«Protecting the poor A microinsurance compendium Edited by Craig Churchill Protecting the poor A microinsurance compendium Protecting the poor A ...»
Organization development in microinsurance 273 Specialists are also appropriate if the insurance product is complex. For example, VimoSEWA (India), which offers a basket policy covering death, hospitalization and property loss, switched from general SEWA organizers to specialized staff to manage its annual mobilization campaign. These Vimo Aagewans are community leaders who are taught how to sell and service the insurance product. By specializing in insurance, