Watching claims stories

Finally had the chance to delve through Allianz's microinsurance claims story videos, interviews with nine of Allianz's microinsurance clients who have made claims, selected at random.

The results were varied and interesting. This is something microfinance does far to little of: showing the results of our efforts as nuanced, worthwhile, but not miraculous.

I particularly enjoyed one woman's insistence that her family would of course have managed without the insurance - a good reminder that surviving disaster is something the poor must achieve regularly without insurance!

Three thoughts:

1) The claimants spoke again and again of insurance protection in the context of family and community. This is their primary support network and the starting point of their understanding: good microinsurance experiences were compared to the treatment you would expect from your family; the main alternative to insurance was support from friends and family; and relief was shown at not having to depend on them. This has implications for the way the poor use microinsurance and the way we should sell and explain it.

2) Even among those who had experienced the benefits of insurance, understanding was often remarkably low. One man who was obviously very grateful for his payment had only actually been reminded of it by accident a considerable time after the death of his wife! As Martin Hintz at Allianz said, "What strikes me in these videos is that insurance awareness is still low. People may already have a policy. And still they often don’t fully understand how insurance works and who their insurer is. They don’t feel confident enough to rely on insurance... So customer education is definitely is something we need to work on.”

3) Finally, I was reminded of the importance of keeping promises; especially when it comes to the amount of time it takes to pay a claim. One claimant was very pleased that her claim was paid within three months. That didn't seem all that quick to me, but what stood out was her satisfaction that the person from the insurance company had told her that everything would be sorted in three months and that was exactly what happened. Perhaps the insurers who will win the trust of their clients in the end won't be those who pay most quickly, but those who pay most consistently within a fairly quick time frame.

P.S. Great article today on why mobile money needs to be persuading customers to put money in, not just out from Ignacio Mas at CGAP. Also finished reading Poor Economics and still think you should read it!

It's good for you, I promise

Mobile phones are a great development tool, but their meteoric rise in Africa and Asia isn't because of their development portential, but because they are useful and exciting. To most people insurance isn't exciting and isn't even obviously useful. For insurers demand is more difficult.

The usual answer is client education; trying to make people realise insurance is good for them. But we don't usually do stuff because it's good for us. We do something because it's fun or obviously useful or because our parents taught us to, our friends do it or our sister swears by it.

At the moment I'm reading Poor Economics by Abhijit Banerjee and Esther Duflo. If you haven't read it, I recommend it. The book explores many examples in development which show that teaching people something is good for them isn't enough.

Things that are good for us need to become a norm, a habit. And this is where free and compulsory microinsurance schemes come into their own. They don't always offer the best client value, but at their best they provide a reliable and positive experience, make insurance a norm and pave the way for more valuable products.

All Q and no A

I have a question that has been floating around my head for a while, and it goes something like this:

Should microinsurance (or any other development tool for that matter) be trying to do the best thing it might be able to achieve or should it be focusing on the problem it is best at solving?

Let’s take the two ends of the spectrum. On the one hand most microinsurance programs start off with credit life. Microinsurance is a very good fit for reducing defaults, making microfinance safer for borrowers and expanding the reach of microfinance. But it’s not the most exciting proposition, and these programs are often criticized as they are compulsory and in some cases benefit lending organizations more than borrowers.

At the other end, health insurance is the type of microinsurance most sought after by low income clients. Protecting poor people against the terrible risks related to health is probably the best thing microinsurance might be able to achieve. But it is difficult, often piecemeal and, crucially, there are other methods available.

Is microinsurance the best answer to the question of providing affordable and quality health care to poor people? I don’t know the answer. But sometimes it seems to me that it is easy as a microinsurance practitioner to start with our tool and ask how we can use it to address the most pressing problems.

Would it be a better use of our resources and our tool to apply it where it can make the most difference, to the problem it best fits?

Insuring really small aliens

Insurers like to push the boundaries of what they can insure. The other day I was chatting with someone who was once involved in designing alien abduction insurance. He has now moved on from his feckless youth to become a leading figure in the microinsurance world, and certainly its most entertaining.

When people try to guess what microinsurance is, nine times out of ten they say something about insuring small things, and they're certainly on the right track.Having gone as big as possible and as weird as possible, the time came for insurers to go smaller. In fact there was a market worth around 40 billion dollars that they were completely ignoring.

I'm sorry to tell you microinsurance isn't about insuring really small aliens. It's actually much more exciting (promise).

Microinsurance is all about insuring small risks, i.e. charging a small amount to insure something that is worth a small amount financially. But that's misleading, because the reason that microinsurance matters is that it insures things that are very valuable to its clients. Microinsurance covers the lives, livelihoods and assets of poor people; anything from insuring a couple of acres of crops against a hurricane to insuring a market stall in case it is burnt down.

The idea is to offer greater stability to a poor person's life: a safety net to support them through crises.

Living in a society with advanced social protection, insurance provision and relative wealth, a crisis is usually a setback. For many of the world's poor their vulnerability to crisis can be critical.

This is the starting point for microinsurance. In reality it can be both more and less than a safety net.