Basix

For the exclusive use of M. ALSHANKITI

9-207-099

REV: OCTOBER 29, 2007

SHAWN COLE

PETER TUFANO

BASIX

In the spring of 2004, N.V. Ramana, managing director of KBS Bank in Mahbubnagar, India, was

thinking carefully about the organization’s recent experience offering weather insurance to farmers.

Weather insurance provides policyholders a cash payout in the event of low rainfall during the

summer growing season. KBS Bank was part of the BASIX group, a group of companies providing

microcredit and other “livelihood promotion’’ services to the rural population.

The new insurance policy had been marketed in two villages in the summer of 2003. Because of

the novelty of the product, Ramana had deployed some of BASIX’s best sales force (customer service

agents, or CSAs) to sell the policy. Only 148 farmers had elected to purchase the policy, paying a total

of approximately Rs. 74,000 ($1,800) for coverage of 600 acres of land.1 As BASIX earned only a 15%

commission on policy sales, the revenue was negligible, especially when compared to staff time spent

developing and familiarizing farmers with the new product. However, the decision of whether to

continue to offer the new product would depend not only on this pilot but on the long-run potential

of the product to advance BASIX’s mission and its clients’ interests.

Ramana, 46, was a graduate of the Indian Institute of Management, Ahmedabad, and had joined

BASIX in 2001 after a distinguished career with ITC Group, one of India’s most successful

agribusinesses. He was confident of the theoretical merit of the insurance product but was still

unsure whether BASIX clients would see the value, given that the product was both complicated and

unlike anything farmers had seen before. Further product development would require a substantial

investment of time from BASIX’s top management. Finally, Ramana was worried that BASIX could

confuse or, worse, alienate some of its customers if they had negative...