Improving Access to Insurance for the Poor (IfP) A pproach of the - PowerPoint PPT Presentation

Microinsurance and Social Protection Improving Access to Insurance for the Poor (IfP) – A pproach of the World Bank (IfP) A pproach of the World Bank EUROPEAN MICROFINANCE WEEK 2008 EUROPEAN MICROFINANCE WEEK 2008 12 th – 14 th November 2008 Luxembourg Luxembourg Vijayasekar Kalavakonda The World Bank Washington DC Insurance for the Poor World Bank Group World Bank Group

Microinsurance Coverage - Gl b ll Globally Region Lives Population Living on Insured <$2/day Africa 3,478,096 Americas Americas 7 800 238 7,800,238 Asia s a 6 , 67,221,169 , 69 ~2 BILLION O Total 78,499,503 4 BILLION Source: The Landscape of Microinsurance in the World’s 100 Poorest Countries, April 2007 Countries, April 2007 Insurance for the Poor World Bank Group World Bank Group

The Challenge The Challenge ATLEAST 1 Billion Covered Lives – By 2015 How do you? <100 million Covered Lives – TODAY 100 illi C d Li TODAY Insurance for the Poor World Bank Group World Bank Group

Characteristics of the Target M Market / Population k t / P l ti � Unorganized, informal sector and predominantly rural. p y � Access to abundant and cheap labor i.e., Social Human Capital Social Human Capital � Distrust the market BUT have limited choice � Pay a huge “POVERTY PENALTY” � Pay a huge POVERTY PENALTY Insurance for the Poor World Bank Group World Bank Group

Constraints of Developing Mi Microinsurance Market i M k t DEMAND SIDE ISSUES DEMAND SIDE ISSUES SUPPLY SIDE ISSUES SUPPLY SIDE ISSUES Lack of AWARENESS (i.e., education) A need to demystify insurance products & services including policy terms. Lack of TRUST (i.e., poor experience of A need to simplify CLAIMS SETTLEMENT dealing with insurance companies in the PROCESS including documentation for claims past) processing. AFFORDABILITY (mismatch between High TRANSCATION COSTS (i.e., need for ability-to-pay and price of insurance lowering the cost of distribution and claims p product) ) processing/settlement from an average of $8 p g g per policy to less than 25-50 cents per policy) Off-the-shelf product(s) do not meet the Lack of investment in PRODUCT NEED (i e lack of customization of product NEED (i.e., lack of customization of product DEVELOPMENT DEVELOPMENT to address the needs of the Poor) Regulatory constraints Insurance for the Poor World Bank Group World Bank Group

The WB role in insurance for the poor p � Developing business models � Microeconomics of providing insurance and risk related services to the working poor households � Promoting market development programs � Developing market-based risk funding systems that can be scaled up � Threefold approach � Investments in building market infrastructure � Technical assistance in developing new products T h i l i t i d l i d t � Integration into social protection approach Insurance for the Poor World Bank Group World Bank Group

The World Bank’s Approach Developing New Business Models Insurance for the Poor World Bank Group World Bank Group

Moving towards a public-private-people sector partnership (PPP) t t hi (PPP) � The public sector may not be the best Th bli t t b th b t manager of financial services… � …But insurance for the poor is unlikely to be But insurance for the poor is unlikely to be � scaled up without government support � Public-private partnership Public private partnership � Delivery of agriculture and health services to the working poor � Premium subsidies to those below the poverty line P i b idi t th b l th t li � Private – people sector partnership � Leveraging Social Human Capital to build “TRUST” � Leveraging Social Human Capital to build TRUST and “LAST MILE CONNECTIVITY” � Lowering the TRANSACTION COST Insurance for the Poor World Bank Group World Bank Group

Leveraging People Sector Leveraging People Sector � Increasingly development will need to be delivered on a co-production mode � PPP has a new “P” for people Public Sector Private Sector People Sector Insurance for the Poor World Bank Group World Bank Group

THE PEOPLE SECTOR Hypothesis : The supply side (both public and private) Hypothesis : The supply side (both public and private) cannot be made more efficient in helping the poor unless it’s in the context of an p organized demand Principle : Help communities help themselves to address P i i l H l iti h l th l t dd � Government failures � Market failures Market failures Rationale : Poor people have a huge untapped potential Rationale : Poor people have a huge untapped potential � For public sector - Largest voting bank � For private sector - Largest potential market for products and services Insurance for the Poor World Bank Group World Bank Group

