity- Cyclone, Flood, Drought,Epidemi
cs, man made disasters
Disaster Pool GIC
Commercial Reinsurance
Donors- Central/ State Govt.
(Regular) Commercial Insurers - (3 of annl.net
profit.) Private Insurers 1
Referrals -high hosptl. Expenenses
Regular Hospitalization Wellness Cover
Micro insurance Units (MIUs)
10
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?

11
WHAT ARE NEW CHANNELS ? (POST IRDA)
  • Weve 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) agents
  • Others Direct marketing agents,brokers,
  • Internet(web world )Rural KIOSKS

12
WHAT ARE NEW CHANNELS ?
  • E-marketing ChannelsNew 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 insurers
  • Call Centres
  • Toll free IVR System in vernacular
    interface(interactive voice response )
  • Simuter- a PDA (personal access device) - cost
    effective for extending outreach in remote
    areas
  • Smart KCC (Kissan credit card)4.25 crores
  • Computer Munshies(CM)-To serve 100-300 SHGs in
    a specific geo-span and that can be accessed
    by all stakeholders social intermediaries.

13
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

14
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.

15
  • Building a retail network for the products
  • Advantage 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.

16
NEW CHANNELS CHALLENGES?
  • New Technology Extension Outreach!- IT IS
    POSSIBLE REMOTELY
  • To 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.

17
ROLE OF VARIOUS GOVT./ NON-GOVT./ AGENCIES/
INTERMEDIARIES
  • I. Role of gram panchayats/ block/ disctirct
    level DRDAs
  • Various Govt. Depts. development corps
    Tribal development corps
  • Women Child Welfare
  • SC/ ST/ BC Dev. Corps.
  • Social welfare dept.
  • Slum clearances ex. THADCO for Housing
    development for weaker section.

18
Role of Various Govt./ Non-Govt./ agencies/
intermediaries
  • II Co-operatives (segmental)Fishermen cos.

  • FISHCOFED
  • Palm gur co-ops
  • Artisans Handicrafts co.ops.
  • Handloom weavers co.ops.
  • Grape growers co-operatives
  • Sugarcane growers co-op.
  • Dairy co-operatives
  • Marketing co-operatives

19
Role of Various Govt./ Non-Govt./ agencies/
intermediaries
  • Banking non-banking financial institutions
  • NABARD thro MFIs
  • Public sector Banks private sector Banks
  • RRBs Branches
  • (lowest NPAs,highest recovery rates,creating
    volumes)
  • Primarily creating the major missing
    link
  • i.e. access to credits
  • for entering into livelihood enterprises

20
Role of Various Govt./ Non-Govt./ agencies/
intermediaries
  • Role of NGOs/ Non-formal institutions/ trusts
  • (based on trust created for building
    sustainable civic institutions)
  • Facilitation
  • Capacity building-leadership training
  • Organizational
  • All sorts of Micro finance interventions. .
    micro savings
  • Creating forward backward linkages-for micro
    credit delivery servbices.

21
Role of Various Corporates co.s/ MNCs (Corporate
Social Responsibility)
  • HLL Sakthi (consumer goods)
  • ITC- E-CHOUPAL(soya choupal)
  • EID Parrys- Rural Kiosk-Agri. Info.

22
State/ Central Govt.s Role
  1. 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 Areas
  4. Road network access
  5. Telecommunication IT
  6. Health
  7. Education
  8. Food processing/ cold storage chains like that of
    Dairy industry

23
State/ Central Govt.s Role
  • Cross subsidizing from other segments like
  • Health tourism- Health Bonds
  • IT Dept.-VDS- Investing in health bonds while
    proceeds go subsidise rural health insurance
  • 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.

24
Donor agencies Role in Micro Insurance
  • To develop their skills before involvement
  • Knowledge to develop low income markets
  • Technical expertise in insurance
  • Access to local market knowledge
  • To look for right operator-support
  • SOLUTION
  • To encourage commercial insurer to work with MFIs
  • To limit self funding of donors
  • Encash on MDG of Donor agencies Govts.

25
Issues and Challenges
  • Pricing sustainable low-cost are suitable to
    lowest income group
  • 15 20 - set aside on commission
  • 15 20 - operational cost
  • 5 - 10 - policy taxes
  • 10 - towards frauds, reinsurance cost
  • friction costs (inefficiencies)
  • 45 - set aside for claim payout
  • SHGs NGOs Legally fit ?
  • Other informal socially backward segments
    Who would organise them?. (contd.)

26
Issues and Challengescontd.
  • 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.

27
Thank you
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