Eliminating Poverty in Society
Based on its know-how accumulated in the insurance business, Tokio Marine Group has developed and initiated sales of weather insurance and microinsurance in India, thereby providing low-income earners with greater access to insurance. We also hope to contribute to the resolution of poverty issues in the world through such efforts as financing to and investment in financial institutions providing microfinancing services.
|Relevant goal||Relevant target||Description of related content|
|1. No poverty||1.4 Ensure that all men and women, in particular the poor and the vulnerable, have access to financial services, including microfinance||Increasing prevalence of microinsurance in India, fund to invest in microfinance-related assets|
|2. Zero hunger||2.3 Double the agricultural productivity and incomes of small-scale food producers through secure and equal access to financial services||Weather insurance in India|
- Products and Services
Weather insurance and microinsurance developed and sold by Tokio Marine Group and a fund managed by a Group company to provide financing to and to invest in microfinance institutions are as listed below.
- Sankatharan Bima Yojna (India): Low-cost accident insurance available for 1 rupee (about 2 yen) per year as an incidental to fertilizer
- Mahila Suraksha Bima Yojna (India): Accident insurance aimed at women in farming communities
- Rashtriya Swasthya Bima Yojna (India): A medical insurance scheme for low-income earners sponsored by the government of India
- Biju Krushak Kalyan Yojana (India): A medical insurance scheme with add on medical insurance for low-income earners sponsored by state governments of India
- Barish Bima Yojna / Mausam Bima Yojna (India): Weather insurance product that evaluates climate risks such as precipitation volume and temperature in all areas of India and takes into account the impact of unseasonable climate on grain harvest yields in farming communities
- Daiwa Microfinance Fund: Provides financing to and invests in financial institutions providing microfinance services
Products and Services
The following sections describe weather insurance and microinsurance developed and sold by Tokio Marine Group and a fund managed by a Group company to provide financing to and invest in microfinance institutions.
Increasing Prevalence of Weather Insurance and Microinsurance in India
Poverty Issue in India
Agriculture is a key industry in India’s economy, as it represents about 16% of GDP with 52% of the country’s working population being farmers. Moreover, about 20% of households consist of low-income earners (130,000 yen per year or lower), many of whom engage in small-scale farming. India boasts the world’s second-largest agricultural land spanning 179.9 million hectares. However, areas in which irrigation is widespread remain less than 30%, and most water for agricultural use is from rainwater. As such, when agricultural production decreases due to drought or excessive rains, farmers may suffer serious economic consequences. In addition, the poorest segment of the population lives on less than US$1.25 a day and accounts for approximately one-third of the entire nation. Resolving the problem of poverty is a critical challenge for the country.
Development of Weather Insurance and Microinsurance Jointly with IFFCO-TOKIO
In 2001, Tokio Marine Group established IFFCO-TOKIO General Insurance Co., Ltd. (IFFCO-TOKIO), a non-life insurance company, as a joint venture with Indian Farmers Fertiliser Cooperative Limited (IFFCO), which has a nationwide network of 38,000 member cooperatives, and began offering auto, fire and other insurance in India. From the start, the business tackled the issue of how to resolve the lifestyle of uncertainty faced by farmers in India through the mechanism of insurance and looked into the development of weather insurance and microinsurance (i.e., insurance available at low cost). These products are becoming essential in stabilizing the lives of people in farming communities, with 20.3 million policies and 11.4 billion rupees (approximately 19.3 billion yen) in premiums written in fiscal 2017.
In 2001, the company, in collaboration with IFFCO, started sales in India’s rural communities of Sankatharan Bima Yojna, low-cost accident insurance available for 1 rupee (about 2 yen) per year as an incidental to fertilizer. Since then, the company has released other microinsurance products, including Janta Bima Yojna, property insurance available for 100 rupees (about 200 yen) per year; and Mahila Suraksha Bima Yojna, accident insurance aimed at women in farming communities.
