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Distribution and Technology in Microinsurance Experiences and lessons learnt from microinsurance providers in India and Brazil

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Distribution and Technology in microinsurance

Content Executive Summary....................................................................................................................................................................................... 3 Bradesco......................................................................................................................................................................................................... 7

1. Bradesco Seguros’ Microinsurance Initiative............................................................................................................................................. 7

2. Microinsurance products................................................................................................................................................................................ 7

3. Distribution channels....................................................................................................................................................................................... 9

4. Insurance and sweepstakes............................................................................................................................................................................ 10

5. Technology......................................................................................................................................................................................................... 10

6. Insurance key processes.................................................................................................................................................................................. 12

7. Challenges.......................................................................................................................................................................................................... 14

CARE Foundation & CARE Hospitals.......................................................................................................................................................... 15

1. CARE Foundation............................................................................................................................................................................................. 15

2. CARE Foundation’s microinsurance initiative............................................................................................................................................ 15

3. Organisational structure................................................................................................................................................................................. 15

4. Distribution channels....................................................................................................................................................................................... 17

5. Insurance Key Processes................................................................................................................................................................................. 17

6. Technology......................................................................................................................................................................................................... 18

7. Lessons learnt.................................................................................................................................................................................................... 21

CARE/AVVI.................................................................................................................................................................................................... 23

1. CARE India......................................................................................................................................................................................................... 23

2. CARE Tamil Nadu and microinsurance........................................................................................................................................................ 23

3. AVVAI Welfare Society.................................................................................................................................................................................... 24

4. AVVAI’s microinsurance initiative................................................................................................................................................................. 24

5. Insurer – Bajaj Allianz...................................................................................................................................................................................... 24

6. Insurance Products.......................................................................................................................................................................................... 24

7. Distribution and insurance key processes................................................................................................................................................... 25

8. Technology......................................................................................................................................................................................................... 26

9. Challenges faced and lessons learnt............................................................................................................................................................ 27

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Distribution and Technology in microinsurance

Executive Summary Households are exposed to a number of risks such as illness, old age, accident, disability or natural hazards. The occurrence of such risks can cause loss of income as well as unexpected expenditure and thus have disastrous consequences, especially for low income households. Families or individuals fall (deeper) into poverty because of catastrophic expenditures and face increased vulnerability due to negative risk coping strategies such as the sale of productive assets. Microinsurance is a successful instrument in terms of managing risks and reducing the vulnerability of low-income households and equally promising in terms of enhancing access to social protection, especially for low-income households. However, access to microinsurance products remains low in most developing countries, owing to the pilot nature and limited scope of most microinsurance approaches currently in place, amongst other reasons. One of the key challenges is therefore how to overcome this limited outreach and improve access to micro­ insurance products.

OBJECTIVE OF THE STUDY Efficient distribution channels and the application of innovative technologies are two key success factors in enhancing the outreach of microinsurance. The purpose of this study is to offer a systematic analysis of the distribution channels and technologies currently being used in this context. Experience gained and lessons learnt in India and Brazil are analysed in order to answer the following questions: 1. What has been the experience to date with different distribution channels and new technology approaches? 2. What are the key success factors and what has hampered the success of these approaches? 3. What is the impact of the increasingly important innovative distribution channels and technologies with regard to consumer protection? 4. How can these lessons learnt be used to replicate successful approaches in other countries?

EVALUATION OF DISTRIBUTION CHANNELS For this study, three microinsurance providers were visited and reviewed. These organisations were selected because each of them uses innovative technology approaches for distributing microinsurance. The organisations concerned are as follows: 1. Bradesco Seguros e Previdência (BSP) – a Brazilian insurer providing micro life and non-life insurance 2. CARE Foundation – an Indian NGO providing micro health insurance 3. CARE India/AVVAI Welfare Society – an Indian NGO providing micro life insurance These organisations use various technologies and channels to distribute their insurance products. The two most distinctive distribution methods were through a commercial retailer network and through non-commercial channels such as primary health care centres or NGOs. Two of the insurers reviewed chose to distribute their products through a retailer network because this offered the best opportunity to reach scale – of vital importance to an insurer. In India the insurer opted for two kinds of retailers: grocery stores and mobile phone top-up counters. In Brazil the distribution channels used were bank retailers, banking correspondents and pharmacies. In the case of densely populated India, retail shops are found everywhere and therefore insurance can be made available in even the remotest areas of the country. The biggest challenge faced by the insurer in Brazil is to reach potential clients in the many remote cities and villages. For 405 cities in Brazil the closest financial service provider is over 100 km away, most of the roads are in poor condition and of those 405 cities, 75 are only accessible by boat or small plane.

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Distribution and Technology in microinsurance

EFFECTS ON CONSUMER PROTECTION Until October 2010, insurers in India were allowed to use retailers without an insurance background to provide referrals. The retailer informed prospects about the insurance product and referred them to agents who then went through the final sales process with the client. The retailers were trained by the insurer in such a way that they could deliver the greatest possible number of prospects to the insurance agent. That approach made it highly likely that the consumer would purchase the insurance product without being properly informed about the pros and the contras of the insurance product. For this reason the Indian Insurance regulator now asks retailers who sell insurance products to complete an extensive 50 hours of insurance training before being allowed to offer insurance sales or any form of referral to prospects. These changes in regulation have forced Indian insurance companies to change their approach to distributing microinsurance products in favour of the consumer. In Brazil, sweepstakes are an important marketing tool for selling (micro) insurance products. The sweepstake is the most important reason why consumers buy an insurance product – the chance to win a prize is apparently of greater importance than the insurance product itself. It is perhaps questionable whether the consumer understands the concept of insurance, and if, in the case of an insured event, they would know if they are covered and understand the steps involved in submitting a claim. In the urban areas of Brazil, consumers are already used to existing distribution channels; retailers and banking correspondents also habitually sell financial products. The question remains as to how insurers in Brazil intend to overcome the issue of training new distributors in remote areas. Will consumers in remote areas have access to adequate insurance information and education? Will consumers be correctly informed about the insurance products or will the focus on the sweepstakes be even more intense in remote areas?

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Distribution of microinsurance through non-commercial organisations differs from how insurance is distributed by insurers. In the case of both reviewed non-commercial organisations, a bottom up approach has been adopted. The aim of these types of organisations in general is to inform and sensitise their members about insurance and its potential benefits. The communities are taught about the concept of insurance, the risks faced by members, how to cope with these risks and the potential uses of insurance for the community. Possible impact of innovative distribution channels in regard to consumer protection  Retailers without an insurance background sell insurance products  Consumer purchases insurance product(s) without being properly informed  Sweepstakes – the chance of winning a prize is sometimes more important than the insurance product itself  A bottom up approach tends to increase understanding of insurance products

TECHNOLOGY APPROACHES Before an organisation can make a technology choice for its microinsurance operations the following question must be answered: What do you want to accomplish by using technology? In other words: how can technology be helpful in the business processes of your organisation? Is it to reduce transaction costs? Shorten turnaround time? Increase transparency for the customer? Establish easy client enrolment or enable fast claims settlement? Each need has its own technology that might be able to support your needs. Only when the need is clearly understood can the search begin for applicable technologies.

UNDERSTANDING OF TECHNOLOGY What does the planned technology actually do and what are its limitations? If you do not understand or misunderstand your technology (and the technologists working for vendors) unexpected results and costs may ensue. Some of the interviewed organisations, for example, underestimated the need for customisation of technology. It is impossible simply to buy readymade technology and start working with it. Each organisation has its own specificities and in most cases the technology must be adjusted to these.


Distribution and Technology in microinsurance

Before searching for technology solutions the emphasis should be placed on (re)engineering internal business processes, system integration and other approaches in order to reduce the administrative load in the back office of an organisation. The risk of not doing so is that investments in your organisations will be incorrectly prioritised, resulting in increased overhead costs. What data absolutely must be captured? Making changes in the data to be captured after the implementation of the technology will require more customisation work and therefore take up more time and money.

SOFTWARE Do not rush into software development. Take your time, especially if it is a first time software or application development. As an organisation you should try to understand your needs, requirements and scope before talking to technology vendors. Understand your processes, fine tune the processes, create a standardised process and then move towards software development. If a decision is taken to outsource the development of the software it is important to select a vendor that is experienced in your area of work. If you also plan to use front-end tools such as handhelds or mobile phones, then it is unwise to separate the front-end hardware and software development as this may raise compatibility and support issues.

HANDHELD DEVICE A handheld device, sometimes also called a Point of Sale Terminal, may prove useful if there is no access to common technologies such as a desktop or laptop for example in remote areas or in the field. The handheld device can carry various technologies required in microinsurance, for example a smart card reader, biometric authentication tools or a printer. The handheld may also have GPRS connectivity for wireless internet use. Such a device would be able to work perfectly in combination with a back-end software system if made compatible. The device could issue policies or print out other valuable information on location without the need for the customer to be in a place where a computer, internet and a printer is available. If the transfer of data is the only requirement then a modern mobile phone will be able to do the job as well and is less expensive in terms of hardware. In the case of CARE Foundation the aim was to provide the customer with a smart card. A smart card can contain all relevant policy details such as name, address, photo ID, a digitally stored biometric fingerprint ID, insurance history and balance. By swiping the smart card through the handheld device all this information can be read by the Village Health Worker.

POSSIBLE LIMITATIONS OF SOFTWARE Ensure that the selected software system you are about to use is flexible enough to reduce the need for expensive and time consuming customisation efforts. Minimise the need for data entry by the user. Common data should be pre-loaded. This will increase the speed of data entry and will limit the margin. Try to establish a capable team that will work with the software vendor during the software development process. Note that the investment costs to get technology into place can be higher than expected. Beside licence fees, other costs such as set-up costs, customisation charges, support services and maintenance fees may lead to high additional costs . Neither should data migration from existing (software) systems to new software be underestimated.

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Distribution and Technology in microinsurance

GPRS CONNECTIVITY

SMS

One of the major issues seen during the study was that CARE Foundation experienced many problems owing to the lack of fully functioning GPRS connectivity. Contrary to expectations, the GPRS connection was unavailable in remote areas and was limited to the larger towns. The organisation had set up an infrastructure whereby the back-end software system was only reachable over the internet through a handheld device. The handheld would use GPRS to connect with the back-end software to ensure that each party involved in the process would have access to identical information. This made the infrastructure highly dependent on working GPRS connectivity. The organisation apparently did not determine (or at least not thoroughly) beforehand whether GPRS was working at the selected location. This led to both organisations being forced to completely revise their approach to the use of technology, making the business process independent from GPRS connectivity. If you choose a GPRS solution you must ensure that GPRS is working at the selected location(s).

Bradesco searched for a mobile solution that was able to send proposals, receive premium payments, check policy status, enter claims and distribute insurance via SMS. Bradesco decided to enter in a joint development with Vayon, an Brazilian insurance technology solutions provider. The Bradesco solution uses the Social Security number given by the Brazilian government to each inhabitant of Brazil. During enrolment the primary information entered in the backend system through SMS is therefore the client’s social security number. When this is sent to the backend software system at Bradesco, the system accesses a database to gather the required customer data linked to the social security number (name, age, sex and address), thus enabling Bradesco to start the acceptance/issue process.

OFFLINE OPERATION CARE/AVVAI used an offline modus in their mobile device to overcome the issue of dysfunctional GPRS connectivity at certain locations. Including an offline modus is recommended to other organisations planning to use a similar solution. The entered data will either, in the case of working connectivity, be directly sent to the backend software or, in the case of dysfunctional GPRS, will be stored locally on the mobile device itself until it reaches a place with working GPRS or internet. The option of an offline modus seems to be a solution for some of the problems mentioned by Care Foundation, although internet connectivity either via GPRS or cable remains a requirement.

An important precondition for successful use of the Bradesco solution is the availability of such a database in the required area. As clearly not every developing country has this kind of data available, this should be carefully investigated and tested in advance. Experiences made so far with new technology approaches  Understand the needs, requirements and scope of technology before talking to technology vendors.  Understand the processes, fine tune and create standardised process before purchasing technology.  Ensure that the selected software system is flexible enough to reduce the need for expensive and time consuming customisation efforts.  Minimise the need for data entry by the user, common data should be pre-loaded.  GPRS connectivity is not available in many of the remote areas. Other organisations planning to use a similar solution are strongly advised to include an offline modus.  SMS was used as an alternative to GPRS by some of the organisations reviewed.  

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Distribution and Technology in microinsurance

Bradesco Banco Bradesco (branded as Bradesco) is one of the Big Four banks in Brazil, the others being Banco do Brazil, Itaú Unibanco and Santander Brazil. Bradesco was the largest private bank in Brazil until Banco Itaú and Unibanco merged in 2009. Bradesco is headquartered in Osasco and had around 3,500 branches in 2010. Bradesco Group offers banking and insurance services. The insurance company “Grupo Bradesco Seguros” was founded in 1935 and acquired by the bank some years later. Bradesco Seguros was the first insurance company to be connected to a bank in Brazil. Bradesco Seguros is the largest insurance group in Latin America with approximately 36 million policyholders and annual revenues of around US$14 billion. The Bradesco group has always thrived in retail, but are active in every market segment. Bradesco positions itself in 2 further core areas: banking services and products and insurance products. Bradesco Seguros’ first life insurance policy was sold in the early 1970’s. Bradesco Seguros e Previdência (BSP) Affinity was founded in 2007. In conjunction with the group’s insurance companies, BSP Affinity lead the sales of microinsurance in Brazil and hopes to add 20 million new clients in the next few years, based primarily on microinsurance.

1. BRADESCO SEGUROS’ MICROINSURANCE INITIATIVE Bradesco Seguros e Previdência (BSP) differentiates its insurance products for the lower market segments into 3 groups and considers products with premiums of less than US$5.50 per month as microinsurance products. Products are differentiated in the following categories: 1. mid insurance – from US$11.00 to US$22.00/month 2. mini insurance – from US$5.50 to US$11.00/month 3. microinsurance – under US$5.50/month

2. MICROINSURANCE PRODUCTS BSP offered its first microinsurance products in January 2010 in the Rocinha (Rio de Janeiro state) and Heliopolis (Sao Paulo state) favelas. The products have monthly premiums of Rs.3.50 (US$1.90)1 with accidental death benefit of Rs.20,000 (US$ 10,890). Another example of a microinsurance product is Bradesco’s residential insurance, named Bilhete Residencial – “Estou Seguro!” (Bradesco Home Insurance – “I’m Safe!”). This product was launched in September 2010 in the Morro Dona Marta favela (Rio de Janeiro state) and has a yearly premium of Rs.9.90, (US$5.39) it offers insurance against residential fire, explosion or lightning, with coverage of up to Rs.10,000 (US$5,446). For more detailed information please refer to Table 1 on page 8.

INTRODUCTION OF NEW PRODUCTS After the passage of the bill regulating the new microinsurance policy model, BSP plans to offer 8 new insurance products belonging to the micro-, and “mini” insurance products groups with monthly premiums ranging from Rs.3 (US$1.63) to Rs.15 (US$8.17). The insurance programmes combine two or three different types of coverage: 1. Home and life insurance 2. Personal accident with financial protection for unemployment 3. Funeral assistance through financial compensation BSP decided not to wait for implementation of a regulatory framework for microinsurance to be formalised before testing the market. After over 80 surveys in recent years and the organisation‘s existing track record of meeting the needs of low-income segments, the company already had the necessary elements to conduct a pilot test in some of the slums of Rio de Janeiro and Sao Paulo.

1 Rs.1 = US$0.54

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Distribution and Technology in microinsurance

Table 1: MAIN MICROINSURANCE PRODUCTS CURRENTLY SOLD BY BSP Accidental death: Primeira Proteção Bradesco Features A  ccidental Death (AD) C  overage: US$11,000 M  onthly Premium: US$1.89

Residential – Property insurance: Bradesco Bilhete Residencial Features Basic Coverage: Fire, lightning and any kind of explosion Additional Coverage: Heavy winds, hail, plane crash, ground vehicle impact and smoke; loss or payment of rent and family liability Additional Benefit: 24hr home assistance Monthly Sweepstakes of RS.50,000 (US$27,000) Aimed at: Bricks and mortar, permanent or summer residence Validity: Annual Payment Method: Monthly and yearly Monthly Premium: US$3.70

Life insurance: Vida Segura Bradesco Features  Accidental or natural death coverage  Additional benefit of individual funeral assistance  4 monthly sweepstakes of RS.15,000.00 (US$8,100)  Aimed at people aged 16-59  Valid for 5 years, with automatic renewal for the same period  Payment method: Monthly and yearly  Premier popular microinsurance product in the Brazilian insurance market (SUSEP bulletin)  Monthly Premium of US$5,00

Life insurance: Tranquilidade Familiar Bradesco Features  Death Coverage  Additional benefit of family funeral assistance (insured, spouse, children under 24, special needs and single daughters with no age limit )  Monthly sweepstakes of RS.10,000.00 (US$5,400)  Aimed at people aged 16-80  Valid for 5 years, with automatic renewal for the same period  Payment method: monthly and yearly  Monthly premiums starting from US$2.60

Personal Injury: Acidente Pessoal Premiável (APP) Features  Accidental death coverage Additional benefit of individual funeral assistance Monthly sweepstakes of up to RS.200,000 (US$108,000) Aimed at people aged 14-70 Valid for 5 years, with automatic renewal for the same period Payment method: monthly and yearly Monthly Premium of US$4.40

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Distribution and Technology in microinsurance

Financial/Unemployment Protection: Proteção Financeira Bradesco Features Coverage: involuntary unemployment, temporary total disability, and death or permanent total disability caused by accident Covers overdrawn accounts according to limits established in the terms of engagement  Offered in combination with the following products: consortium, credit cards, overdraft, automatic debit of utility bills (electricity, water, gas, telephone...), among others Aimed at people aged 18-65 Validity: Undetermined, because it follows the duration of the credit concession or the utilisation of the service Payment Method: Monthly Monthly Premium of US$1.30

Personal Injury: Primeira Proteção Bradesco Features Accidental death coverage Single benefit of RS.20,000.00 1 monthly sweepstake of RS.20,000 (US$ 10,800) Aimed at people aged 14-70 Validity: annual Payment method: monthly  First insurance plan on the Brazilian market, adapted to the MICROINSURANCE philosophy, in full accordance with current regulations Monthly Premium of US$3.50

3. DISTRIBUTION CHANNELS BSP uses a variety of channels to deliver its insurance products, however its strongest focus is on its own large retail network. To sell microinsurance BSP uses the distribution channel of the existing Bradesco Bank retailers, where the financial products are sold through dedicated brokers. Besides the sales and service channels within the Bradesco organisation, Bradesco has also formed partnerships with many institutions. In the larger cities of Brazil it is relatively easy for Bradesco to sell its insurance products since the existing retail infrastructure can be used. The biggest challenge faced by BSP is in reaching its potential clients in the many remote cities and villages of Brazil. For 405 cities the closest financial service provider is over 100 km away, most of the roads are in poor condition and of those 405 cities, 75 are only accessible by boat or small planes.

