The twenty-first session of the Conference of Parties (COP-21) recognised the importance of insurance as an integral part of national climate risk management strategies and the high potential for building financial resilience by expanding insurance. It stated that the insurance industry has the potential to contribute significantly to making societies more resilient with respect to the adverse effects of climate change. While the Paris outcome marks a milestone in climate policy, anchoring it within a comprehensive risk management paradigm, we are in the fourth year of the project which provides micro insurance solutions.
The overall objective of the said project is to create resilience amongst vulnerable populations-often people at the base of the pyramid (BoP) – by providing financial protection against three classes of risks, all of which are exacerbated by climate change: human health, crop and livestock. Hence it is called the “RES-RISK” project. The project offers composite packages that provide insurance coverage to the members in all three risk classes through a single window and a process, maintained by local people that the entire community knows and trusts. The challenges of achieving this objective include reaching out to the population to understand their risks, gather their perception about climate change, develop suitable insurance options customized to the needs of the people, and devise the mechanisms and strategies to catalyze acceptance of such solutions among the target population.
The project is motivated by realizations, such as-
RES-RISK's model for implementation of Community Based Mutual-Aid Scheme (CBMAS) deals with how to engage with populations that are unfamiliar with the process of insurance, have usually lived without it, are uncertain if they could enforce contracts with insurers, do not have the education or information to evaluate the value-for-money of an insurance policy, unable or unwilling to pay more than small amounts unless convinced, and may distrust anyone outside the immediate community (especially when it comes to giving away their money). Yet grassroots communities practice and are experienced with informal reciprocal relations for mutual aid among community members during periods of financial stress. The implementation model builds upon the social capital underlying such informal arrangements and expands them to introduce a rule-based system that is contextualized, needs-based and demand-driven. The project uses the existing social structure of Self-Help Groups (SHGs), farmer groups and a cooperative to enhance the outreach of the scheme and ensure a high level of participation; working with a system that is sensitive to the local needs. We target the members of the community groups along with their households individually and collectively in the awareness campaigns, which includes the ChAT process. At present, the project is reaching more than eighty thousand individuals among several groups.
RES-RISK was first launched in two blocks of Vaishali district, Bihar, (Hajipur and Bidupur) in 2014 providing a health cover. In 2015, along with these two blocks, another scheme was launched in an additional block (Vaishali) of the same district with roll-out of all three risk covers. The scheme is known as Swasthya Kamal in the three blocks of Vaishali. In 2016, the scheme has also been launched in one block (Meenapur) of Muzaffarpur district of Bihar State (and is known as SrishtiSurakshaKawach) and four blocks (Kaij, Dharur, Beed and Ambajogai) of Beed district in Maharashtra (and known as Kalptaru). Currently, the scheme is running with all three covers in above mentioned blocks of Vaishali and Muzaffarpur. Besides, enrolments for health cover are ongoing in Beed district.
The health cover in Vaishali includes medicines and wage loss in case of hospitalization, imaging and scanning, and lab test; in Muzaffarpur it includes the same benefits apart from wage loss, and with different event and family caps. The livestock policy covers mortality of the animal (natural or accidental) and the coverage is underwritten by an external insurer (60%) and by the community (40%) through a quota share arrangement (sharing of premium income in the same proportion). The Livestock cover is being supplemented with additional value added services, namely vaccination and deworming, which makes it more attractive for the community. These measures reduce morbidity and mortality of the animal and improve milk production. The crop policy covers hardship of the insured farmers against financial losses caused by adverse weather conditions like intense rainfall, deficit rainfall and high temperature for Paddy and Maize in Kharif and Wheat in Rabi season in both the districts of Bihar.
The implementation model of the project builds upon the “social capital” underlying such informal arrangements and expands them to introduce a rule-based system that is contextualized, needs-based and demand-driven. The project engages with populations that are unfamiliar with the process of insurance, have usually lived without it, are uncertain that they could enforce contracts with insurers, do not have the education or information to evaluate the value-for-money of an insurance policy, unable or unwilling to pay more than small amounts, and may distrust anyone outside the immediate community (especially when it comes to giving away their money). Yet grassroots communities practice and are experienced with informal reciprocal relations for mutual aid among community members during periods of financial stress. The project is tapping on these relations to offer better solutions to risks of losses. One of the implementation steps includes awareness creation activities that engage as many people as possible from the community; the actual decision-making process entails simulation games and group activities to design the benefits package for health insurance. The process, called ChAT , is conducted in three steps: first each woman in a SHG selects one package from several options that are presented to the group. Then, each woman takes a “ChAT board” (a graphic presentation of the benefits package options) home and is supported in discussing this option with her family, so that she can get support from the menfolk and the other family members; a few days later, the women of the SHG meet again and find consensus on one package that the entire group prioritizes; finally, in step 3 of the process, the choice of all the SHGs is confirmed and the option selected by the largest number of SHGs is retained for the entire CBMAS. This consensus building process also gives women equal voice to make choices, consider alternatives, and influence the collective choice of the community.