THE PEOPLE SECTOR THE PEOPLE SECTOR Strategy : Strategy : � Gaining Voice � Reaching Scale Reaching Scale How: 1 The software: Build institutions OF the 1. The software: Build institutions OF the poor (vs. institutions FOR the poor) � Organization, social capital, capacity building g p p y g � Irrespective of whether it is for public or private goods 2. The hardware : Put assets in the hands of poor people l � providing opportunities for income generation � Income will strengthen the “voice” � Income will strengthen the voice Insurance for the Poor World Bank Group World Bank Group

The Software The Software ☞ Groups organized around a strong common purpose (social cohesion and/or economic incentive) ☞ Strong inclusion and (self) targeting methodology – beware of risks of elite capture gy p ☞ Use scale to develop a market and leverage access to financial services (incl insurance) access to financial services (incl. insurance), access to markets and service providers (crowding-in) (crowding-in). ☞ Foundation for local governance and accountability accountability. Insurance for the Poor World Bank Group World Bank Group

The Software – The graduation model d l Franchising Community Trade Trade Retailing R t ili enterprises t i Banking Marketing Commodity Federation of Savings & services Cooperatives p User Groups p Loans Coops Loans Coops Different levels of associative tiers Different levels of associative tiers Affinity-based Resource-based Activity-based Irrigation, Savings and Loans Assets/marketing g Watershed, forestry Watershed, forestry Insurance for the Poor World Bank Group World Bank Group

The Case of Andhra Pradesh (INDIA) Insurance for the Poor World Bank Group World Bank Group

Institutional Building Structure st tut o a u d g St uctu e Z S Zilla Samakhya District MS 1069 Mandal Samakhya y Block VO 34,269 Village Organization Vill O i ti Vill Village Self-Help 10 – 15 members SELF Groups SELECT to form a SHG 7,08,313 > 8 million women members State Level Insurance for the Poor World Bank Group World Bank Group

Livelihoods Of the Poor SO CIAL SO CIAL DIMENSIO N DIMENSIO N ECO NO MIC DIMENSIO N ECO NO MIC DIMENSIO N • Empowerment of Community • Thrift • Education • Credit • Credit • Health • Health • Bank Linkage • Tackling Social issues like • CIF child marriages. • Livelihoods Li lih d • Risk Mitigation Ri k Miti ti • Safety Net through insurance Insurance for the Poor World Bank Group World Bank Group

Insurance and Social networks of the poor • Tie up with an Insurance Company • Nodal Agency for the scheme • Maintain data base and Call Centre • Issue Certificate of Insurance/Bonds • MIS • Capacity building of its staff and community ZS • Pay out solatium within 24 hours through • Bima Mitras • Planning and Monitoring MS • Training of VOs • Claim documentation • Office bearer is member of Area Committee • Member education VO • Enrollment • Collection of premium • Reporting claims • Facilitate documentation of claims Insurance for the Poor SH SH SH SH SH SH World Bank Group World Bank Group Gs Gs Gs Gs Gs Gs

Comparative advantages p g Insurer Insurer CBOs CBOs • Provide risk cover • Provide risk cover • Enrollment • Enrollment • Training of CBOs • MIS g • Claim Settlement • Claim documentation • Part settlement within 24 hours Insurance for the Poor World Bank Group World Bank Group

Self Management - Modus Operandi g p Call Center- a hub of all the 1. community based insurance community based insurance interventions are carried out by the community are established in all the 22 Districts with IT support . It functions all through the 365 days. It g y is well equipped with computer connected to the web portal, human resources like a Manager, Operator and an accountant. 2. During the awareness and enrollment the insured family members are educated about call centers and given the Call Centre Phone Number i th C ll C t Ph N b to inform at the Center of any causality immediately. 3 3. Bima Mithras: a Strong social capital Bi Mi h S i l i l are selected, trained and positioned from among the SHG members to deliver the insurance services to the community community. Insurance for the Poor World Bank Group World Bank Group