What Do Clients Really Want from Insurance?

Steve Jobs once said: ‘Never ask your customers what they want, they will always mislead you’.

Not the most appropriate quote for the ‘Clients at the Center’ series, but one that resonates with microinsurance providers. Many providers complain that their efforts to understand the market have often misled them. Clients are simply inconsistent in what they say and what they do. Willingness-to-pay figures declared by clients do not match purchase patterns, and good client satisfaction results do not translate into renewals as experienced by the Cooperative Insurance Company in Kenya. Part of the problem is that low-income households don’t convert intentions into action either because of behavioral constraints (as explained in Psychology of Microinsurance) or practical realities of dealing with limited resources and competing demands.

Some say that insurance does not have a natural ‘fit’ with financial behaviors of low-income households, given that benefits are deferred in time and limited to just those few who claim. But, the shocks experienced by those lacking good risk-management tools have such devastating effects on livelihoods, that it is important not to abandon insurance as a development tool only because the ‘fit’ is not obvious.

Is there a better way to understand clients to find the right fit?

Better tools to monitor client behavior                                                                                                                                                                                        
The contributors to this blog series have highlighted several strategies to successfully conduct good market research, which is a must for all organizations.

There is also a compelling case for making better use of what clients have already told us through their take-up, claims, and renewal actions. Mining existing data to better understand client needs is an under-used practice in microinsurance–and one that made companies such as Apple and Amazon so successful.

Claims analysis is a natural place to find out more about clients, but is not always easy. A major upfront investment is needed to collect the right data and monitor its quality. In India, VimoSEWA found large inconsistencies in how claims were reported by hospitals and invested significant resources to map related claims into common categories to better understand which types were driving the product’s performance. The claims analysis showed that common water borne diseases and respiratory ailments, along with hysterectomies, were primary drivers of claims costs and in many cases, preventable. To address this, VimoSEWA created specific health interventions to educate women on how to prevent illness and to avoid unnecessary (and costly) hospitalizations.

Data mining and market research are complementary activities that can be used to triangulate client information. ICICI Lombard, for example, found very low health claims during the most illness-prone monsoon months. Surprised by this trend, ICICI Lombard conducted focus group discussions with clients, only to find that the low claims were not because of low incidence of illness, but because of the inability to access healthcare during these months.

Holistic approach to institutionalize client feedback                                                                                                                                                               
At the ILO’s Microinsurance Innovation Facility we believe that the ultimate objective behind understanding clients is to incorporate a client-focused perspective into an organization’s entire decision-making process, so that practitioners can improve the client value of their products and processes. But we lacked a simple, yet holistic approach to understanding client value in real time. Based on field tests with 15 microinsurance providers, the Facility developed a client value assessment tool called PACE (Product, Access, Cost and Experience). The PACE tool looks at the added value for clients of insurance by comparing the products to each other and to alternative means of protection (like informal or social security schemes). The tool provides an initial assessment of the product and the processes that support the product and aims to provide actionable insights for practitioners.

The PACE approach is simple. Practitioners can start by analyzing existing data, but they need to analyze each dimension from a client’s perspective. For instance, under the cost dimension we measure both affordability and value for money, while also looking at additional costs for clients (including transport) as well as at providers’ cost structure and controls to keep down overall costs of delivery.

One key aspect that differentiates PACE from other client value assessment tools is that PACE looks at both product specifications and related processes. Often, microinsurance processes to enable access or to service claims are poorly designed and undermine the value of the products. By evaluating current processes from the client perspective, PACE can identify improvement opportunities.

A client-focused approach to product development is not new and some microinsurance providers have already institutionalized the client perspective into their product development life cycle. Client value creation is an ongoing process with value increasing over time, as demonstrated by Uplift, one of the schemes reviewed using the PACE tool.

Improving client value is often about small changes that can make huge difference for clients. For example, ICICI Lombard in India includes a list of exclusions provided on the back of the insurance card as one of the attempts to better inform its clients about product benefits. Often client value improvements do not require much investment of labor or other resources.

Looking for a better fit with clients’ behaviors                                                                                                                                                                                                             
Our belief is that adopting a client-oriented lens will help providers identify how microinsurance fits into the overall risk-management portfolio of low-income clients. For microinsurance products to add value, they need to mimic informal risk-management practices to provide easy access and complement the benefits of social security schemes, while offering superior service. We need to know more about how insurance can fit within a broad array of formal and informal financial services that low-income households use to manage risks. Research by EUDN, FAI, IPA, I4, Microfinance Opportunities and Microinsurance Centre’s MILK project provide extremely useful inputs to further prove or improve client value from microinsurance.

Current demand challenges are forcing the microinsurance industry to pay attention to client value early in the industry development cycle. These efforts should yield a positive dividend in the long run; ultimately business viability is dependent on providing client value.

A recent Financial Times article entitled, “Innovators don’t ignore customers” argued that the rapidly dropping share price of Netflix, a DVD rental and online film service could be explained by the fact that the company lost touch with what its customers wanted. Keeping a sharp eye on client demand is thus not only the responsible or developmental thing to do–it simply makes good business sense.