Insurance programs for the BOP empower them to participate in markets by protecting them against risks, such as illness, injury, damage, or loss. The BOP are often more vulnerable to such risks because they are less able to cope with the financial burden caused by unexpected occurrences. Despite this, the BOP are typically ignored by mainstream commercial insurers.
Governments can share the risk of covering BOP communities by: providing fully or partially subsidized coverage for specific services; or paying customers’ premiums and entrusting private sector insurers with the operation of the scheme.
Mexico: Extending insurance to rural smallholder producers
With an agricultural sector which accounts for 3.8% of the GDP (2011) and employs 13.7% of the population, climate hazards are closely monitored by the Mexican government. Farmers are highly vulnerable droughts and cyclones. Credit in the rural agricultural sector is also scarce, but one way to access it is through banks which accept insurance as a guarantee for a loan. Therefore, access to insurance is even more crucial to these farmers.
As a result, the state set up Agroasemex, a public institution which offers rural insurance and reinsurance products. It is both a national insurance organization and development agency that provides reinsurance for Mexican insurance institutions, mutual societies, and insurance funds. Agroasemex provides stop-loss insurance of up to 100 percent of the total sum insured to mutuals of smallholder farmers. As a result, farmers don’t pay for insurance, Agroasemex rather collects the premium from federal and state governments.
The reinsurance subsidy provided by Agroasemex has remained important since it was introduced. As of 2009, Agroasemex’s Catastrophic Agricultural Insurance covered an estimated 3 million hectares in 18 states.
- Agroasemex (2015). www.agroasemex.gob.mx/
- Vargas Hill, R.; Gajate-Garrido, G.; Phily, C.; & Dalal, A. (2014). Using Subsidies for Inclusive Insurance: Lessons from Agriculture and Health. Microinsurance Paper No. 29. Geneva, Switzerland: International Labour Organization.
Policy Case Study
- Brazil: Garantía Safra: Crop Insurance scheme services small and medium producers in rural areas.
- India: Rashtriya Swasthya Bima Yojna provides health insurance coverage for families living below the poverty line.
- Mongolia: Index-based livestock insurance scheme protects farm herders against livestock loss due to extreme cold. https://openknowledge.worldbank.org/bitstream/handle/10986/2432/538810PUB0Gove101Official0Use0Only1.pdf?sequence=1
- Philippines: Presidential Decree No. 1460, or the Insurance Code, allows cooperatives providing insurance to also register for insurance purposes.
- Aggarwal, A. (2010). Impact Evaluation of India’s ‘Yeshasvini’ Community-based Health Insurance Programme. In Health Economics. Volume 19, Issue Supplement 1: pp 5–35. New York, NY: John Wiley & Sons, Ltd.
- Chuma, J.; Mulupi, S.; & McIntyre, D. (2013). Providing Financial Protection and Funding Health Service Benefits for the Informal Sector: Evidence from Sub-Saharan Africa. Working Paper No. 2. South Africa: UK Department for International Development.
- da Silva, C. & Rankin, M. (Eds.). (2013). Contract farming for inclusive market access. Rome, Italy: Food and Agricultural Organization.
- Deutsche Gesellschaft für Internationale Zusammenarbeit (GTZ). (2010). Scoping Mission for an Agricultural Insurance Feasibility Study in Brazil (Amazônia and Mata Atlântica). Berlin, Germany: GTZ.
- India Insurance Regulation and Development Authority (IRDA).2014. Annual Report 2013-2014. New Delhi, India: IRDA.
- La Forgia, G. & Nagpal, S. (2012). Government-Sponsored Health Insurance in India. Are You Covered? Washington, DC: World Bank Group.
- Sinha, T. (2005). The Indian Insurance Industry: Challenges and Prospects. Retrieved from http://ssrn.com/abstract=792166 or http://dx.doi.org/10.2139/ssrn.792166
- Yellaiah, J. (2013). Health Insurance in India: Rajiv Aarogyasri Health Insurance Scheme in Andhra Pradesh. In International Organization of Scientific Research (IOSR) -Journal of Humanities and Social Science. Volume 8, Issue 1 (Jan. - Feb. 2013), pp. 07-14. IOSR.
- Global Health and Foreign Policy, GA Res 66/115, United Nations General Assembly, 66th Sess, 2012.
- Nicolle, E. & Mathauer,I. (2010). Administrative Costs of Health Insurance Schemes: Exploring the Reasons for their Variability. Discussion paper 08/2010. Geneva, Switzerland: World Health Organization.