What if you could simply swipe your card every time you wanted to pay for a minibus taxi ride? That might be more convenient than carrying the right change in cash... But what about if you are automatically insured for the trip you’re about to take, as a result of using that card? Now that’s an incentive, isn’t it?
David de Coning, who presented at the recent Microinsurance Network regional workshop on microinsurance distribution, shared this, and other interesting ideas on how to crack the mass market for microinsurance. Over fifty experts and professionals within the region’s microinsurance space came together in Johannesburg to discuss barriers and opportunities in microinsurance distribution.
Here are 7 things I learned from the event:
Know your customer. “To be honest, we still haven’t got the product design right – we just don’t know what the clients want.” Leila Moonda from the South African Insurance Association said what many providers are secretly thinking. The low-income segment in Africa is underinsured, even though various short and long-term products are out there. Distribution is an issue, but products often don’t meet consumers’ needs, leading to low take-up. It’s important for providers to learn about their customer and find out where the gaps in the product offerings are. This may sound rather obvious but many providers still have not got their products right. Adjustments may be in the form of offering flexible premium payments reflecting people’s irregular income streams, or it may be extending coverage - insuring members of a family even though there is no blood relation.
Partnerships are key. Low premiums in insurance mean there is little room for distribution expenses on the providers' side. Distribution in higher-income markets works so well due to the different touchpoint that insurers can make use of, i.e. direct debits, payroll deductions, brokers etc. As these are largely absent in the low-income space, the price of insurance for consumers in that space is higher, which ultimately leads to unaffordable or low-value products being offered. One way around this is to partner with existing groups who are already embedded in local communities. An example of this is burial societies in South Africa, where around 12 million adults make regular contributions to more than 100,000 societies across the country. Partnering with these groups could provide security to members and solve the distribution headache for providers.
More field, less boardroom. Learning about clients often requires getting out of boardrooms and into the field, to understand what’s really front-of-mind for the consumer. Insurers, reinsurers, aggregators and the like, should go out as often as possible, to test out their products. For example, they could travel to branches by public transport, buy a policy, and try to make a claim. This way they will get a better understanding of the hurdles faced by low-income households and why their offerings are not being taken advantage of.
Communicate beyond sales. Face-to-face interaction with low-income clients is crucial. This is not only the case at the point-of-sale but equally, if not more so, when a customer has already signed up. Word-of-mouth is extremely powerful in the close-knit communities that microinsurance targets, potentially more so than any advert or promotion. If insurers can provide a personal face-to-face service this could translate into satisfied customers driving awareness and up-take through their positive experiences. For example, imagine the outcome if a provider attends the funeral of a customer’s relative, paying their respects; and ensuring a quick and smooth pay-out? Being in touch creates trust and signals interest in your customers’ well-being.
Loyalty points for premiums. Think outside the box when it comes to marketing and premium payments to attract more customers. One example might be turning loyalty programme points into contributions towards insurance premiums instead of rewards. Payment systems can be leveraged to make premium payments easier, e.g. every time you swipe, a percentage is taken for insurance premiums. This integrates insurance whilst making paying for it less painful. We’ve seen this work to varying degrees with loyalty-based mobile insurance models.
Sell and teach. Financial literacy is often lower in the microinsurance target market, where many adults have never had insurance before. These adults often prefer other risk management mechanisms due to the perceived complexity of insurance products. Therefore, to increase take-up and inform decision-making, providers can teach insurance concepts to new consumers. Hollard Insurance in South Africa is doing just that. As soon as a client has signed up for a product, he or she, together with 20 others, is taught how to manage risks more effectively. This way Hollard can be sure that the product is understood well and its agents are held to their word during the sales process. Hollard has emphasised that consumer retention has increased since this approach was adopted.
The benefits of communicating with the client face-to-face is not merely limited to empowering the client to use the service. Great customer service, and therefore high levels of customer satisfaction, will attract other potential customers through word-of-mouth.
Combination of fixed and mobile branches. Physical branches in busy shopping malls and popular hubs are important for branding and to raise an insurer’s profile. But building these structures might not make economic sense if the consumer base is low and insurers cannot cover costs. A good supplement to a physical branch is having a wide network of agents operating from mobile branches and stations. These can be positioned near taxi ranks or markets to interact with people that would usually not pass by the physical branch. Agents, who have been hired locally, are brand promoters in their own networks and create footfall for the physical branches, where people can then go to pay their premiums. A combination of sales approaches mimics the differing realties of the microinsurance target market and lead to a higher insurance take-up, when done right.
This regional workshop was the first of its kind organised by the Microinsurance Network and provided great insights into the current thinking around microinsurance distribution. I look forward to attending similar events in the future.