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Box 5.2 VimoSEWA: Synergies between health insurance, health care, and health education The health service provided by SEWA to members is a particularly important resource for VimoSEWA’s health insurance. SEWA Health has worked to improve the skills of midwives and health workers, which has had a direct impact on reducing maternal and infant mortality. In some districts, a pharmacy service provides low-cost, generic drugs to members. Attempting health insurance without knowledge of diseases, health facilities and risk mitigation strategies will likely doom a scheme to failure. VimoSEWA has benefited from the experience of SEWA Health by better detecting fraud by members and providers, directing members away from inappropriate and expensive treatments, and by providing health promotion activities and information to insured members. Excerpted from Garand 2005 Box 5.3 Lessons from the insurance experience of ASA, Spandana and SHEPHERD Lessons: Mission, Vision and Outcomes • MFIs cannot provide all services; and clients cannot afford to buy numerous insurance products. The challenge for the MFI and its clients is to figure out the most cost-effective solutions to their clients' primary problems. • These cases demonstrate that the MFIs' mission and vision significantly influenced which products were selected and how they chose to sell and service them. • There appears to be a trade-off between reaching many people with a simple (mandatory) product and reaching fewer people with more complex, varied, and voluntary insurance. • MFIs should examine who is likely to receive a life insurance benefit. By ensuring that children, especially girls, can receive the benefit, the product could be more attractive to women. • For women to really benefit from life insurance, the coverage should be on the lives of their husbands. As the cases will show, however, this is easier said than done because of adverse selection problems that can emerge when coverage was extended to husbands without screening or age restrictions. • While an MFI might undertake prevention strategies to fulfill its social mission, these interventions could have the additional advantage of reducing claims. • It makes sense for MFIs to start with a simple life policy to learn about insurance. However, once MFIs know how to manage insurance risks, then it makes sense for them to move on and provide coverage that better meets clients' needs. Lessons: Delivery Mechanisms • There are many problems with the partner-agent model, but they can be fixed. • In India, where insurers are legally compelled to sell insurance to low-income clients, it is difficult to see the advantages of an MFI selling insurance in-house. 84
Microinsurance Box 5.3 Continued • MFIs do not have to be wedded to one insurance partner forever. If the insurer is not performing, the MFI can get a new partner. Yet if an MFI changes insurance partners too frequently, it can cause confusion among clients and staff. • The alternative to changing partners is to get existing partners to improve. SHEPHERD has adopted this approach by inviting insurers to the field so they better understand the target market and begin to recognize the difference between insurance and microinsurance. • To get good products and processes from insurers at a decent price, MFIs need to know what they want and they have to take the driver's seat in the negotiations. The larger they are, the more demanding they can be. • An efficient claims processing system is one of the most important points for negotiation. MFIs should insist that they pay the claims, and then be reimbursed from the insurer, based on documentation that is appropriate for their clients. • A review committee, with representatives from the MFI, insurer and clients, could be a way of improving claims processes. • MFIs should also persuade insurers to drop as many exclusions as possible, even if they have to pay a higher price. Lessons: Product Design • Efficiency depends less on the delivery model than on the simplicity of the product or product menu. • Simple products work best because they are easier to administer and easier for clients to understand. Adding riders is fraught with difficulties. Even small riders may have large consequences. • The link between insurance and a loan can improve efficiencies, but it also has significant limitations. Of the three, only SHEPHERD has concluded that insurance should not be linked to microcredit since risks can happen when people do not have a loan. • The target market is heterogeneous, so it is wise to offer a couple of different product options as long as they do not overly complicate the marketing message. • MFIs should only include benefits that clients can claim without difficulty. • If MFIs sell microinsurance to non-members, the organizations (or their insurance partners) are vulnerable to adverse selection risks. To control this risk, insurance should only be offered to persons who have joined a group for purposes other than accessing insurance. • Without actuarial calculations, premiums are likely to be set too high–which means that clients are getting poor value for money–or too low, which can place the entire scheme in jeopardy. • MFIs need to conduct a costing analysis to determine how much they need to earn in commission to cover their administrative expenses. • MFIs cannot afford to lose money on an in-house insurance scheme, so they have to price conservatively and hence overcharge their customers. Excerpted from Roth et al 2005 85
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Microfinance in India A State of th
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List of Tables Page No Table 2.1 Gr
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Preface and Acknowledgements This r
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Abbreviations ABC ADB BC BF CAR CAG
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CHAPTER 1 Overview and Summary of M
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Overview and Summary of Main Recomm
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1 1a 1b 2 2a 2b 2c 3 3a 3b 3c 4 4a
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The Light and Shades Study A major
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highest proportion of weak records
Page 36 and 37: their profitability after accountin
Page 38 and 39: allow the programme to grow organic
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Page 42 and 43: Endnotes 1 It is very hard to compa
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Page 46 and 47: linkages", 11 percent 3rd, and 5 pe
Page 48 and 49: References APMAS (AP Mahila Abhivru
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Page 53 and 54: Progress Under the MFI Model is fun
Page 55 and 56: Table 3.4 Comparative performance i
Page 57 and 58: Progress Under the MFI Model on lit
Page 59 and 60: Progress Under the MFI Model 4 Howe
Page 61: Progress Under the MFI Model Refere
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Page 66 and 67: size had actually come down during
Page 68 and 69: The point at which peer group press
Page 70 and 71: The lack of contact and communicati
Page 72 and 73: Box 4.1 Continued 4. MFIs will coll
Page 74 and 75: Endnotes 1 There will be many disag
Page 76 and 77: 19 The base suicide rate in AP is 1
Page 78 and 79: References APMAS, 2005, "A Report o
Page 80 and 81: (such as cattle and houses), and co
Page 82 and 83: The advantage of the provider model
Page 84 and 85: Some lessons learnt from experience
Page 88 and 89: 86 Table 5.1 Main Feature of Health
Page 90 and 91: Endnotes 1 While the microinsurance
Page 92 and 93: 16 A little less than a fifth of th
Page 94 and 95: 29 The rationale for transfer progr
Page 96 and 97: Roth, James and Vijay Athreye, 2005
Page 98 and 99: Issues and priorities for action re
Page 100 and 101: Endnotes 1 See for instance CGAP (2
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Page 104 and 105: such as Chaitanya who soon became s
Page 106 and 107: money to support operational expens
Page 108 and 109: finance, and the microfinancial ski
Page 110 and 111: Box 6.1 Continued in experts and to
Page 112 and 113: Endnotes 1 In a sense it always was
Page 114 and 115: 16 Examples are Margdarshak in Luck
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Page 118 and 119: Table 7:1 Commercial bank exposure
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Page 122 and 123: further review, RBI has modified th
Page 124 and 125: 9 Thus ICICI has sold some of its b
Page 126 and 127: B. Equity Investments by the Ventur
Page 128 and 129: Figure : The Bellwether triangle Lo
Page 130 and 131: Despite the weaknesses the public s
Page 132 and 133: Box 7.1 Continued foreign sources o
Page 134 and 135: Endnotes 1 At this point they will
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References ACCION, 2003, "The Servi
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SIDBI Foundation for Micro Credit (
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categories, depending on the amount
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The distribution of total disbursem
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Endnotes 1 It should be noted that
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B. Donor Participation in Indian Mi
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this has dropped to 8% on the curre
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and poor populations. More directly
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and expansion of available retailer
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11 SDC through various programs for
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1.1 Impact evaluation of Spandana's
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in the loan tenure of 24 months. Th
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There are two main motivations of a
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compensation structures used by Ind
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Endnotes 1 By Annie Duflo, Anvesha
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29 The main components of direct tr
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