For those cities and villages close to the Amazon River, accessible only by boat, Banco Bradesco introduced a boat containing a bank branch. The branch offers services including savings and checking accounts, personal loans and direct deposits from the government for public servants, pensioners and the poor. BSP also aims to offer insurance delivery services on the boat.

CURRENT DISTRIBUTION CHANNELS USED BY BSP Retail bank - BSP has approximately 3,500 traditional bank branches throughout the country, where around 7,000 dedicated insurance brokers work for BSP.

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Distribution and Technology in microinsurance

4. INSURANCE AND SWEEPSTAKES Bradesco turned to sweepstakes to encourage potential customers to buy an insurance product. Supermarkets (with banking correspondents), pharmacies or other retailers are targeted by Bradesco because these locations already sell lotteries and sweepstakes to their customers. With the sweepstakes added as a feature to the insurance products the customer can win big prizes. The sweepstakes are linked to residential, life and personal injury insurance products. Beside the insurance coverage the customer has a chance to win prizes ranging from US$5,500 to US$108,000. VOYAGER III – Anazonas, first bank branch aboard a boat

Banking correspondents – The 25,000 locations in Brazil that act as banking correspondents are a very important channel for the distribution of insurance for BSP. This is due to the large numbers of people using supermarkets, grocery stores, pharmacies and the convenience this offers. In Brazil it is possible in many supermarkets (in the larger cities) to access simple financial services through ATMs. These not only serve as money dispensers in the supermarket but also make it possible to pay bills, dispense cash, and purchase simple financial products, including insurance. Another example is the project initiated by BSP and “Big Serviços” to distribute microinsurance through banking correspondents at “Big Serviços” pharmacies. Big Serviços is part of the Big Ben chain, the 9th largest chain of pharmacies in Brazil. Big Ben has a strong presence in the northern part of the country. The programme enables the pharmacies to act as intermediaries and banking correspondents, for financial services. Complementary Channels 1. Postal banks 2. Internet banking and insurance 3 Telemarketing

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According to Bradesco these strategies have paid off and sweepstakes are now an important marketing tool for selling microinsurance products. The sweepstake is apparently one of the most important motives for the purchase of an insurance product. It appears that clients find the chance of winning a prize of higher importance than insuring their house, life or themselves. The insurance is more or less seen as an added benefit of purchasing the sweepstake.

5. TECHNOLOGY BSP realised that if they wanted to make microinsurance operations sustainable they would need to meet certain requirements, possibly using technology and bearing in mind that; Distribution costs should be as low as possible Administrative costs should be as low as possible  No “high-tech” infrastructure was available to sell the product in remote areas

MECHANISMS TO SERVE REMOTE COMMUNITIES This last requirement is key. How to overcome infrastructure limitations in remote areas? Brazil is a vast country with communities in remote areas lacking the infrastructure (electricity, internet or GPRS connectivity etc.) found in the larger cities. BSP therefore required a solution that could be used by any staff member serving in remote locations without the need for high-end IT infrastructure. One technology available to distributors and customers even in the remotest areas is the mobile phone. In the best case scenario therefore, the only technology required by the distributor would be a mobile phone. BSP searched for a mobile solution able to send proposals, receive premium payments, check status of policies, enter claims etc. Similarly, the customer should be able to receive information about the insurance product for free via mobile phone, even when they have no credit on their phones.


Distribution and Technology in microinsurance

Mobile technology2 Data from the developing world are becoming increasingly valuable to aid agencies, governments, and insurers and an asset for the base of the pyramid. For insurers, for example, it is crucial to have access to target group data in order to develop a (micro) insurance product. Mobile technology is becoming more prominent in supporting the collection, validation and packaging of microinsurance data. In the case of Bradesco, this will require its staff at the various distribution channels to be trained in the use of such technology for insurance. It will thus turn data collection into a routine, low cost and complementary activity, eventually replacing traditional surveys. Mobile technology will address the critical problems associated with data collection activities such as:  ridging paper-based and electronic data collection B I ntegrating professional surveys with community-based data collection  vercoming constraints posed by inadequate support O infrastructure  educing the cost of continuous data collection in remote R locations One of the main objectives of mobile platforms is to integrate data collection with existing professional insurance delivery methodologies. Because applications will run on mobile phones, their acceptance should be well received by the target group, who are for the most part familiar with mobile telephones.

In their search for a solution BSP contacted Vayon, a Brazilian insurance technology solution provider. Most of the solutions delivered by Vayon relate to the distribution of insurance products through mobile technologies.

The mobile market has significant potential in Brazil, driven by wide access to its technology by a number of social classes. In view of this, BSP decided to enter in a joint development with Vayon to initiate a pilot project in the Rocinha favelas, Rio de Janeiro state and Heliopolis favelas, Sao Paulo state. The company closed 2010 having underwritten over 560,000 policies. Another product pilot was launched in September 2010 in the Morro Dona Marta favela, Rio de Janeiro state. This co-operation with Vayon is important for BSP because this enables both partners to test new tools and technologies, expanding the reach of the current distribution channels and creating new opportunities, potentially targeting 20,000,000 new microinsurance clients. The partnership between BSP and Vayon has resulted in the development of a system known as on.iBusiness.

ON.IBUSINESS on.iBusiness is a web/mobile based platform designed to manage a complete end-to-end process, from product conception to sale of the insurance product. The system can be used by all distributors working with and for Bradesco: brokers, banks and banking correspondents located in the various retail channels. With no need to install an application on a mobile phone, the on.iBusiness platform allows business flow customisation. It enables the distributor to start proceedings through SMS. The alternative and relatively new way to distribute insurance include for example direct sales through SMS (as described in the chapter “Insurance key processes”). Another interesting feature is the use of Bluetooth, whereby a customer enters an area in which on.iBusiness transmits a Bluetooth signal, then receives product promotional or any other information that Bradesco would like to share. Vayon has also developed a Facebook application, enabling customers to promote their insurance product to “Facebook friends”. When a Facebook friend decides to purchase the insurance product via the Facebook application the referrer receives a discount immediately providing the same incentive to the new customer. To summarise, on.iBusiness is used to:  Capture data from clients who are interested in buying insurance products  Foster client relationships through mobile phone and internet  Carry out sales at the distributor, requiring only the agent or client’s mobile phone

2 Gerelle, E. and Berende, M. Technology for Microinsurance. Geneva : Microinsurance Compendium, 2011.

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Distribution and Technology in microinsurance

TABLE 2: ON.IBUSINESS MODULES Main sale cycle component • Offer • Sign-up • Certificate issuance • Controlling tools: • Sign-ups • Billing • Claims • Transfer Commercial • Portfolio Management • Billing Management • Product Management • Partner Management • Underwriting Management Marketing • Training Management • Campaign Management • Product Performance • Channels: • Quotation/Offer • Underwriting Tracking • Policy/Certificate Printing

The above table offers an overview of the 3 main system components or modules. The first is used to initiate the actual sales process. The second “commercial” module is used to handle and maintain existing policies and their customers and the third module focusses on marketing for either prospects as well as existing customers.

6. INSURANCE KEY PROCESSES PROMOTION OF THE INSURANCE PRODUCTS At the moment BSP uses 3 ways to promote its microinsurance products. BSP’s focus is on awareness raising with regard to insurance and its benefits for those on low incomes. PROMOTION TOOLS 1. Media  Articles about the use and benefits of insurance in papers specifically read and spread in favelas.  Radio commercials, advertisements in local newspapers, at bus stops and on public transport with a focus on awareness raising. 2. Sweepstakes  An important marketing tool for selling microinsurance products is as already mentioned the monthly sweepstake. In Brazil such sweepstakes are frequently linked to insurance products. According to BSP this is one of the most important reasons for buying insurance. 3. Point of Sales and promotional materials  Stickers and brochures for publicising the product.  Support material for the Banking Correspondent and the Regional Multiplier. BSP plans to use the Vayon platform to engage in communication with prospects and customers through active telemarketing, e-mail marketing or text messaging. The platform can be used to provide access to a range of applications that are easily maintained and can be downloaded to a mobile phone. The system enables data collection procedures, designed specifically for microinsurance purposes, providing a standard method for entering and uploading survey data to databases. The mobile platform can easily be used as a cheap channel for delivering education on microinsurance to the customer.

