Potential Risks, Costs, and Benefits of the Weather Insurance "Basix"

Case Study Basix
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Case Study Basix
Would the policy sell well?
Regarding the information provided, the policy would sell well, BASIX has spent years earning the trust of its clients and with the new policy, the relationship would grow even stronger between BASIX and its clients. The new policy would be a perfect timing and a great opportunity, as just in the previous year, the yield did not meet the client’s expectations and the majority of clients are looking for a way to overcome this problem.
What was the best way to explain it to potential clients?
While marketing the product, clients reveal ignorance about this new policy and their response is a clear indication that they don’t have adequate experience with rainfall insurance. To give potential clients a better understanding of this product, the organization need to expound on what is an insurance cover? What are premiums? How premiums are paid, and when the compensation is guaranteed. Nevertheless, the clients have to understand and distinguish between loaning terms and insurance terms, The marketing argents should have gone ahead and mentioned that premiums are not compensated when the loss is not a result of the insured risk.
Was the policy fair? How would it help BASIX clients?
The terms are in favor of the customers and therefore the policy is very fair as the compensation increases with a decrease in rainfall. The new policy would help farmers to recover losses resulting from unexpected decreases in rainfall and to maintain a constant flow of production. It would also give farmers confidence in planting crops that they might have previously feared a negative result because of a decrease in rainfall.
Other Important Risks and Benefits that Ramana had not Considered
Risks
Systemic Risks
Many of the agricultural output hazards that farmers confront are caused by the randomness of weather and natural growing circumstances. Because such hazards often occur over a vast geographic area, catastrophic risks can be substantial and difficult to diversify for insurers.
Lack of Insurance Culture
The lack of awareness of crop insurance's benefits is a prevalent cause of its low demand in developing countries. Because premiums are received every year but indemnities are paid far less frequently, insurance is typically seen as a nonviable investment. Many rural households in developing countries lack financial literacy, and many potential policyholders are unfamiliar with the notion of insurance. As a result, potent...