People living in rural communities in India confront a range of hardships that may lead them into poverty without the safety net of insurance. The cost of health services, high interest rates on private debt, social expenses – for instance, a family funeral – and drought are recognized as the greatest threats to the livelihoods of rural populations. Less than two percent of the rural poor have any kind of insurance cover, often discouraged by their lack of familiarity with insurance products and their cost. In hard times, the poorest rural families will turn to expensive loans from money lenders or traders, or dig into their own savings. Those who do have insurance often face long delays in getting settlements, or find their claims rejected, sometimes because of poor understanding of the policy’s terms. IDA, together with the State government of Andhra Pradesh, is bringing affordable and effective insurance to the most vulnerable.
Through the IDA-supported Andhra Pradesh Rural Poverty Reduction Project, the World Bank is working with the state government and community groups to:
- Leverage the strong community-based organizations created and supported by the Andhra Pradesh Rural Poverty Reduction Project to encourage financial literacy and use economies of scale to lower the cost of financial services.
- Enable rapid claims processing through: an insurance call center; web-based claims submissions to insurers; and trained grassroots workers/community leaders acting as insurance agents and claims adjustors.
- Provide quick cash relief to families within 24 – 48 hours after reporting a claims event to ensure they do not have to resort to borrowing from private money lenders or other informal sources to meet immediate contingencies.
Through the self-help groups supported by the Andhra Pradesh Rural Poverty Reduction Project, more than eight million women and their spouses have life and disability insurance coverage, and more than 800,000 lives are insured against health risks. Significantly, given the importance of livestock to rural families, around 500,000 cattle, primarily cows and buffaloes, have been insured. The robustness of the system also has encouraged insurers to work with community organizations in Andhra Pradesh to provide a variety of insurance products and services to the rural non-poor.
Highlights:
- As of March 2009, the Andhra Pradesh Rural Poverty Reduction Project had supported the formation of more than 850,000 self-help groups of 10-15 members each; 35,500 village organizations, 1,180 sub-district federations, and 22 district federations.
- More than ten million women are members of self-help groups and their federations.
- Cumulative investment by IDA totals around US$357 million toward the overall cost of the Andhra Pradesh Rural Poverty reduction Project.1
- An IDA investment of more than US$150 million (out-of the US$357 million) in a community-institution building component of the project, helped create the self-help groups and federations, with an additional US$500,000 supported training programs, investments in technology and management information systems, the creation of an insurance call center, and product design and development.
- The Project, which closes in September 2011, also partnered with local insurance companies to ensure rural households have access to better financial products.
1 Andhra Pradesh Poverty Initiatives Project (2000 – 2006) of US$118.48 million; Andhra Pradesh Rural Poverty Reduction Project (2003) US$239.31 million; 1st Additional Financing (2007) US$65 million and 2nd Additional Financing (under preparation) of US$100 million
The community-managed insurance initiative will seek to expand the range of products offered within Andhra Pradesh, especially in the areas of health, property, and livestock insurance. It will also seek to expand coverage to rural households with higher incomes. This model will also be taken to more states within India, and to other countries in East Asia and Africa who are making substantial investments in community-based development, such as Indonesia.
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