General details of SHAKTI

General details of SHAKTI

1. Country: Bangladesh2. State :30 districts (State) out of 64 districts.3. Age of the Organization is 14 years.4. Total number of staff - 923 till November

20065. Total number of members- 175000 till

November 20066. SHAKTI delivers its own insurance program

through branch offices.

Micro Insurance Products Cont…

1. SHAKTI offers Life Insurance for its members

2. The product is not subsidised by SHAKTI3. The products features of SHAKTI:

I) Compulsory for all the group members under the micro finance program

II) Normal death coverage for the member or her husband

III) The total insured value for the coverage is Tk. 5,000/-

Micro Insurance Products Cont…

IV) If no claim arises during the five-year period then the member will receive her deposited amount at the end of the period

4. In the next five years SHAKTI would like to include more coverage from the uncertainties members bear for their poverty.

Micro Insurance Products Cont…

5. SHAKTI charges a nominal premium of Tk. 5/- but pays claim of Tk. 5,000/-, which is 400% and not the usual practice by other life insurance companies in Bangladesh who conduct a similar program for the underprivileged people.

Micro Insurance Products

6. Members responded positively because of its cost effectiveness for them.

7. The insurance product is mandatory for all members of SHAKTI.

8. SHAKTI design and set the benefits of its product by considering the financial conditions of members as well as fund it would generate to provide necessary sustainability to its microfinance program.

9. If no claim arises during the five-year period then the member will receive her deposited amount at the end of the period

Insurance Prerequisites Cont…

1. Poverty and vulnerability are closely related. The coping mechanisms against such crisis lead the poor into a situation of further debt and impoverishment. Insurance services extend the coping capacity of the poor to a next level of leverage complementing the role of savings and credit in addressing their poverty and vulnerabilities.

Insurance Prerequisites Cont…

2. By considering the financial benefits for its members as well as the fund it would generate for its RLF

3. To prove effectiveness of the program to the members

4. Started the program on mandatory basis by charging Tk. 1/- as premium.

5. They were not confident about refund of their premium at the end of the period or whether their claims will be settled by the organization in time

Insurance Prerequisites6. When members found that the

organization duly refunded their premium as well as settled claim in time

7. SHAKTI tagged the insurance program mandatory with its micro-finance program.

Insurance Prerequisites

8. In Bangladesh micro insurance is not supported by a regulatory environment.

9. No steps have yet been taken by the organization to be supported by a regulatory environment.

10.The government of Bangladesh does not provide any kind of assistance to micro- insurance programs conducted by the MFIs.

Pricing Cont…

1. Cash inflow in each instalment 175000 x 5/- = Tk. 8, 75,000/-Tk. 8,75,000 x 250 = Tk. 21,87,50,000/-the present value of this amount comes to Tk. 18,00,00,000. 8% interest value from the fund Tk. 1,44,00,000/- and per month 1,44,00,000/ 12 months = Tk. 12,00,000/-.

Pricing Cont

2. SHAKTI does not have any actuarial resource person for assessing the premiums.

3. Mainly the financial conditions of its members.

4. The Organization did not have any resource person or a team of resource persons in the concern field.

5. Individual

Pricing

6. Members will receive more fund from the program Enhance RLF fund for SHAKTI.

7. No problem for premium payments8. BY collecting information from primary

source Also by gathering information on how much other operators in the same market were charging premium

9. Weekly basis

Insurance Fundamentals Cont…

1. Malnutrition, water borne diseases and for living under unhealthy condition

2. Subsidised clinic for members3. Primary information

Secondary information 4. SHAKTI has not countered any fraud till

to date.

Insurance Fundamentals

5. After satisfactory investigation by a responsible official of SHAKTI, refer the case to branch doctorBranch doctor will refer the case to “Health Unit of SHAKTI H.O.After recommendation by H.O. doctor and Finance unit claim will be settled.

Insurance Fundamentals

6. To design its insurance product SHAKTI mainly considered the financial benefits for its members as well as the fund it would generate for its RLF.For risk analysis if cost of running the program is less than the fund generating from interest.

Insurance Fundamentals8. At present the organization have approximately

around 1,75,000 (one lac seventy five thousand ) members. If they pay Tk. 5/- per week / instalment. Therefore total expected amount of cash inflow in each instalment 175000 x 5/- = Tk. 8, 75,000/-. Although total cash flow expected from the existing project would be Tk. 8,75,000 x 250 = Tk. 21,87,50,000/- (taka twenty one crore eighty seven lac fifty thousand) only, the present value of this amount comes to Tk. 18,00,00,000 (Taka eighteen crore) only as per present value calculation. If earning from interest of the fund is greater than the cost of running the program than it is feasible for the organization.

Risk and Responsibility Cont…

1. No out sourcing2. No reinsurance arrangement 3. Own resource to deliver its insurance

product.

Risk and Responsibility

4. No option for commission5. Fund and human resource obstacles

compared to commercial insurance 6. SHAKTI did not consider partner-agent

delivery model for its insurance program from the beginning

Managerial Control Cont…

1. What is the management structure of SHAKTI.

2. Development of MIS for micro insurance program of SHAKTI is under process

3. Through present calculation the organization can meet minimum 240 claims from members.

4. fund gathered through premium earning is reinvested to SHAKTI’S RLF.

Managerial Control5. What type of reserve system has Shakti?6. SHAKTI has not encountered any

underwriting problem till to date, because insurance program that SHAKTI conducts is rather simple.

7. SHAKTI screens her members through primary health checking conducted by the doctors available in the clinics of SHAKTI.

Managerial Control

5. After satisfactory investigation by a responsible official of SHAKTI, refer the case to branch doctorBranch doctor will refer the case to “Health Unit of SHAKTI H.O.After recommendation by H.O. doctor and Finance unit claim will be settled.

General 1. Training, workshops and through external

exposure2. In the weekly meeting conducted for members

of SHAKTI3. They have apprehension whether their

premium will be refunded at the end of the period or whether their claims will be settled by the organization in time.

4. SHAKTI has not any conducted any research studies on its micro insurance program as yet. But considering making its insurance program more beneficial for members as well as organization by conducting a research program in near future