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Some lessons learnt from experience so far
Clearer
communication
about the terms
and conditions
of the insurance
they have
bought, speedy
clearance of
claims, and
introducing
products that
carry maturity
benefits would
all serve to
increase the
proportion of
members who
avail of
insurance
While a growing number of MFIs are offering microinsurance, an important issue is the extent
to which the products offered are meeting client needs preferences. It takes time for many
MFI members to get used to the idea of paying an annual insurance premium and getting back
nothing in return, although with time, as claims are made and paid out, many of them do
become convinced and willing to join the scheme. MFIs on the other hand have an obvious
immediate interest in protecting their loans, as well building up economies of scale by expanding
outreach as soon as possible, and many of them make insurance compulsory, at least initially.
EDA (2005) discusses the balancing act that MFIs have to face between what is practical and
sustainable for them as service providers with what is responsive to members' needs. It points
out that clearer communication about the terms and conditions of the insurance they have
bought, 30 speedy clearance of claims, and introducing products that carry maturity benefits
would all serve to increase the proportion of members who avail of insurance.
Examples of products with such maturity benefits are return of life insurance premium if policy
holder survives 31 , or of sum insured 32 or payments of periodic lumps sums, or of pension. One
of the best known pension products was LIC's Krishi Shramik Samajik Suraksha Yojna under
which a premium of Rs 365 per annum or Rs 1 a day paid for life and disability insurance as
well as lump sum survival or pension benefits after the age of 60. 33
A summary of the valuable lessons to be gleaned from the experience of three MFIs, ASA,
SHEPHERD, Spandana, who have offered insurance for some years is contained in Box 5.3.
Box 5.1 Issues in Livestock Insurance: SHEPHERD's Experience
For some time SHEPHERD had been running a livestock insurance scheme with UIIC. Unlike
ASA's livestock insurance, which is compulsory for its milch animal loans, SHEPHERD's coverage
is voluntary and some members even continue their coverage after they have repaid their loan.
In roughly half of the cases of persons taking out a loan for livestock, they also buy in to the
insurance. According to field staff, some of the reasons why clients choose not subscribe to
the insurance scheme include:
• Cost: The premium is a one time payment of 4% of the animal's initial value (as determined
by a veterinarian and also serves as the sum assured), which typically amounts to
Rs 400 ($9);
• Money down the drain: If the animal does not die, it is much harder to justify "losing" the
large premium than the smaller ones for life and health insurance;
• Term: The current policy is for one-year of coverage, but some members want the flexibility
to sell the animal during the course of the year;
• Extra formalities: The availability of the vet to prepare the paperwork and assess the
health and value of the animal is an additional complication that may also deter potential
policyholders; and
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