Based on our enrollment experiences, it is observed that people are receptive to the opportunity of being offered composite packages, especially when insurance becomes embedded in a wider risk management strategy that includes advisories to farmers on best practices, veterinary services and health talks. This architecture of combining better holistic support to people resolves the problems associated with insurance uptake among rural poor.The project has touched upon various dimensions of life of people; some of the testimonies that reflect thisand impact of the project are as below:
Local governance: For execution of the scheme, there are the claims committees and the scheme activists and livelihood facilitators that support the claims committee (CCs) as well as the scheme coordinator who acts on behalf of the coordination committee (CoCo). The CCs are responsible for adjudication of claims that are submitted by the members of the scheme and the CoCo oversees the functioning of the CCs, keeps vigilance if the rules are being abided by and maintains records. The best feature of the project, as revealed by the community members is that it is co-owned by the community members i.e. the participants in the project community representatives who are trained to run the scheme and perform all the key functions. The local governance places a trust among the participants and feel empowered with the ownership.
“I believe insurance will be beneficial if it covers our real risks, and delivers what was agreed, and no one should cheat us and go, here SHG is working in full swing and any insurance provided by the SHG will be beneficial for us.” - ManojLal Prasad, Phulwaria, Muzaffarpur.
Financial Literacy: Realizing that most of the target population has never been exposed to the concept of insurance and its importance for risk managing, the project has demonstrated that dedicated efforts to raise awareness is an essential first entry point for a “voluntary buy-in” of the community members. This project, apart from countering the supply side challenges by providing packages tailored to people’s needs and means, has stimulated demand for insurance by awareness and education about insurance. It is overwhelming to see theimproved perception about insurance - the community members now view insurance asa protection and believe that it is not only for few members of the family, but all.
“In my view, what is the point of insuring few members of the family; if one is protected, everyone should be. Protection from health risks is for everyone. And insurance provides that protection” - Pawan Prasad, Phulwaria, Muzaffarpur
Choosing All Together – A process to facilitate the consensus building among all community members on which benefits package among 4-5 options should be chosen for the scheme.
Gender Equity: The interventions are being carried out through Self-Help Groups (SHGs) which predominantly engage women. The project places women as a “gate-opener” i.e. enrolment in the scheme is possible only when a woman member of a SHG has joined. Apart from this, the consensus building on package design gives women equal voice to make choices, consider alternatives, and influence the collective choice of the community. Women, along with men, hold key positions in the operation of our scheme. The equalizer created by our project is reflected in objectivity of enrollment numbers in favour of gender parity.The project has also contributed to increasing financial capabilities, decision-making and self-confidence among the women as much as it has enhanced financial independence.
“If someone in my community is treated from my contribution, it is good for the entire community, isn’t it? I am happy that we are all part of this project that protects us from big costs. We are also more aware about better health practices than we were in the past.” - Girija Devi, Hajipur
“Women have brought a revolution in Bihar. They are running SHGs, they have banned alcohol and now they have also started this insurance scheme. They convinced us how the scheme provides protection to family in case of risks.” - Nageshwar Kumar, Khemaipatti, Muzaffarpur
We have found that many people value financial protection from cost of illness, which can be reflected in the enrolment numbers. This is not only of importance for them in financial terms, but also with regard to their state of mind. Financial protection is closely knit to peace of mind for many.
The impacts of insurance are per se not limited to those who insured or claimed; and these are the impacts experienced by a sizable targeted population. We have established strong evidences on how insurance can help an individual/household realize gains even when the conditions do not warrant making insurance claims – through financial literacy which helps them make informed decisions on financial management. The enhanced participation of community members across three risk classes in the intervention areas reflects that more “fence-sitters” are hopscotching inside the pitch of CBMAS as and when they realize that the scheme is welfare enhancing. Implementation of community based microinsurance has essentially eased out both informational and liquidity constraints, which increased the buy-in.