If your clients don’t know about their insurance product, does it even exist?
Recent research from Egypt suggests many low-income clients who have insurance, tend to be unaware of it. As Shilpi Shastri and Sandy Salama explain, long-term commercial success depends on clients both using their insurance product and feeling satisfied with the experience. By courtesy of the Micro Insurance Network.
Lead Foundation, an Egyptian microfinance institution, partnered with Women’s World Banking – a global leader in women’s financial inclusion – to introduce an insurance scheme for its clients in December 2015. Our research showed a need for insurance to compensate for loss of income if a household’s breadwinner was hospitalised or died. This led us to develop the ‘Hemayet Lead’ (‘Protection by Lead’) hospitalisation and life insurance programme.
Hospital cash insurance provides US$17 (EGP 300) for each night in hospital for any condition, including maternity and pre-existing conditions. To claim, the insured person simply submits a discharge certificate to Lead as proof of hospitalisation. Life insurance pays out three times the amount borrowed, less any outstanding loan, to the family of the deceased client.
Successful microinsurance programmes are those that are actually used. If clients do not use their insurance, it delivers no value to them. Low usage could stem from a lack of awareness, perceptions of the limited value of the benefits or generally negative views of insurance (“it doesn’t work for us”). Collecting client feedback is important for gaining a better understanding of the underlying causes. On the other hand, usage of a particular insurance programme can be measured by the claims frequency – that is, the proportion of the total insured population filing claims over a given period of time. Phone surveys are particularly useful for collecting statistically representative client feedback. Three phone surveys conducted over 18 months have provided us with valuable insights to ensure Hermavat Lead’s success.
Claims frequency and client awareness
A three-month post-pilot evaluation in March 2016 revealed that the actual frequency of claims was lower than initial actuarial assumptions and that it varied across Lead’s three branches. In addition, research by Women’s World Banking and Lead Foundation showed that clients’ understanding of the insurance features was limited and that they did not trust the product to work for them. However, those who had benefited from claims were satisfied with the process and the sums paid out.
These findings suggested that low awareness may result in low claims frequency. To test this hypothesis, Women’s World Banking conducted a phone survey with six groups, speaking to both group loan clients and individual clients away from the three pilot branches. A total of 635 clients took part in the phone survey. This revealed that, while the majority of respondents knew they had insurance (only 12% were not at all aware of having any), most could not mention more than three features of the product.
The survey underscored the need to simplify communication and create reminders as clients tended to forget about their insurance over time. Women’s World Banking and Lead created a marketing programme focusing on the three most important features: amount of benefit per night; requirement for hospital discharge certificate; and life insurance benefit amount. In addition, posters were put up in branches to remind clients about insurance.
Easing the claims experience
By March 2017, six months after the roll out and scale up of the programme, monitoring by Lead found that claims frequency varied significantly across all its 18 branches. Women’s World Banking and Lead conducted another phone survey to understand the reasons behind this phenomenon. Branches were sorted into three groups based on their claims frequency: very low claims frequency; portfolio average claims frequency; and higher than the average claims frequency. 270 clients from each group were contacted to take part in the survey.
Women’s World Banking developed a scoring model to quantify clients’ awareness levels: 10 points for mentioning one of the three key features; 5 points for partially correct mentions; and 1 point for the mention of any other feature. The total points accrued by each respondent would indicate the level of understanding of the insurance scheme. The survey (Table 1) found that 31% of respondents from the very low claims group had zero awareness of insurance, compared to 23% in the average claims group and 25% in the high claims group. The results strengthened our hypothesis that lack of awareness drives low claims frequency.
The survey also revealed that some respondents who had been hospitalised in the recent past did not file any claims. They cited one of three reasons: they forgot they had any insurance; they were unable to get a hospital discharge certificate (either through their own delay in asking for it or inefficient hospital bureaucracy); or because they did not have any trust that they would receive the money.
To address these issues, Lead first organised training for branch managers specifically to drive client awareness. Secondly, we began providing official request letters for clients to present to hospitals in order to get a discharge certificate more promptly. The certificate should be easy to get but can in practice be difficult to obtain in a single visit, and women from low-income backgrounds may lack the confidence or agency to ask hospital officials for these documents. Finally, branch managers paid out claims in front of other clients to demonstrate that insurance cover really works and to reinforce trust in the product.
In November 2017, Lead partnered with AXA Egypt and increased the hospital benefit amount from US$14 (EGP 250) to US$17 (EGP 300) per night. This change was rolled out accompanied by a marketing campaign to inform clients. A phone survey and detailed evaluation was carried out to understand both the effectiveness of the marketing campaign and the factors that influence insurance usage.
This time, Women’s World Banking and Lead surveyed four sample groups based on loan type and history: existing group loan (GL) clients; group loan clients with loans taken out or renewed after November 2017; existing individual loan (IL) clients; and individual clients with loans taken out or renewed after November 2017 (Table 2).
Clients who took out loans after November 1st 2017 had better awareness of the updated features, suggesting that new information did not reach clients receiving their loan prior to that date. Interestingly, group clients had higher awareness than individuals, most likely because information is shared and reinforced in group meetings. However, individuals had a higher claims frequency than groups (for individual male clients, this could be due to their higher morbidity risks).
Individual female clients were found to more likely to seek proper treatment in hospital compared to their group counterparts, due to their being in a more financially secure position to look after their health. Group clients tended to cut short their hospital stays to get back to their work and their children, to minimise loss of income and to avoid large hospital bills. Some of the group loan women did not stay overnight in the hospitals and so were ineligible to file claims under the scheme.
While client awareness is crucial to insurance use, it is clear that other factors such as familial responsibilities and financial constraints, especially for low-income working mothers, influence their decision to seek medical treatment. Incomplete treatment reduces their eligibility to file a claim and their health condition can worsen as a result. Lead is looking to develop preventive health management services in order to address these barriers.
Awareness is key
Lack of client awareness defeats the purpose of microinsurance. If clients are unaware and lack trust in the product, they will not use it in the first place. To make sure microinsurance is successful in future, insurance providers and distributors must take the following steps: develop clear and simple communications about its benefits; deliver on promises of hassle-free claims processes and meaningful benefits; and use regular monitoring to identify gaps in delivery. Phone surveys are an easy and cost-effective tool for gathering and analysing data that organisations can then use to create solutions to serve their clients more effectively.