MR Microinsurance_2012_03_29.indd - International Labour ...
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MR Microinsurance_2012_03_29.indd - International Labour ...

MR Microinsurance_2012_03_29.indd - International Labour ... MR Microinsurance_2012_03_29.indd - International Labour ...

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10.12.2012 Views

410 Insurers and microinsurance corporate culture that creates an open and unbureaucratic approach. Nevertheless, it emphasizes that this does not imply any compromise of basic business principles, and that new ideas need to be backed by a sound business proposition. Expansion into the low-income market is often an iterative learning process, where initiatives are fi ne-tuned as the insurer gains experience. A big part of learning is the willingness to get things wrong, whereby new tactics are attempted and failure is tolerated as long as the company learns from the eff ort it makes (see Box 19.5). Box 19.5 Creating space for errors and learning At the outset of Zurich’s global microinsurance initiative, the Chief Executive Offi cer (CEO) was asked, asked, “We aim to do some some new things things and eventually we will ‘stub ‘stub our toe’. Are you ready for that?” that?” He answered, answered, “If the mistake is strategic – we we didn’t know something that was was unknown – – I have a lot lot of tolerance. But I will not tolerate sloppy execution.” execution.” Using experiments and pilots Experiments and pilots are two approaches that form part of the learning process that can be used to refi ne models. Experiments are one-off projects with clearly defi ned hypotheses, meant to confi rm that it is possible for the company to achieve its microinsurance goals. As far as possible, the core business should be sheltered from these one-off projects and costs should be limited to the minimum required to learn the results. Experiments can be invaluable in developing initiatives and learning about customers’ needs and preferences, potential partners, local conditions, and regulations without major up-front resource commitments or liabilities. Systems requirements can be kept low with data often being handled in spreadsheets or with readily available software solutions. External funding during this phase may be especially helpful if those who make resource decisions are not rewarded for achieving the goals supported by these experiments. Clear evaluation criteria for experiments need to be established and the projects regularly assessed against these criteria. By eliminating or clarifying certain variables, initial fi ndings from the experiment stage help to build the case for pilots. Insights from experiments form the basis for the innovation necessary to secure the long-term success of a project. Pilots to start the business are initiated after experiments provide answers to prove the hypotheses. By the pilot stage, most of the key questions about how the business will eventually work have been answered. While pilots need to be

Teaching elephants to dance fl exible and agile, they are also the point where more permanent initial investments are made. A pilot is an interim investment to confi rm the best methods before rolling out, gaining scale and industrializing. Pilot methods are more fl exible than industrialized processes, but more substantial than experiments. Th e basic shape of the endeavour should be seen at the pilot stage, even if the individual elements are still relatively easy or inexpensive to replace. Like experiments, a strong focus on learning will speed up eff orts during the pilot stage. Pilots and experiments are valuable opportunities for insurers to get things right before going to scale, but due consideration of the impact on all participants is recommended. Experiments create expectations with staff and colleagues as well as with customers and other external stakeholders. Colleagues are often invigorated by the chance to use insurance to do good in society and may even contribute personal time to help. Th e further an experiment reaches into vulnerable populations, the more important it is to consider the eff ects on the target customers. Besides the insurer’s time and money, low-income customers are asked to invest their time and trust into experiments and pilots. Box 19.6 Iterative learning process In Kenya, the experience of Cooperative Insurance Company (CIC), which off ers a bundled life and health product that was re-launched as Bima ya Jamii in 2007, illustrates how the development of microinsurance products can be an iter- iterative learning process through changes to the product, risk carrier and distribu- tion model. CIC began providing the bundled product through selected microfi nance institutions (MFIs) and savings and credit organizations (SACCOs) in 2003. Over time, the product was enhanced at the request of the partners with increased benefi t levels and options for higher-cost hospitals. Th e business soon became severely loss-making. CIC then formed a partnership with the Govern- ment’s National Hospital Insurance Fund to provide the health benefi ts. Under this new arrangement, the claims ratio for the life cover component retained by CIC was at an acceptable level, but policy volumes were much lower than expected due to a lack of individual incentives to sell the product for the staff of the MFIs and SACCOs. To compensate, CIC has entered into a relationship with an independent agency to distribute the product through the micro- fi nance intermediaries. Source: Angove and Tande, 2011. 411

Teaching elephants to dance<br />

fl exible and agile, they are also the point where more permanent initial<br />

investments are made. A pilot is an interim investment to confi rm the best<br />

methods before rolling out, gaining scale and industrializing. Pilot methods are<br />

more fl exible than industrialized processes, but more substantial than experiments.<br />

Th e basic shape of the endeavour should be seen at the pilot stage, even if<br />

the individual elements are still relatively easy or inexpensive to replace. Like<br />

experiments, a strong focus on learning will speed up eff orts during the pilot<br />

stage.<br />

Pilots and experiments are valuable opportunities for insurers to get things<br />

right before going to scale, but due consideration of the impact on all participants<br />

is recommended. Experiments create expectations with staff and colleagues<br />

as well as with customers and other external stakeholders. Colleagues are often<br />

invigorated by the chance to use insurance to do good in society and may even<br />

contribute personal time to help. Th e further an experiment reaches into vulnerable<br />

populations, the more important it is to consider the eff ects on the target<br />

customers. Besides the insurer’s time and money, low-income customers are<br />

asked to invest their time and trust into experiments and pilots.<br />

Box 19.6 Iterative learning process<br />

In Kenya, the experience of Cooperative Insurance Company (CIC), which<br />

off ers a bundled life and health product that was re-launched as Bima ya Jamii in<br />

2007, illustrates how the development of microinsurance products can be an iter- iterative<br />

learning process through changes to the product, risk carrier and distribu-<br />

tion model.<br />

CIC began providing the bundled product through selected microfi nance<br />

institutions (MFIs) and savings and credit organizations (SACCOs) in 20<strong>03</strong>.<br />

Over time, the product was enhanced at the request of the partners with<br />

increased benefi t levels and options for higher-cost hospitals. Th e business soon<br />

became severely loss-making. CIC then formed a partnership with the Govern-<br />

ment’s National Hospital Insurance Fund to provide the health benefi ts.<br />

Under this new arrangement, the claims ratio for the life cover component<br />

retained by CIC was at an acceptable level, but policy volumes were much lower<br />

than expected due to a lack of individual incentives to sell the product for the<br />

staff of the MFIs and SACCOs. To compensate, CIC has entered into a relationship<br />

with an independent agency to distribute the product through the micro-<br />

fi nance intermediaries.<br />

Source: Angove and Tande, 2011.<br />

411

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