ENROLMENT A major and time consuming problem faced by BSP (and many other insurers) is the client enrolment process. Collection of certain data such as name, birth date, gender and address is required before the policy can be issued. The longer it takes to collect this information the more costly it becomes for an insurer to deliver the product.

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Distribution and Technology in microinsurance

To overcome this problem Vayon developed a solution, using the “Cadastro de Pessoa Fãsica (CPF)” or Social Security number given by the Brazilian government to each inhabitant of Brazil. During enrolment the primary information to be entered in the system via SMS by the client or agent is this CPF number. This enables the system automatically to collect additional data required for policy issuance. The system connects with the database of those organisations authorised by the government of Brazil (e.g. Serasa Experian) to store data connected with the CPF. When the CPF is sent through SMS the backend system accesses the bureau’s database to gather the required customer data (name, age, sex and address), thus enabling BSP to start the acceptance/issue process. The data collection process is thus reduced drastically, as it is no longer necessary to enter a lot of data in the mobile, thereby also reducing time spent and the margin of error. The IT required to enrol clients at the distribution channel is therefore just a simple cell phone that is able to send and receive SMS. All transactions (e.g. sending of the proposal, premium payment and notice of loss) are subsequently done through SMS. SIGN-UP AND CONFIRMATION PROCESS 1. Customer meets agent and requests insurance product; 2. Agents asks for social security number and postal code; 3. The agent sends a text message to BSP using client’s data for sign-up: social security number (CPF), postal code (CEP), insurance code and cell phone number. The customer receives confirmation message with request for reply; 4. The customer sends a return text message with the following data: social security number, postal code and policy number; 5. Vayon receives the message and records the information in the system; 6. Vayon sends an inquiry to Serasa Experian and completes client’s data file; 7. The data is stored in the database, and a text message is sent with the confirmation; 8. A sign-up confirmation message is sent containing the client’s identification code, website for access to the insured manual/general conditions and additional relevant information (e.g. Lucky No. for the lottery).

PREMIUM PAYMENT AND CERTIFICATION PROCESS MOBILE PHONES FOR PREMIUM PAYMENTS Premium payments can be made by debit card, credit card or in cash on location (distributor). When the payment method is selected by the client the system starts the following process: 1. Every month, as the policy near expiry, the system sends an SMS reminder with the value and expiry date of the insurance product. 2. The customer then has the option to cancel the insurance policy or continue the insurance. If the latter, the customer goes to the distributor, reports the policy number and pays the premium amount. 3. The customer and distributor then receive a payment confirmation via SMS. 4. Should the customer require a printed receipt, this is possible, e.g. via a Point of Sale terminal with printer. 5. The system consolidates and stores the transactions and payments made and automatically transfers them to the insurer at predefined moments. CERTIFICATE  Issuance and delivery upon sale of the insurance through the Banking Correspondent. Printing of the lucky number at the moment of sale. POST-SALE PROCESS  When all required details are entered in the system at distributor level a webpage is automatically made available that is only accessible by the customer. This page enables the details of the insurance policy to be viewed and the Insurance Certificate downloaded.  Accordingly, the insurer is also able to view its customer base.  The customer may also receive a printed post-sale kit by contacting the insurer. CERTIFICATION PROCESS AND SALE BURDEN 1. The system consolidates and stores the transactions and payments made at the distributor’s and these are then automatically transferred to the insurer on a daily basis. 2. The system stores the data and makes it available to the insured, along with support and further insurance processes. 3. The system makes the transaction control reports available at regular intervals to BSP.

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Distribution and Technology in microinsurance

CLAIMS MANAGEMENT

DISTRIBUTION

A customer can submit a claim in various ways:  By contacting a call centre  By sending an SMS  Through an agent at local distribution channel  Through the BSP website

When selling microinsurance BSP prefers to make use of the existing Bradesco Bank retailers, where financial products are sold through dedicated brokers. Besides these sales and service channels within its own organisation, Bradesco has also formed partnerships with many institutions. In the larger cities of Brazil it is relatively easy for Bradesco to sell its insurance products since the existing retail infrastructure can be used. The biggest challenge faced by BSP is in reaching its potential clients in the country’s many remote cities and villages. Bradesco is highly dependent on the success of the proposed use of technology in remote areas.

The claim process is as followed: 1. Identification of the policy, e.g. by sending policy number via sms. 2. Customer will be informed of receipt of text message and asked to reply to the SMS confirming the opening of the claim. 3. After confirmation, the customer receives another SMS with the procedures to be followed in order to receive the claim amount. 4. The system starts the process of regulating the accident. 5. The customer receives an SMS every day on the progress. 6. The customer finally receives an SMS with the information required in order to receive the benefit.

7. CHALLENGES Below an enumeration of the most important challenges mentioned in this chapter.

CONSUMER PROTECTION According to Bradesco, sweepstakes are an important marketing tool for selling the microinsurance product; the sweepstake is apparently the most important motive for customers in buying an insurance product. It appears that clients find the chance of winning such a prize more important than the insurance product itself. It is in fact questionable whether the customer understands the concept of insurance, and if, in the case of an insured event, the customer would know if they are covered and understands the steps to be taken when submitting a claim. Although consumers in Brazil’s urban areas are used to existing distribution channels and retailers and banking correspondents are also used to selling financial products, the question remains of how Bradesco can train new distributors in remote areas. Will the consumer in remote areas have access to adequate insurance information and education; will the consumer be correctly informed about the insurance products or will the focus be even more on the sweepstakes in the remote areas?

14

TECHNOLOGY The mobile phone is a form of technology available to distributors and customers even in the remotest areas. BSP thus concluded that the only technology required by the distributor should be a mobile phone. BSP searched for a mobile solution able to send proposals, receive premium payments, check status of policies, enter claims etc. Similarly, the customer should be able to receive information about the insurance product for free with a mobile phone, even when there is no credit on their phones; but it is sometimes questionable whether the actual microinsurance prospect in remote areas also has a mobile phone. A major and time consuming problem faced by BSP (and many other insurers) is the client enrolment process. Collection of certain data such as name, birth date, gender and address is required before the policy can be issued. To overcome this problem, Vayon developed a solution based on the “Cadastro de Pessoa Fãsica (CPF)” or Social Security number given by the Brazilian government to each inhabitant of Brazil. It is not clear how many people actually possess a CPF; in rural and remote areas the percentage of people belonging to the target group who do so is conceivably lower. If so, Bradesco’s project to deliver microinsurance throughout Brazil could be significantly undermined.


Distribution and Technology in microinsurance

Care Foundation & Care Hospitals CARE Hospitals is a private entity that started in 1997 with the aim of providing tertiary health care specialised in the cardiology area. Over a period of time CARE Hospitals has grown from a single hospital to a chain of 12 hospitals across 5 states in Central and South India. The organisation has around 5,000 employees, with approximately 100 specialised cardiologists. CARE Hospitals aim to act not only as hospitals but also seek to form an integrated healthcare delivery network that meets the overall goals of a complete healthcare system. In 2007 CARE Hospitals started to investigate how it could expand to other areas in order to meet the challenges of the people in rural areas and integrate healthcare in such a way that people from the villages and small towns could also be treated at affordable rates.

1. CARE FOUNDATION CARE Foundation is a registered non-profit society with the mandate of making quality health care affordable and accessible to all through appropriate use of technology, research, training & education. The Foundation conducts its mission based on a three dimensional programme; 1. Conducting research and delivering specialised education. 2. Developing cost effective medical products. 3. Providing healthcare to people from the economically weaker sectors of society and those living in rural areas. One of the reasons CARE Foundation was established by CARE Hospitals was to meet the needs of the people in rural areas and to develop a model to deliver primary healthcare to villages and rural areas. Field studies conducted by CARE Foundation on health expenditure quickly demonstrated that the outpatient care model would meet the needs of most villagers. Providing both in and outpatient healthcare would obviously have been the best option for the target group but in terms of costs and scalability it became clear that this was not feasible.

