Mutual's answer to the partner agent model


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Presentation made by M. Balasubramanian (Programme Leader, DHAN Foundation, India) at the 6th ICMIF Development Network Seminar (1-2 November 2012; Nairobi, Kenya)

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Mutual's answer to the partner agent model

  1. 1. Mutual’s answer to the partner agent model November 2, 2012 S.Balasubramanian DHAN Foundation
  2. 2. • DHAN Foundation is a premier NGO of India working with over onemillion families in 10,000 villages and slums in 12 states – TamilNadu, Andhra Pradesh, Karnataka, Orissa, Madhya Pradesh,Jharkhand, Kerala, Assam, Maharasthra, Bihar, Rajasthan andPondicherry - in more than 220 locations (panchayat unions / blocks)with about 400 professionals working at the grass roots• The insurance program has genesis in DHAN since 1992.•The insurance has been accessed to over one million poor withdifferent risk covers – Life, health, livestock, crop and pension(longevity risk)•The insurance is accessed through collaboration with mainstreaminsurers and mutual solutions
  3. 3.  Kalanjiam Community Banking Program Tank fed Agriculture Development Program Coastal Conservation and Livelihood Development program Rainfed Agriculture Development Program Tata-Dhan Academy- Development Management Education Information Communication Technology for poor Democratizing Panchayat Climate change adaptation Migration and development Youth and development Heritage Tourism
  4. 4. Community Banking Programme Promote alternative financial services and mechanisms at the grassroots level for poor women
  5. 5. Tankfed Agriculture Programme Organise the farmers to conserve and develop tanks and improve tank fed agriculture
  6. 6. Coastal Conservation and Livelihood Development Programme Relief (immediate) Livelihood restoration (short term) Habitat reconstruction (medium term) Coastal zone conservation and management (long term)
  7. 7. Reviving the best practices of rain fed farming and promoting livelihoodsRainfed Agriculture Development
  8. 8. Tata-Dhan Academy Grooming young graduates into development professionals, undertake research studies & documentation of experiences
  9. 9. Developing IT applications for poverty alleviation and livelihood promotionInformation Technology for poor
  10. 10. Democratizing panchayats anddeveloping them as effectivelocal governance systems
  11. 11. People Mutuals is the insurance initiative of DHANFoundationPeople institution promoted by federations of poorSeparate entity to implement the insuranceprogramme for poor organized by DHANProgrammesSupported by Oxfam Novib, Rabobank Foundationand Achmea Foundation
  12. 12. • Collaboration with mainstream insurers• Mutual solutions•Hybrid approach - Accessing mainstream insurance productsand mutual solutions for the gaps in the mainstream products.
  13. 13. Partner agent model Full Service Model Mutual Model Provider Model
  14. 14. •Commercial insurers together with MFIs / NGOs as partner agents•Insurers utilize agent’s delivery mechanism to provide sales and basic services toclients•There is no risk retention and limited administrative burden for agents•The insurer absorbs the risk•The agent markets the product through its established network.•Lowers the cost of distribution and thus promotes affordability.•win-win situation: The distribution potential of the MFI with the institutional capacity ofan established insurer•MFI itself will not place any risk on its loan portfolio•Leverage potential: The insurance company may be able to reinsure part of its exposure•Possible disadvantage: Insurance products too mechanically down streamed to thepoor.•New concept of “micro-insurance agent ” in India, in addition to insurance agent /corporate agent / insurance broker•Micro-insurance agent can be NGO / SHG / MFI•Micro-insurance agent can be appointed by an insurer by entering into a deed ofagreement
  15. 15. •Local communities, MFIs, NGOs and/or cooperatives•Develop and distribute the product, manage the risk pool and absorb the risk.•There is no involvement on the part of commercial insurers.•The policyholders own and manage the insurance program, and negotiate i.e., withexternal health care providers under health insurance•Essential features:•Voluntary membership•Based on groups possessing common characteristics (members of a sameorganization, villages, etc.)•Promotion of solidarity, democracy, social cohesion, etc.•Improve access to insurance through risk-sharing/resource pooling•Not-For-Profit•Mutual interest organizations (owners/ deciders/policyholders = members). Whichimplies: •Participation mechanisms (design of the insurance product and organizational options) •Control mechanisms (organizational and financial)•Pro poor / member systems and processes. Example: Under health insurance, nomedical-based selection of the members
  16. 16. Appropriateness of Mutual Insurance•No mainstream product in tune with the needs•Lack of appropriate systems and processes•For small and frequent risks•Existence of strong social capital
  17. 17. Co-existence of mutual and commercial insurance•Assessing the insurance needs of members•Negotiating and accessing appropriatemainstream insurance products•Mutual insurance to address the gaps For covering the risks of members in entirety
  18. 18. Co-existence of mutual and commercial insuranceLife insurance: - DHAN’s experience •Life risk cover up to 60 years – Mainstream insurance •Life risk cover ≥ 60 years – Mutual insuranceHealth insurance: •Hospitalisation care cover – Mainstream insurance •Primary care cover – Mutual insuranceOnly mutual insurance is possible, when there are lack of pro member products /processes or both.Example: Mutual insurance crop income insurance – Lack of pro member product Livestock insurance – Lack of pro member processes
  19. 19. Health initiatives
  20. 20. Micro Pension
  21. 21. Challenges for mutual insurance•Mostly operate in small geographies and with smallpopulation of membership thus limiting the geographicalspread of risks and law of big members•Initial zero levels of solvency funds•Not with in the radars of regulation Prohibits access to reinsurance and the claim payments would be jeopardised if the initial years are bad, thus influencing the viability of insurance operations and the programme sustainability