Bajaj Allianz Micro Insurance Initiative - India Case Study 9th International Micro Insurance Conference 2013 14 th November 2013, Jakarta Presented by - Yogesh Gupta Senior Vice President & Head Business Procurement, Micro & Mass Market
India: Economic Snapshot Only 5% of the Indian population is covered with some sort of insurance cover In India, Social Security Is virtually non existent This means that Close to 800 million People in Rural India have no insurance access There is an urgent need to provide insurance protection to these individuals Our company operates in a country where 32.7% of the population fall below the international poverty line of US$ 1.25 per day while 68.7% live on less than US$ 2 per day. This segment of the country largely has no access to the financial services. --------------------------------------- Large part of this population, which is below poverty line are without savings, credit or insurance services. Source: UNDP, World Bank 2010 Report Opportunity: Lower middle income group Emerging Trend: Opportunity at the ' forgotten Middle of the Pyramid 2
Challenges : Product Design - Rural Market Customer Profile Simple to understand as the target audience is largely financially illiterate Low awareness Documentation Limited availability of documents to determine health, age & primary education levels. Income Patterns Erratic and seasonal income hence lapsation trends can be higher than normal Small Ticket Sizes Efficient mechanisms for collecting premiums as little as US$ 1 per month against yearly premium
Product Development Dashboard An Innovative Micro Savings Product How would one define a good savings plan?? How do we measure against these parameters?? Affordable Affordable Available in small premium sizes Rs 45 (Less than $ 1 per month) Wide Coverage across ages Wide Coverage Individuals between the age of 0-65 male and female can be across ages covered. Flexible Low Surrender Penalty Premium withdrawal at any point during the policy tenure Flexible Non-forfeiture of premiums and continuation of policy Safety of Investment and competitive yield Both regular and single premium payment options available Capital Guarantee on the net investment premium Minimal documentation for enrollment and 0% Equity claims exposure across the fund Safety of Investment and Competitive Yield Returns declared on the existing fund. of 8.3% - 8.8% in last 5 years
Our Flagship Micro Insurance Product Innovation Sarve Shakti Suraksha which stands for Securing & Empowering Everyone Launched - April 2008 Nos of Lives Covered More than 7 Million
Sarve Shakti Suraksha - Simplistic & Customer Centric Key Product Features SSS (Sarve Shakti Suraksha ) Over the Counter Solution( OTC) Risk coverage with savings options Minimum Sum Assured per annum: Rs 2500 Minimum product term: 5 years Eligibility- Between 0-65 years Low Premium: Rs 45 (Less than $1per month) Minimal documentation at the time of product enrollment & Claims. Rider Available ADB & ADDB Incase of Death of the member- Sum Assured plus the account value of the customers investment On Maturity Value - The account value subject to the minimum maturity guarantee, Over the Counter (OTC) Solution Non Forfeiture of Premiums Low Surrender Penalty Easy Revival without Penalty Loan Against Policy Non Medical Underwriting Easy Enrollment by just filling One Pager form with on the spot Welcome Letter Standard Premium Across all Ages 6
Yet Another Hit in Micro Insurance & Financial Inclusion Group Term Life Product Product name (generic or marketing name) Product type (e.g. credit life, endowment, motorcycle) Country Distribution partner type (e.g. MFIs, banks, coops, retailers) 1 - sentence product description Group or individual product Covered risks & benefits / sum insured Premium range (min, max) Group Term Life Pure Risk Insurance coverage for a period of one year India Non - bank Microfinance Institutions (MFIs) & Common Service Centers An insurance product designed to provide risk protection against natural natural death death to the end customer Other benefits include an accidental death & disability rider Group Insurance Sum Insured: Minimum INR 1000, no limit on maximum coverage Risks covered: Natural and accidental death Disability rider is optional (but rarely implemented in microfinance ance context) MFIs deduct the outstanding loan balance (if any) from the sum insured nsured Depending on the group, underwriting rate is set by the company s underwriter s Varies based on group demographics Nos of Lives Covered More than 30 Million in last 5 years
Product Distribution Approach Rural Market Collaborate with strategic partners Associate with partners operating across these segments Have sound knowledge, understanding and access to captive customer databases Proper Infrastructure Have a service orientation Willing to get associated with service support and policy administration/servcing Support the insurer in intimation and resolution of claims and other requirements Promote insurance awareness Promote financial literacy and insurance awareness through specially designed tools Existing distributors of products/services Have a firmly established operation across specified core businesses Insurance cant be the sole business activity Help in buildling Low cost of distribution
