Bharagav Dasgupta

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Creating a purple patch:

Social Security for poor

March 17, 2010

Financial Inclusion & Responsible Microfinance

New Delhi



Needs pyramid

Source : National sample survey organization (NSSO),Government of India, FINCA¶s poverty pyramid

People o ave fe (if

any) assets ± very limitedc ances to earn money

Credit

Savings

Entrepreneu

rial Poor

Self Employed

Poor

Laboring Poor

Very Poor

People o are slig tly

belo t e poverty line

InsurancePoor people o are meeting

t eir basic needs by runningmicro-businesses

Farm laborers, domestics and

unemployed orkers

Safety Net Program

Income increasing

across

socioeconomic

classes

Availability of credit

restricted to lesser categories

Most of t e ot er

classes still

dependant on savings

Making t em very

vulnerable to risksand uncertainties



Impact of risk and response

CONSEQUENCES� Income Loss

� Asset Loss

� Need for Lump sum Cash

RES ONSE� Use Savings

� Borrow: Informal/Formal sources

� Sells assets

SECONDARY IM ACTS

� Diversion of household resources� Depleted financial reserves

� Indebted for future income

� Loss of income

� Loss of access to financial markets

rotection :

Affordability+Availability+Awareness

Specific to household

Health Events

Life Cycle Event

Covariate (common)

Weather variations

Natural calamity

Epidemic

Crop failure

rice fluctuations



Protection tools: Current landscape

General Insurance penetration is 0.6% of GDP as comparedto world average of 2.14%

Despite rising rural prosperity

Attributed to low consumer preference, untapped ruralmarkets and constrained distribution channels

A survey conducted among urban and rural below povertyline showed

67% of the respondents had used private healthcare

Spent Rs.100 to 250 per family per year on out patientservices

Approximately 45% of the families borrowed money for health needs

Nearly 94% of the families had borrowed less thanRs.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

Infrastructur

e

� 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 easylanguage

Flexible payment options

Ex. Sampoorna Suraksha program launched with aNBFC, 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 operation

costs

Product

understanding

Mandatory/Minimum Enrolment, Fixed Window periods

Renewal linked to loan Renewal, Pre-authorization, Co-

payments

Optimal 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

AvailabilityDistribution

Rural agentsRural agents

E-enabled kiosksE-enabled kiosks

Micro-finance

Institutions

Micro-finance

Institutions

Govt. subsidized/

funded schemes

Govt. subsidized/

funded schemes





Myth : Rural markets are expensive

Truth : Rural insurance is not only commercially viable butalso 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 technologyAdministration using technology

Assuring accessibility & qualityAssuring accessibility & quality

Experimentation

Innovatio

n

Time

Flexible Policy

In conclusion



Thank you

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Bharagav Dasgupta