2. CARE FOUNDATION’S MICROINSURANCE INITIATIVE In 2007 CARE Foundation developed a model to deliver primary healthcare to villages and rural areas. Known as the “4 pillar model”, it enabled the CARE Foundation to introduce primary healthcare Village Health Workers. The 4 pillars are: 1. Healthcare Service Delivery (Nurse, doctor and clinic) 2. Supply Chain (Drugs, point of care testing and point of care diagnostics) 3. Technology (capturing of data for reasonable health databases, village and clinic level) 4. Health Financing (Microinsurance, credit based, and fee for service) CARE Foundation believes that microinsurance could play a role in making healthcare sustainable. To verify this assumption CARE Foundation started, with the support of the ILO Microinsurance Innovation Facility, a pilot of the model in 2008. CARE Foundation currently concentrates on an area in Maharashtra targeting 50 villages, where each package consists of:  Community Clinic  Health Centre  Remote Doctor  Hospitals (both CARE hospitals as other hospitals)

3. ORGANISATIONAL STRUCTURE In each of the 50 villages selected by CARE Foundation, a Community Clinic is established. The Community Clinic is staffed by one Village Health Worker who is trained by the Care Foundation team. The training allows the Village Health Worker to conduct basic primary healthcare activities. One of the responsibilities of the Village Health Worker is to educate villagers about prevention, health and hygiene. The Village Health Worker is also trained to understand health problems, record details of the physical examinations of patients and communicate these to (remote) doctors. The remote doctors are employed by CARE hospitals and can be reached via a call centre. The Village Health Worker is not authorised to make decisions about treatment and medication but is responsible for transferring the right medical information to the remote doctor. The remote doctor verifies the information and request additional details from the Village Health Worker if required. After receiving all the necessary information the remote doctor provides prescriptions and advice to the Village Health Worker and only then is the Village Health Worker allowed to provide (basic) drugs to a patient, along with the appropriate instructions.

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Distribution and Technology in microinsurance

Through the Community Clinics, CARE Foundation is building its own (health) distribution channel, or even (health) distribution network. CARE Foundation aspires that in the future NGOs, MFIs, Cooperatives or even government will form a partnership with the Community Clinic so that financial services and products can be added, creating a more sustainable distribution channel at grassroots level.

The Village Health Workers are supported and trained by the Primary Healthcare Centre. CARE Foundation spends much of its time on training the staff at the Primary Healthcare Centre so that they can train the Village Health Workers. A Primary Healthcare Centre employs approximately 12 people, including a medical doctor and is a place where laboratory tests e.g. can be carried out.

A Village Health Worker attends multiple training courses at the Primary Healthcare Centre on different topics, such as how to use technology, the features of the microinsurance program and how to deliver microinsurance as an agent. However, the main focus of the training is to raise awareness of the necessity of health insurance products. These courses are provided on a continuous basis. Besides primary healthcare activities the work of a Village Health Worker consists of conducting household surveys, educational sessions, eye care and testing for anaemia, hypertension and diabetes. Primary healthcare may be considered to be the main service delivered by a Community Clinic. The piloted micro health insurance product is a part of the programme covering risk management for primary care – for which there are no existing insurance programmes. This programme aims to enhance primary healthcare by making healthcare sustainable through the provision of micro health insurance.

table 3: SCHEMATIC VIEW OF THE HEALTHCARE DELIVERY

Remote Doctor

Village Health Worker (Community Clinic)

Community

16

Primary Healthcare Centre

Hospital


Distribution and Technology in microinsurance

Table 4: THE INSURANCE PRODUCT Coverage Primary Care Consultations Drugs Injections

Exclusions

Coverage

C  hronic Disease (AIDS excluded) Emergencies Accidents Impatient care

I ntravenous Lines/Fluids Lab tests – 9 listed tests are covered

Primary Care No waiting period No underwriting 6 months to 65 years Enrolment throughout the year Sum assured Rs.2.500 per year P  remium Rs.300 for person insured (2 adults, 2 children)  A preventive package is available at a discount • Soaps • Hand kerchief • Mosquito repellent • Mosquito net • Measles vaccination • Water disinfectants

4. DISTRIBUTION CHANNELS

5. INSURANCE KEY PROCESSES

The Community Clinic and its Village Health Worker are seen as the microinsurance distributors for this programme. The Village Health Worker is responsible for delivering the product as well as servicing the clients with primary healthcare. Because women tend to be more responsible in general towards family, health and finances, CARE Foundation decided that all Village Health Workers should be female. CARE Foundation also insists that the Village Health Worker should also be seen as a representative of the target group. In the selection process CARE Foundation asks the local governing boards (Panchayats), in consultation with the villagers, to present two or more candidates for the role as Village Health Worker. CARE Foundation performs a number of interviews and subsequently selects the candidate who appears best equipped to do the job. The Village Health Worker earns a simple wage proportionate to the wages earned by the target group.

PROMOTION AND AWARENESS CREATION

All these criteria have a purpose; the Village Health Worker must be accepted by the villagers, trusted and seen as “one of them”.

A project team from the Primary Healthcare Centre organises a 2-day training programme for a group of around 10 Village Health Workers. During this training programme the principles of insurance, the product and how to administer enrolment, premium collection, data entry and claims are taught. Two days of training prior to selling insurance would appear rather little. However, CARE Foundation states that these 2 days can be seen as basic training whereas improving the skills of the Village Health Worker is a continuous process during which both healthcare and insurance are frequently discussed in cooperation with the Primary Health Centre and CARE Foundation. The Village Health Worker introduces the benefits of the health insurance product to the villagers through door-to-door visits, meetings with local groups (SHG) and visits to schools and prayer groups. Another opportunity for the Village Health Worker to promote the insurance product is during a patient’s visit to the Village Health Centre for medical treatment purposes. The visit offers the Village Healthcare Worker an excellent chance to explain the benefits of health insurance to the patient.

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Distribution and Technology in microinsurance

ENROLMENT, PREMIUM PAYMENT & VERIFICATION

6. TECHNOLOGY

When the customer decides to purchase the insurance product an enrolment form must be filled out. The premium is collected from the client by the Village Health Worker. The customer’s details are written on a sheet and the client receives a receipt. The Village Health Worker sends the collected premium and enrolment details to the Primary Healthcare Centre. The enrolment is then verified by the Primary Healthcare Centre Accountant and the received premium deposited into a bank account. The Primary Healthcare Centre verifies and prepares the insurance policy and inserts a photo ID taken by the Village Health Worker. The insurance policy is then ready and given to the Village Health Worker who is responsible for issuing the insurance policy to the client.

The software system used by CARE Foundation has a number of classifications or user levels corresponding to the organisational structure for healthcare delivery. Access levels vary from the Village Health Worker located in the Community Clinic to the doctor at the Primary Healthcare Centre and the remote doctor. The software also provides a module enabling pharmacists to use the system for drugs delivery and stock maintenance at pharmacy level. However this option is not yet used by pharmacists.

CLIENT VERIFICATION CARE Foundation aims to provide a smart card with all relevant policy details including a biometric fingerprint ID to all customers. This would enable the Village Health Workers to verify if a patient actually is insured on a handheld device . Although purchased, the lack of GPRS Connectivity currently prevents CARE from using handheld devices and smart cards. Once these connectivity issues are solved, the Village Health Workers will be able to conduct the whole process via the handheld device, making the enrolment and claims management a paperless process.

CLAIMS MANAGEMENT Everybody in need of healthcare may come to the Community Clinic for treatment by the Village Health Worker. However, those without insurance have to pay for the received services. When a person in need of healthcare reaches the Community Clinic the Village Health Worker requests proof of insurance and then starts by noting down the health issues. These are entered in a claim sheet and the Village Health Worker contacts the remote doctor by phone for treatment advice. In the case of fully functioning GPRS connectivity the process would be as follows; a. Client arrives with Biometric Smart Card b. Verification of the insured person c. Name, address and health history appears in the screen of the handheld device d. Health conditions of client entered in the system e. Synchronisation of the data with back-end system located at CARE Foundation f. Remote doctor contacted by Village Health Worker g. Remote doctor provides drugs prescription h. Drug prescription sent by doctor to Community Clinic handheld device i. Drug prescription provided to patient and claims sheet filled by Village Health Worker in the handheld.

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Depending on the region and user the system interface can be displayed in the local language if required. In practice it will be useful for most Village Health Workers as the majority of them do not read or write English. Care Foundation has access to all modules and levels available in the system.

SOFTWARE CARE Foundation had already worked with a specific software vendor in fields other than microinsurance. The Foundation knew that this vendor had already been active for many years and that they had developed a web based Customer Relation Management (CRM) software. This made it logical for CARE Foundation to investigate with the vendor how they could work together to develop a software system for the micro health insurance initiative.

Customer relationship management (CRM) is a widelyimplemented strategy for managing a company’s interactions with customers, clients and sales prospects. It involves using technology to organise, automate, and synchronise business processes—principally sales activities, but also those for marketing, customer service, and technical support. The overall goals are to find, attract, and win new clients, nurture and retain those the company already has, entice former clients back into the fold, and reduce the costs of marketing and client service. Customer relationship management describes a company-wide business strategy including customerinterface departments as well as other departments.