Distribution Our Rural Business Model 70 Micro Finance Institutions More than 600 Co-op Scocities Credit/ Non Credit Co-operative Societies Micro Finance Institutions Rural Banks 200 Rural Banks Exploring Coffee/Tea/Sugar Board etc Boards & Associations Rural Business National E-governance Plan 7 NeGP Players with 60,000 CSCs NGOs, Organisation with Rural Presence such a Rural Retail Others We have piloted with 4 key Dairy Boards in Indian Dairy Federation Business Correspondents 10 Key BC Players with target reach to 20 million people
Rural & Micro Insurance Achievements (As on Sept 13) No of Lives Covered SSS GTL Total Lives Covered (in Millions) 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00 1.69 1.70 1.70 1.37 0.31 0.00 15.61 0.33 1.04 1.37 4.27 5.08 2.21 0.81 17.81 0.61 7.90 8.51 7.02 29.14 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Total Year 36.16 Total Nos of Lives Covered in last 5 years : 3.61 Million Figures are on Financial Yea Wise i.e. 1 st April 31 st March Figures as on September 13
Rural & Micro Insurance Achievements (As on Sept 13) Micro Insurance New Business SSS GTL Total 200 163.24 Premium ( in USD Million) 150 100 50 16 16.10 0.01 34.72 34.98 0.26 25.75 21.68 1.39 23.0720.34 5.41 27.57 16.03 43.60 9.51 19.75 10.24 130.63 32.61 0 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Total Year Total New Business Premium Collected in last 5 years : US $ 163.24 Mn Total Corpus under Micro Insurance in last 5 years : US $ 272.67 Mn 1 USD = INR Rs. 60 Figures are on Financial Yea Wise i.e. 1 st April 31 st March Figures as on September 13
Claim Settlement : The Moment of Truth Micro Saving Solution Sarve Shakti Suraksha Nos of Claims Received - 27,418 Nos of Claims Settled - 26,536 Claims Settlement Ratio (NOP) -96.78% Claim Received (Amount) -Rs. 174.65 or US $ 29.11 Mn Claims Settled (Amount) Rs. 169.10 or US $ 28.18 Mn Claim Settlement Ratio (NOP) 96.78% Claim Settlement Ratio (Amount) 96.81% Micro Saving Solution Group Term Life Nos of Claims Received - 1,74,197 Nos of Claims Settled - 1,70,413 Claims Settlement Ratio (NOP) 97.83% Claims Settlement Amount (Sum Assured) Rs. 227.56 Crores or US $ 37.92 Mn 1 USD = INR Rs. 60 Total Nos. Claims Settled under Micro Insurance Initiative 1,96,949 Total Claims Settled (Amount) Rs. 396.66 Crores or US $ 66.11 Mn Overall Claim Settlement Ratio (NOP) 97.31% 12
Claim Settlement : The Moment of Truth Claim Story
Our Cost Effective Strategy More Emphasis on Less Less Documentation Less Premium Less Operational Cost Service Delivery Products Claims Issue Master Policy Constant Interaction through community workers Process re-engineering to keep policy issuance cost less Keep it simple Lack of data can be a hurdle, so price as per experience Customized to the needs of the target segment Speedy settlement of Claims A marketing opportunity Underwriting Spread the risk Mutual basis premium / claim sharing 14
Microinsurance Business model: Large customer aggregator driven Mass Market Approach Activity: Example: Product development Marketing & sales Purchase of policy Bajaj Allianz Life & Aggregators Aggregators RO s/ Branches Member & the Aggregator In 2008, research conducted by partner on savings needs of its microcredit customers. Data collected as part of survey formed basis of product development approach. Mass awareness campaigns in villages, Product information disseminated through well organized daily center meetings Center meets serve as effective customer contact points. A typical client lives on less than 2$ a day Lives In rural areas or Slums generates income from activities such as agriculture, livestock, trade, production & services only members allowed Bajaj Allianz Life & Aggregator Bajaj Allianz Life & Aggregator Bajaj Allianz Life & Aggregator Claims Claims documentation Damage / Risk Verification and payments issuance Cheques issued by Bajaj Allianz Payment issued in partner branches or in center meetings Limited paperwork requirements Assessment of the claims received Verify and certify documentation Cancel out exclusions Death due to natural reasons, illnesses or accidents such as drowning, snake bites which occur in rural areas
Special Initiatives in Micro Insurance
To Summarize... It s an essential requirement Financial Inclusion The segment is vulnerable and exposed to different sorts of risks which can impact livelihood, Insurance performs the role of a efficient risk protection and social security tool. Easy and simple to understand products Simplified products, minimal documentation for enrollment and claims settlement, non forfeiture in case of premium non payment, 2 years for reinstating policy at no interest charges Financial Literacy and Insurance Awareness Cascading key messages on insurance concepts as well as product details using easy to explain simple tools Important tool to ensure portfolio quality, as members are aware and well informed about the key attributes of the scheme Ensures long term value creation and customer satisfaction. Microinsurance is a Social Business Opportunity 17
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