IFFCO-TOKIO offers Barish Bima Yojna/Mausam Bima Yojna, an index-based weather insurance product that takes into account the impact on grain harvest yields in farming communities due to unseasonable climate in the wet monsoon season (June to September) and the dry rabi season (October to April). Development of this revolutionary product leveraged IFFCO-TOKIO’s capabilities in market surveys aimed at local farmers and Tokio Marine Group’s years of expertise in insurance underwriting accumulated in Japan to evaluate climate risks such as precipitation volume and temperature in all areas of India. To gain communities’ understanding of the weather insurance mechanism and spread its use, the company has been conducting briefings for farmers in every state in India on an ongoing basis together with banks, NGOs and other partners. Currently, the company sells weather insurance, including its own as well as other government-sponsored products such as Pradhan Manti Fasal Bima Yojana (RMFBY) and Weather Based Crop Insurance Scheme (WBCIS), to about 2.36 million farming households per year.
Crop & Weather Insurance details
FY2017: GWP INR 10,770 million; Claims paid INR 15,734 million
IFFCO-TOKIO’s Efforts to Increase Prevalence of Medical Insurance for Low-Income Earners
Rashtriya Swasthya Bima Yojna (RSBY) is a medical insurance scheme for low-income earners sponsored by the government of India. It was launched in 2008 in India through joint efforts among insurance companies, medical institutions and the government. Subscribers to RSBY only need to pay 30 rupees (about 50 yen) per household as a registration fee with coverage up to 30,000 rupees annually (about 50,000 yen) for a maximum of five persons per household in case medical services are required for injury or illness. IFFCO-TOKIO began selling RSBY in 2011 and launched add-on medical insurance in 2014 under Biju Krushak Kalyan Yojana (BKKY), another insurance scheme for low-income families sponsored by a state government.The company has delivered security to approximately 12.54 million people with low incomes. Also, the company has been working to spread the use of insurance and promote its sales mostly in the southern state of Karnataka, the central state of Madhya Pradesh and the eastern states of Odisha and Tripula in India. In fiscal 2017, as the sum of RSBY and BKKY, the company provided security by way of medical insurance to around 17.87 million people and paid approximately 580 million rupees (about 990 million yen) in total in insurance claims. RSBY and BKKY have become essential medical insurance schemes for people who previously could not receive sufficient medical services because of their economic situation.
Subscribers to RSBY and BKKY are given a biometric card. Information regarding insurance and consultation at a medical institution is managed on the card and customers can choose to have a consultation at one of more than 10,000 public or private medical institutions in India.
Reducing World Poverty
Establishing Japan’s First Fund to Invest in Microfinance-Related Assets
Microfinance is a system to provide financial services, including microcredit loans (small loans usually provided without collateral), savings and insurance, to low-income entrepreneurs who traditionally have no access to these services. The system, for example, provides short-term loans to low-income households, and they use these funds to buy chickens. When they pay off loans in full using profits generated from the sale of eggs and poultry products, the system in turn provides funds to build a chicken coop. The major characteristic of microfinancing is that it helps people get out of poverty and become financially independent. It has recently drawn much attention in the international community as a social investment tool that provides direct aid for and generates immediate outcomes in reducing poverty around the world. The number of financial institutions providing microfinance services to low-income entrepreneurs mainly in developing countries (Microfinance Institutions – MFIs) has begun to show rapid growth.
The Daiwa Microfinance Fund, established and managed by Tokio Marine Asset Management, provides direct financing (loans) to MFIs and purchases corporate bonds and negotiable certificates of deposit (negotiable CDs) issued by MFIs. The fund also purchases bonds issued by the International Bank for Reconstruction and Development and other international financial institutions that are keenly working to improve the business environment for MFIs. Microcredits provided under the microfinancing system generally show a high ratio of repayment and a low tendency of turning into bad loans. Thus, investments in MFIs are simultaneously investments in businesses with high potential.
Initiative to Support Low Incomes in the United States
The Tokio Marine North America Services (TMNAS) Finance Team has implemented an initiative to support low incomes via the reduced tax burden with Philadelphia Insurance Companies (PHLY) and their long time business partner Affordable Equity Partners (AEP).
The housing complexes developed by AEP and their partners are financed through the sale of the tax credits to PHLY, and when completed are rented to low income members of the communities. PHLY benefits via the reduced tax burden made possible by the tax credits purchased from AEP. So far, PHLY has invested over US$2.25 million, which has gone towards the 2,500 units across six states in the United States. The relationship is a “win-win-win” for PHLY, TMNAS and AEP and the 1,500 families living in the beautiful new facilities.