The most important selection criteria for the software were as follows: 1. Low costs 2. Support in the selection of a hand held device 3. Compatibility with a handheld device 4. Able to handle large volumes of clients


Distribution and Technology in microinsurance

TABLE 5: USER LEVELS Functional coverage of the software Village Health Worker

Health Centre

1. Insurance Module

1. Insurance Module

Claims

Claims

Client Administration

Client administration

Coverage

Coverage

Existing claims

Existing claims

Insured balance

Insurance plans

Search Type of insurance products

Insured balance

Policy approval

Search Type of insurance products

Remote Doctor

2. Healthcare Module

2. Healthcare Module

2. Healthcare Module

Add a consultation

Add a consultation

Add a consultation

Diagnoses

Diagnoses

Diagnoses

Medication

Medication

Medication

Patient details

Patient details

Patient details

Patient history

Patient history

Patient history

Prescription

Prescription

Prescription

Results Blood test

Results Blood test

3. Medical Protocol Module Clinically tested protocols to initiate diagnoses and treatment plans For some of the health issues the system has an automated Health care prescription system

3. Medical Protocol Module

Pharmacy Level

3. Medical Protocol Module

Telemedicine

4. Survey Module 5. Medicine Product database 6. Drugs Delivery system

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Distribution and Technology in microinsurance

CARE Foundation decided that the most cost-effective approach would be to use its own in-house software development team to build a micro health insurance shield around the software vendor’s existing CRM platform. By opting for in-house software development, costs could be reduced drastically and CARE Foundation would benefit from an opportunity to build its own capacities in software development. Another reason cited by CARE Foundation was that by opting for in-house development, there would be no limitations in terms of fees whereas outsourcing would lead to a constant process of negotiation with the vendor. CARE Foundation studied existing IT systems with handheld device programme compatibility and concluded that customising an existing product to the needs of CARE Foundation was more expensive compared to a new development with a defined scope of work. CARE Foundation had a number of reasons for investigating how technology could support the healthcare delivery process and its micro health insurance activities, including the enhancement of access and utilisation of health care, facilitating claim processes, a reduction in paperwork and costs and a subsequent increased value of the health insurance product for the patient. With that in mind CARE Foundation started to look at its own situation and needs. These were as follows: Increased efficiency through in-house administration of enrolment, transaction and claims Easy client or patient verification process Being able to provide a cashless facility Real time access to claims data at the various levels within the organisation Data collection for analysis and tracking purposes Reducing the operation costs by becoming paperless Reducing costs of prescriptions and treatments

HANDHELD DEVICE The main advantage to CARE Foundation of handheld devices is their portability. In most cases the Community Clinics are located in remote areas where the Village Health Worker is expected to visit clients and patients in the field, where there is often no access to a desktop or laptop. A handheld device is mobile and can be used to record any kind of information in the field, also increasing efficiency by reducing the paperwork of the Village Health Worker.

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DEFINING THE FUNCTIONAL COVERAGE OF THE DEVICE To offer optimal support to the Village Health Workers, and benefit from the advantages created by the backend software system, CARE Foundation required a portable device. The Village Health Workers play a proactive role, meeting people in the villages through door-to-door visits, attending Self Help Group meetings and so on. During these moments of contact the Village Health Workers conduct surveys, collects client or patient details and carries out insurance activities such as enrolment and premium collection – precisely the activities that CARE Foundation wanted to make paperless. The process would preferably involve a device using the local Hindi or Marathi languages. CARE Foundation would also clearly benefit from an automated process. The Village Health Worker would work more efficiently and it would become much easier for CARE to analyse, in an early stage, data entered in the system. To summarise, the device required had to be portable, interface with the backend software, facilitate insurance activities and support the primary healthcare delivery in remote areas. The most important feature of the device defined by CARE Foundation was that the (clinically tested) protocols for diagnoses and treatment plans were accessible in the field. The device had to enable the remote doctor and the village health worker to diagnose, view patient details, print prescriptions and assist both parties in the consultation process. Finally, Care Foundation needed the device also to be able to verify that the person to be treated was insured. CARE Foundation aimed to use biometric identification through a fingerprint scanner in combination with a smart card containing information about the client and balance amount. CARE Foundation finally outlined the following set of requirements; The technology had to be portable Should be useable for surveys, insurance, payments and primary healthcare Connectable to GPRS Fingerprint scanner included Smart card reader available Printer included


Distribution and Technology in microinsurance

CONNECTIVITY CARE Foundation originally wanted to use GPRS for transferring information. Although GPRS connectivity should in theory work well everywhere in India it soon became clear that GPRS was inconsistent and unreliable in remote areas. It certainly did not always properly on the handheld device used by CARE Foundation.

SMS Based on this experience CARE Foundation had to search for an alternative. Significant investments had already been made in the purchase of handheld devices and development of software to enable the use of these devices. Abandoning the use of the handheld device was therefore not an option. CARE Foundation contacted the vendor of the handhelds, explained the issues and asked for a solution to enable the transfer of data without the use of GPRS on the handheld devices. The vendor suggested installing a SIM card reader in the handheld device. The SIM Card would enable data transfer through SMS. By using SMS to transfer information instead of GPRS the handheld would be able to maintain a part of its functionality. The disadvantage of data transfer via SMS as against GPRS is that GPRS can transfer data that must be entered in the backend system where SMS only can transfer text, making SMS less efficient. However, mobile phones (containing a SIM card) can be used throughout the country and CARE Foundation therefore hoped for a more consistent data connection for their handheld devices. A further software application had to be developed to enable the use of a SIM card and SMS, which entailed extra costs. To make matters worse, after a couple of months of developing the application, CARE Foundation found out that the SMS application in the handheld device was also not working properly. The idea behind the SMS application for the handheld was that the remote doctor could send the details of the drug prescriptions via SMS to the handheld device of the Village Health Worker. Unfortunately the Village Health Worker received only 3 out of 10 messages on average. Care Foundation had set a minimum receipt ratio of 6–7 out of 10 messages, making the SMS application even less reliable than GPRS.

7. LESSONS LEARNT CARE realised that it would be much easier if the software development for the handheld was handled by the same company that supplied the handheld device. The selected hardware vendor had a large development team and would be able to complete the software development in a much shorter period. Nonetheless, it was decided to reduce costs and purchase the handheld device without following the vendor’s advice to bundle in the software development, which was carried out in-house by the CARE Foundation team. The team had to build its required features with a basic software development kit3 that came along with the handheld device. However, this did not meet the requirements of CARE Foundation. CARE Foundation wanted to modify the existing software system in such a way that certain modules of the existing back-end software, required by the Village Health Worker, could be used on the handheld device. As a result of CARE Foundation’s decision to opt for the hardware without the customised software the vendor was only willing to support hardware related issues. This choice was the cause of many challenges and support issues. The more time CARE Foundation spends on improving its system the more difficult it becomes for CARE Foundation to abandon its technology-driven approach. Given the investments already made, CARE Foundation could not look into other solutions.

TRAINING

Avoid over-reliance on IT. First organise your (manual) process efficiently, train your staff to follow that process and then move towards IT. Teach your staff what to do when technology fails to work, if something goes wrong the organisation will be able to continue its work without too many problems. IT Training is very important, as is the challenge of finding the right people to conduct such training.

Whereas CARE Foundation was expecting difficulties in teaching the Village Health Workers to use the handheld, the major challenge in fact became the technology that did not operate as expected.

3 A Software Development Kit is set of development tools received from the vendor that allows for the creation of software applications.

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Distribution and Technology in microinsurance

PREPARATION PHASE

Do not rush into software development. If it is a first time software or application development then take your time. Understand your needs, requirements and scope before talking to technology vendors. Try to understand the longer-term technology needs. Will you be working with a 1000 clients or a million? Understand and fine tune your processes, create a standardised process and then move towards software development. Conduct proper process mapping. Select a vendor experienced in your area of work, ask for proof or references. It is not wise to separate hardware and software development; this may cause compatibility and support issues. The (in-house) development of software for insurance, inclusive health protocols working on a handheld device is a time consuming process. If you opt for a GPRS solution, ensure that GPRS is working at the selected location(s). Ensure that the selected system and technology you are about to use is flexible (without the need for expensive and time consuming customisation efforts) If multiple languages are required in the technology explore beforehand the possibility of including this in your system. Minimise the need for data entry by the user – most of the data should be pre-loaded. This will increase the speed of your process – e.g. it is better to use software which allows for simple ticks rather than requiring the input of text by the user. Discuss the maintenance of the system with the vendor. Is it automated via (online) update patches or will it be done manually? Can this be done by your staff or do you need to hire and train a person for this? Try to establish a capable team that will work with the software vendor in the software development process. Define time frames and write these up in contracts. Conduct tests in the early stages of the development process, check in advance whether your assumptions in terms of using the technology work in the field or not. If not, the costs of changing system will be reduced.

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EXPERIENCES OF CARE FOUNDATION DURING THE PROJECT

The basic software kit added to the handheld device required a great deal of customisation. The applications frequently crashed because of compatibility issues. The applications for GPRS connectivity and SMS data transfer developed by the hardware vendor did not work properly. In-house built applications were incompatible with the application/software development kit delivered by the hardware vendor. There was no SMS application available in the handheld although CARE had assumed that this application was included by the hardware vendor. This misunderstanding led to additional costs before the achievement of a working SMS application. Besides the GPRS connection issues, the software application required for GPRS connectivity did not work properly and required additional development. Programming on an existing system without proper support of the vendor is time consuming; ensure you have qualified people in-house. A handheld device is advisable if you want to use portable technologies such as biometric authentication and a printer. However, if you only need to transfer data, a modern mobile phone could possibly suffice and could be less expensive in terms of hardware. Depending on the platform used, customising an application to local languages might be a time-consuming exercise.


