Public-Private Partnerships On the Rise

In some parts of the world, getting sick can be a fatal blow. Being unable to work when you live on the breadline is bad enough, but what's worse, medical treatment is likely to be prohibitively expensive. According to Gabriele Ramm from the German Society for Technical Cooperation (GTZ), falling ill in a developing country can fast become a matter of life and death.

"People are forced to work under appalling conditions, without any kind of safety precautions, on construction sites or in factories where they're dealing with toxic chemicals," she said. "They're regularly exposed to various factors that will make them susceptible to illness, and inevitably have no access to medical care."

Protecting against crises

In India, for example, 93 percent of the workforce earns its living without ever having signed any kind of contract, and therefore fails to pay any social contributions. To combat the problem, the GTZ and the German Allianz Insurance company have developed what they call micro-insurance schemes. These allow locals in primarily rural regions of India, such as farmers, trades-and craftspeople and owners of small businesses, to insure themselves against accident, illness, invalidity and natural disasters at affordable rates -- as low as 20 cents a month.

"Micro-insurance schemes are a protection against crisis situations, and available to people who fall through the net of other systems," explained Ramm. "They work on the same principle as other insurance schemes, but there are certain conditions. Standard insurance structures are too costly for the poorer members of society, which means that we have to develop other options. We concentrate on group contracts -- we don't offer many individual policies, because it would be too expensive. And in order to process these contracts we rely on middle men."

A question of trust

That's where the Indian NGOs come into the equation. Teaming up with a development aid agency is one way for a company to test the waters of a potential new market and boost its image, while in return, the organization gets to benefit from its partner's commercial clout -- the condition of getting on board being that the business partner takes over at least 50 percent of the costs.

Rural cooperatives collect the contributions from scheme members and take over the claims investigations and settlements. As group insurers, they can negotiate optimal rates and also enjoy the trust of the people -- who often need to be told why it's worth being insured in the first place.

The plan has already proved successful. In Tamil Nadu, some 60,000 people signed up for a life insurance with the help of the NGO "Activists for Social Alternatives," under the aegis of the Indian-German joint venture Bajaj Allianz.

Allianz is well aware that these small-scale insurance schemes will never make mega-bucks, but the company is optimistic that it's tapping into a potential mass market. Meanwhile, the GTZ gets to assemble a welfare net for impoverished members of Indian society -- a service that would have remained a pipe-dream without the know-how of a commercial insurer.

Taking advantage

It's a win-win situation. But are these public private partnerships swallowing public development funds -- in other words, taxpayers' money -- which companies could invest on their own initiative? Gabriele Ramm is familiar with the suspicion that companies might take advantage of these PPPs, but she explained that the Ministry for Economic Cooperation and Development (BMZ) has taken due precautions:

"The BMZ set up the concept in 1999 and fleshed out some very stringent stipulations," she said. "Any project carried out in cooperation with private business has to be approved by the ministry. So there are tight controls to ensure that there's no risk of manipulation."