Finally able to insure what really matters
The majority of Bolivia's population works in the informal sector and has little or no access to health and disability insurance. Even the smallest of accidents can trigger a slide into poverty. To improve the situation, the SDC is encouraging the private sector to develop affordable, inclusive and agricultural insurance products.
Author: Zélie Schaller
«Since we often work high up, we're particularly at risk of accident. And we could get injured using our tools. We'd heard talk in the media of a form of insurance that secures the livelihood of orphans whose parents worked in the construction industry and were killed in a workplace accident.» Sonia Quispe Ventura is a member of the Bolivian Association of Women Builders. She became aware of the advantages of life and accident insurance through television.
Insurance has a low uptake in her country, accounting for just 1.5% of GDP, half the Latin American average – with serious consequences for poverty and the economy. Accidents, illness, crop failures and disasters heighten the uncertainty. With a poverty headcount ratio of 24.6%, more than one-third of the Bolivian population is affected. The COVID-19 crisis has further exacerbated the situation, given that as much as 69% of the country's economic output is generated through informal employment, which itself stands on shaky ground. And on top of that there is climate change, which is causing the agricultural sector to struggle and jeopardising food security.
Considered barely creditworthy and risky
To stem the loss of income brought about by climate change, health problems, accidents or disasters and reduce poverty, the SDC is encouraging the private sector to develop inclusive and agricultural insurance products. The project is being run by the Profin Foundation, which has been promoting financial inclusion in Bolivia for more than 20 years.
Inclusive insurance is particularly suitable for those sections of the population that are excluded from the usual financial circuits as they are considered barely creditworthy – and therefore risky. The project has developed 20 products that provide death and accident risk cover for low-income earners, as well as cover for medical care and stays in hospital, for example. «The annual premiums cost the equivalent of between 1.40 and 65.40 Swiss francs,» says Project Manager José Luis Pereira Ossio from the SDC office in Bolivia.
Future-proof insurance model
One of the options is aimed at women. It includes two gynaecological consultations a year, a pap test to screen for cervical cancer and an appointment to discuss the diagnosis. Workshops are also held – not just for women, but for children and young people too – to promote financial literacy and raise awareness of insurance issues, covering topics such as credit, savings, drawing up a budget and forms of insurance. They look at how insurance works and explain basic terms like policy, premium, reimbursement or insured value.
An online programme has been developed to give the general population a basic grasp of insurance. At the same time, information campaigns have been launched on social networks as well as in traditional media and on public transport. «People should understand that insurance can help protect their life, their health, their family and their livelihood,» explains José Luis Pereira Ossio.
Sonia Quispe Ventura is not the only one to be persuaded. Speaking as a mother and daughter, Yanette Marisol Durán Chipana also sees the advantages. Her eyes moisten as she tells us how much money she had to spend on her late parents: «We spent what little we had saved up. All of it. Our financial situation was miserable, quite apart from the fact that we were already suffering anyway. In the end, it was the insurance that saved us.» Like Yanette, around 53,000 people have taken out life insurance since the project began in 2017. The number of policies sold is likely to rise sharply in the future as special rules for inclusive insurance are to be introduced by the end of this year.
Lobbying is key
But how were the insurance companies persuaded to direct their services to people living on a low income? «We invited the key decision-makers to various events at which we demonstrated the significance and potential of these types of products. Interest grew and we were able to work closely with the insurers in developing them,» replies José Luis Pereira Ossio. «We also provide the insurance companies with support regarding communication, helping them to emphasise the development and social change aspects.»
Another project concerns food security for families. This meant developing agricultural insurance products. Livestock insurance for dairy cattle is just one example. It pays up to 80% of an animal's market value on its death. Other forms of insurance deal with soy and wheat cultivation, both of which are badly affected by climate change. They cover losses caused by flooding or drought: once a plot of land is insured, it is monitored by satellite every 10 days in order to spot any anomalies. An indemnity is paid as soon as the water balance moves above or below a level set in advance by the insurance company. Thanks to this project, 10,000 hectares of cultivatable land has been insured; this is equivalent to an area of 100 square kilometres.
COVID-19 cover a first
During the corona pandemic, the Bolivian Profin Foundation succeeded in negotiating cover with an insurer for COVID-19 deaths for the very first time. This benefit is now included in that particular company's life insurance for low-income earners. About 10,000 people have taken out a policy. And other insurance companies have already followed suit. In addition, Profin has also set up a ‹microfactoring› service with the banks as part of the projects launched by the SDC to improve financial inclusion. This enables small farmers, for example, to submit a bill to their bank, which then advances the amount owed minus a modest commission, thus giving the farmer access to ready cash. Microfactoring proved to be an effective instrument during the pandemic: agricultural enterprises held on to their liquid assets and were able to continue paying their staff.
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