Distribution and Technology in microinsurance

CARE/AVVAI CARE is an international humanitarian organisation fighting global poverty, with a special focus on working with poor women. Its mission is to serve individuals and families in the world’s poorest communities by promoting innovative solutions and advocating for global responsibility. CARE facilitates lasting change by strengthening capacity for self-help, providing economic opportunity, delivering relief in emergencies, influencing policy decisions at all levels, and addressing discrimination in all its forms. Programmatic areas include Agriculture and Natural Resources, Economic Development, Education, Emergency Relief, Health, HIV/AIDS, Nutrition, Water, as well as cross-cutting initiatives that span multiple sectors. CARE was founded in the United States in 1945, but is structured today as a confederation of twelve national members, each one an autonomous non-governmental organisation and registered in a different country. Members coordinate and cooperate through the CARE International Secretariat. In the recent years CARE reached more than 55 million people in 66 countries.

1. CARE INDIA CARE has been working in India since 1950 and has 15 field offices across the country, in addition to its country headquarter in New Delhi. CARE India is engaged in a variety of programmes related to disaster relief, health and nutrition, HIV/AIDS, education, livelihood protection and promotion. Operations are frequently carried out in partnership with other organisations, which range from local NGOs to bilateral organisations to insurance companies. NGO partners typically receive both funding and technical assistance from CARE. In this sense, CARE can be thought of as a hybrid organisation that is at once a donor and a programme implementer.

2. CARE TAMIL NADU AND MICROINSURANCE CARE became active in Tamil Nadu following the 2004 tsunami; this was the Indian state worst affected by the disaster. CARE’s purpose was to support the Indian government with relief operations. CARE Tamil Nadu, – the organisation visited during this study – currently has a staff of 24 persons and works with 45 partner NGOs impacting a total of approximately 350,000 people. After the tsunami the idea of microinsurance became relevant and began to feature in CARE programming. To find out how this could serve the people, CARE conducted a survey to understand the needs of the community. Based on the results of this survey, CARE started discussions with the insurer Bajaj Allianz. CARE explored how incoming grants for the tsunami relief initiatives could be used to develop a business opportunity for the insurers and how this could meet the social needs of the people. CARE currently works with 6 insurance companies, the largest of which are Bajaj Allianz and Royal Sundaram.

FACILITATING ROLE OF CARE CARE can be seen as the intermediary between AVVAI Welfare Society (see 3.) and the insurer Bajaj Allianz. CARE understands the interests of both parties very well: the corporate interest of the insurer versus the social aspects of AVVAI are both taken into account with CARE acting as a negotiator and endeavouring to protect the interests of their target group, the poor community. CARE negotiated not only with Bajaj Allianz but also with other insurers. However CARE India found that the product offered by Bajaj Allianz is best suited to the needs of the community. In addition CARE supports AVVAI in conducting needs assessments. Training is another very important role played by CARE. Whereas AVVAI is responsible for informing the community about insurance, CARE is responsible for transmitting that insurance knowledge to AVVAI. AVVAI staff are trained by CARE in all aspects of insurance and its delivery. CARE provides communication methodologies, develops tools and designs the insurance delivery processes for and with AVVAI. Also does CARE review the work of both Bajaj Allianz and AVVAI; monitors enrolment and claims management and analysis the social impact of insurance for the community.

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Distribution and Technology in microinsurance

3. AVVAI WELFARE SOCIETY

6. INSURANCE PRODUCTS

AVVAI Village Welfare Society is an NGO founded in 1976 in Tamil Nadu, India. Its mission is to promote equitable and selfsustainable development in marginalised and disaster-affected communities. While its primary focus is on education, AVVAI implements programmes that address a range of issues related to children, women, the elderly, health, and livelihoods. Its operations cover two districts in Tamil Nadu and one region of Puducherry, the neighbouring union territory.

The tables below outline the insurance products available to AVVAI members. The products are developed by Bajaj Allianz in co-operation with CARE India. Three insurance product types are available: general insurance, life insurance and a life insurance product with a savings component.

AVVAI currently has a staff of 264 people and has a member base of 96,000 whom they address via a bottom up approach.

4. AVVAI’S MICROINSURANCE INITIATIVE AVVAI works with disadvantaged communities to provide access to minimum social protection coverage, to increase microinsurance penetration among low income households and to create broad acceptance of microinsurance services. AVVAI attempts to do so by raising community awareness of basic insurance principles through promotional and educational campaigns for example with street theatre and music.

DISTRIBUTION ROLE AVVAI AVVAI has a number of responsibilities. As a distribution agent AVVAI has to inform and raise community awareness of insurance. In most cases the community does not know about insurance or does not understand the concept of insurance. AVVAI therefore begins by organising insurance awareness events. During these events the community learns about risk and how insurance can be of use to the community. When the community understands the concept of insurance and sees the benefits, AVVAI starts to sell insurance; AVVAI is responsible for collecting the premium but also for the disbursement of policyholder claims in the case of an insured event. A more detailed description of the processes followed by AVVAI is given below in the section entitled ‘Insurance Key Processes’.

5. INSURER - BAJAJ ALLIANZ Bajaj Allianz is the insurer and risk carrier. Their clients are delivered and marketed by CARE and AVVAI. Most of the administrative work is done by AVVAI under CARE supervision. The main task of Bajaj Allianz is product development.

The following insurance products are offered: General Insurance (ILAL) Features Death of insured due to accident Death of spouse due to accident Permanent total disability of insured (due to accident) Loss of limb or eye sight (due to accident) Funeral expenses capped at Rs.2,000 (US$40)4 Educational grant to children capped at Rs.5,000 (US$100) Entry age for child/children is 5 years Hospital expenses arising out of accident and or accidental injury Wage loss during hospitalisation due to accident Rs.200/- per day with a maximum of Rs.1000 (US$20) Life Insurance – (Life 10) Features Premium Rs.45 (US$0.90) (1 member only) Death Benefit Rs.10,000 (US$200) (suicide excluded) Nominee can be husband, wife or child(ren). 18 - 69 years One year plan Life Insurance – (Life 20) Features (1 member only) Premium - Rs.90 (US$1.80) Death Benefit - Rs.20,000 (US$400) (suicide excluded) Nominee will be Husband, wife or child(ren) 18 - 69 years One year plan Features (member + spouse) Premium - Rs.180 (US$3.60) Death Benefit - Rs.40,000 total (Rs.20,000 / US$400 per member) Suicide excluded Nominee will be Husband, wife or child(ren) 18 - 69 years One year plan

4 Rs.1 = US$0.02

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Distribution and Technology in microinsurance

Life Savings Plan (SSS) Coverage 118 - 65 years Plan - 5 Years Premium –Rs.500 per year per member (Rs.450 Savings and Rs.50 Premium) Death Benefit - Rs.10,000 Suicide excluded Features To prevent cancelation of the policy e.g. in the case the insured is unable to pay the premium it is then possible to deduct the premium from the savings. At the policy ending 5th year, Bajaj Allianz will pay the savings part (Rs.450 x 5 = Rs.2,250) to the customer. If the insured dies, the nominee receives Rs.10,000 plus savings. One member can take out a maximum of 5 SSS products (Life Product) under his/her name. These 5 policies will be individual policies under this same person.

7. DISTRIBUTION AND INSURANCE KEY PROCESSES The distribution of microinsurance differs from how insurance is usually distributed. Bajaj Allianz did not first develop a microinsurance product and then seek ways and partners to distribute the product. In this case, a bottom-up approach was taken. As we have seen, the 2004 Tsunami played a role in the introduction of microinsurance to poor communities in the Tamil Nadu coastal areas. CARE believed that microinsurance could be used as a tool for risk management and therefore started to seek out partners: an insurer for product development and local NGOs with a strong presence in the selected area. The following paragraphs outline the key insurance processes followed by AVVAI and CARE.

PROMOTION AND AWARENESS CREATION The focus of CARE and AVVAI’s microinsurance promotion activities is on (consumer) education. CARE and AVVAI see the purpose of promoting microinsurance as helping members understand the benefits of insurance in order to change their sometimes negative attitudes. For CARE, promoting insurance started at the top level of AVVAI, with the CEO, thus respecting the strict hierarchical organisational structures within Indian NGOs. A microinsurance introduction programme was developed especially for the CEO. When the CEO understood and agreed with CARE that microinsurance could be of use for the members of AVVAI, first the organisation’s project coordinators and then the field staff received a microinsurance introduction training course.

The training covered the organisational aspects of delivering microinsurance such as policy, people and grant management, as well as communication. After the training and when mutual trust had evolved between CARE and AVVAI and the latter was ready to deliver microinsurance, it was time to inform the community about microinsurance. To this end AVVAI organised mass awareness campaigns in tandem with CARE. Between 400 and 500 people, mostly members of self-help groups within federations active in AVVAI, were invited to come to the village centre. During these awareness campaigns, aspects of microinsurance were presented through drama, street plays and songs. Pamphlets were also handed out. After the mass awareness campaigns the field staff of AVVAI approached individual self-help groups to assess their understanding of insurance. Where necessary AVVAI clarified ambiguities and also distributed promotional materials. The total process from the meeting with the CEO to the discussions with the first individual self-help groups took around 6 months.

