> Posted by Richard Leftley, Chief Executive Officer, MicroEnsure
The Financial Inclusion 2020 campaign at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. This blog series spotlights financial inclusion efforts around the globe, shares insights from the FI2020 consultative process and highlights findings from “Mapping the Invisible Market.”
Last year a statistic was released claiming that there are 6 billion phones in circulation around the world. It is clear that mobile-based delivery channels are perhaps one of the greatest opportunities in working to achieve human and market development goals, including financial inclusion.
Microinsurance is one of the great beneficiaries of mobile-based payments and service delivery innovations, as shown by the rapid growth of mobile microinsurance (MMI) products from an estimated 20 in 2006 to 84 in 2013. Today much of the growth in microinsurance is through partnerships with mobile network operators that are keen to increase sales and retain customers. But demand side obstacles persist and pose a significant challenge to growth and sustainability. Many products are available that are sound and beneficial, but clients are not picking them up. Why is that?
Over the past nine years we have provided microinsurance to millions of clients via a range of distribution channels including banks and microfinance institutions, SACCOs, cooperatives, and even churches. However, our real breakthrough came when we realized that no one wakes up wanting to buy insurance, but people do wake up worried about the risks they face. Through our work with mobile network operators, we have demonstrated that the mass market will radically change their consumer behavior in return for free insurance that addresses their risk.
Recently I stopped a man in the street and asked him if he wanted to buy life insurance. However hard I tried I could not make the sale, but when I asked him how much money he sent home to his mother every month, he became excited about a product that would keep providing that remittance to his mother if he had an accident and died.
Our ability to provide great microinsurance products is driven by our capacity to consider the needs and attitudes of our clients and then integrate these types of insights about choice and value into each product.
However, we often don’t think enough about our own role in building financial capability for people who are new to insurance. More than simple financial literacy, financial capability refers to a combination of attitude, knowledge, and skills that clients should have to be able to make and exercise money management decisions. Financial capability encompasses financial literacy, financial education, but also the willingness, confidence, and opportunity to act.
How can MMI’s products be used to spur demand for microinsurance and also help develop clients’ financial capability?
Marketing and Financial Education: The line between marketing and education is blurred. How do you market a product that customers have no past experience with? This is a perennial challenge affecting traditional microinsurance schemes. If the client has no past experience with a product, he or she will not understand how the product works and will not buy it.
In many instances marketing has doubled as an effort to educate consumers. A third of the MMI products that are offered today are free of charge and often conditional on customer activity. In many cases, consumers are able to pay to upgrade their insurance product from the free basic offering. For example, we just launched a free insurance offer with Telenor Pakistan and Jubilee Life Insurance Company that enables users to obtain life insurance in proportion to their monthly mobile usage.
If it is to reach millions of microinsurance clients, the delivery of financial education has to adapt to be effective and sustainable. While mobile network operators often drive product awareness through mainstream advertising such as television commercials, radio advertisements, and billboards, part of our role at MicroEnsure is to build capacity with local staff and agents who interact with thousands of consumers every day. It is these face-to-face meetings that allow consumers to gain a greater understanding of the products.
By the very nature of life insurance, the consumer who is insured is not the person making the claim. Consequently, MicroEnsure has set up dedicated toll-free helplines where consumers and claimants are able to make a claim or discuss any questions they have about the product. By monitoring airtime usage, we are also able to call consumers when we notice significant changes. For example, a halt in airtime usage may indicate that the consumer has passed away, which allows our staff to contact the beneficiary and begin the claims process.
Building Trust: One significant aspect of both marketing and building financial capability is building trust in the insurance provider. It takes a leap of faith for anyone to believe that, if I pay money now, it will come back to me when I need it. Even in countries with highly developed insurance markets, there is a suspicion that the insurance company will not come through if a need arises.
That’s why the one metric I look at on a daily basis is ‘hours until payout’. If a customer has a death in the family, I want to see that his or her payout happens within the promised number of hours. Once other customers see that the promised funds come to them in a timely way and with minimal red tape, trust begins to be established.
Behavior Change: The reality is that behavior change happens over time and in steps. The leap from product introduction to adoption isn’t simple and requires adequate market and client research, recurrent evaluations and tweaks. As successful MMI examples show, providers should start small with simple products and grow “vertically” only once they’ve understood a specific market, developed a strong customer base, and identified some demand for a specific product.
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Image credit: lukexmartin
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