ENROLMENT & PREMIUM PAYMENT & VERIFICATION Once the above steps were complete, the actual distribution of the insurance products could take place. Since AVVAI works closely with the self-help groups and would like to maintain equality within its groups, the aim is to enrol every member of the self-help groups. Although the insurance products are individual products, their purchase should be a group decision where everybody agrees that the insurance product is of use to each individual member. AVVAI field staff attend self-help group meetings to see if the members would like to purchase the insurance product, and if so, enrol them. For a successful enrolment, a number of steps must be taken. The first step is to verify the member’s eligibility for insurance (e.g. is the member of insurable age?) and to verify the identity of the member. This can take place in a number of ways. As not everybody has a passport, voter ID, a school certificate or a driver’s licence are accepted as identification. In some cases rural poor are unable to present even these documents – in which case a group resolution suffices, meaning that all the group members guarantee that the person without identification documents is who they claim to be. By doing this even those without proper documentation are insurable. Following the verification and authentication it is possible to fill the insurance proposal form and the premium can be collected. The member then receives a receipt and AVVAI transfers the premium to Bajaj Allianz. Bajaj Allianz acknowledges receipt and issues the policy which is sent to AVVAI, who subsequently issue the policy to the member.

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Distribution and Technology in microinsurance

CLAIMS MANAGEMENT In the case of an insured event the self-help group organises a meeting. The group discusses what has happened and the group leader informs AVVAI, who explains to the group leader what kind of documentation is required in order to successfully submit the claim. In case of accident, the First Information Report (FIR) provided by the police is required. In case of hospitalisation, a doctor’s report is required; the doctor must provide the bill, a discharge summary, a diagnosis, the date of entering the hospital and all other relevant information with regard to the treatment. In some cases this might be problematic. It quite frequently happens that the hospital does not provide the relevant information to the insured, despite the fact that Bajaj Allianz demands this information in order to pay the claims. CARE and AVVAI are still in the process of negotiating with hospitals to provide the required information to their patients and also training the members to insist on obtaining the requested details from the hospital.

8. TECHNOLOGY CARE and AVVAI faced a long list of issues attempting to make microinsurance sustainable and viable for its members. To reduce the transaction costs of microinsurance and to improve the process efficiency CARE discussed a number of questions with various software vendors as listed below: Capture data online Create trust and confidence through policy holders receiving a receipt. Deliver services on the spot. Establish a proper tracking mechanism. Lower the entry barriers for clients Manage large volumes Monitor activities Provide immediate access to data to all involved parties Reduce distribution costs Reduce the paperwork Renewal process: showing reminders through SMS Simplify the premium collection Speed up claim settlement Speed up the enrolment process It was difficult for CARE to select a vendor that really could meet their needs and solve the issues raised. At one point the organisation received a strong recommendation to approach a software vendor that already had proven experience in the field of microfinance, where, according to CARE, it is frequently the case that the cost of a software system is measured per transaction instead of a fixed licence fee per month or year.

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A transaction-based pricing model for outsourcing is one in which payments to the software vendor are based on the number of transactions executed, the number of claims processed or on the number of policies sold. This is known as a Transaction-Based Pricing Model for Outsourcing (TMO). The main advantage of transaction-based pricing is that in the case of low insurance sales the costs of the software are also low. Such a scheme was clearly of interest to CARE. The software vendor was asked to visit CARE and AVVAI to discuss expectations, the issues ahead and insurance processes. The vendor subsequently started working on a software solution around the processes and made them visible in the software. An additional benefit was that it was possible to include microfinance activities in the system.

TECHNOLOGY SELECTION The software finally used by CARE and AVVAI “MF-Insure” is a web-based system designed to support the various dimensions of the insurance business – Health, Life and General Insurance. The software’s “product configurator” provides a parameterised and table-driven approach with the benefit of creating the most common insurance product specifications and features in advance. The day-to-day user of the software benefits in that in many cases it is unnecessary to enter data manually in the system because the most common data terms to be used are already selectable from the system. The user needs to only select the applicable option from dropdown menus. Examples of available data are address type, payment mode, payment frequency, bank & branch details, state, district, product type, relationship etc.

HANDHELD DEVICES The software is enabled to handle transactions with handheld devices such as the Point of Sale terminal, mobile phones, biometric devices etc. In the case of AVVAI this means that the field staff can use a mobile phone for member enrolment, premium payments and claims. A small application is installed on the mobile, enabling the same menu structure as on a desktop to be seen on the mobile phone. This offers the significant advantage that the user can enter data in the software from any location. Henceforth, when the field staff attends a self-help group meeting for enrolment, there is no need to first write the details on paper sheet, return to the AVVAI office and re-enter the data in the software, increasing the margin of error in the process. Consequently, AVVAI can do its work much more efficiently.


Distribution and Technology in microinsurance

Depending on GPRS connectivity, which is not always available, the entered data will either directly be sent to the backend software or stored locally on the mobile phone until the moment it connects with the internet. There are also benefits for the members of AVVAI, with field staff able to use a mobile phone but also a mobile and very small printer. This printer connects with the mobile phone and immediately provides the member with proof of the transaction made (enrolment, premium payment or claim statement).

9. CHALLENGES FACED AND LESSONS LEARNT CARE and AVVAI faced a number of challenges during the start-up and implementation of the software and related technologies such as the mobile phone.

COSTS The investment costs to get the technology into place were higher than expected. As described in the previous chapter, one of the main reasons that CARE chose the current technology was the transaction-based pricing model. Other costs such as the set-up costs, customisation charges, support services and maintenance fees increased the costs. Data migration from the existing systems to the new software was difficult and time consuming and therefore proved costly.

UNDERSTANDING THE TECHNOLOGY These unexpected costs were the result of misunderstanding the technology and the technologists working for the software vendor. It proved difficult for CARE to understand what the software vendor was talking about. What exactly did the technology do? What was possible, what was not possible? And how could the technology be helpful in your own processes? Understanding the need for customisation: CARE and AVVAI expected that the software provided by the vendor would simply need to be installed without any further modifications (such as the installation of text processing software). But implementing the software covering all the business processes of AVVAI required significant customisation. Whenever CARE or AVVAI decided to change some of the processes e.g. in enrolment or premium collection, these changes also had to be made in the software.

TRAINING Once the technology was in place it took a long time to train the staff to use the system properly. CARE and AVVAI assumed it would be relatively easy to train field staff for example in the use of the mobile application of the software. This was not the case. CARE initially developed a manual for AVVAI field staff but this proved insufficient. Real time demonstration on location worked much better. To reduce the dependence of AVVAI on CARE and the software vendor, AVVAI had to train a staff member to be able to handle technical issues. Finding the right person was not easy.

COMMITMENT FROM PARTNERS Implementing a new technology requires commitment from all the parties involved. Although it is now possible to speed up the process following introduction of the new technology, Bajaj Allianz is not convinced of the technology. The insurer was slowing down the process by asking AVVAI and CARE to deliver hard copies of reports providing details of the insured people although in fact Bajaj Allianz had direct access to data fed through the system.

TECHNOLOGY SUCCESS FACTORS CARE and AVVAI mentioned a number of success factors for the technology. The most important ones are the reduction of transaction costs and shortened turnaround time (in enrolment and claims settlement). Enhancing transparency at different levels and transactions through technology was seen by CARE as another important goal. They wanted to build trust and to do this it seemed very important for the member to be able to see exactly what happens e.g. at the point of premium payments, grievances, claims and renewals. This could be done by using technology, for instance by providing a receipt on the spot to the members showing the amount paid, the insurance product bought and the policy number. The technology used also helped to track the performance indicators, one important aspect to monitor the financial and social performance of the insurance product selected.

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Published by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH Registered offices Bonn and Eschborn, Germany Social Protection Section Sector Initiative Systems of Social Protection Dag-Hammarskjöld-Weg 1-5 65760 Eschborn, Germany T +49 6196 79-3380 F +49 6196 79-1115 E social-protection@giz.de I www.giz.de Author Michiel Berende Design Nikolai Krasomil, www.design-werk.com Printed by Top Kopie GmbH Photographs Cover: iStock Images As at February 2013 GIZ is responsible for the content of this publication. On behalf of Bundesministeriums für wirtschaftliche Zusammenarbeit und Entwicklung (BMZ); Division Millenium Development Goals; poverty reduction; social protection; sectoral and thematic policies Addresses of the BMZ offices BMZ Bonn Dahlmannstraße 4 53113 Bonn, Germany T + 49 (0) 228 99 535 - 0 F + 49 (0) 228 99 535 - 3500 poststelle@bmz.bund.de www.bmz.de

BMZ Berlin Stresemannstraße 94 10963 Berlin, Germany T +49 (0) 30 18 535 - 0 F +49 (0) 30 18 535 - 2501


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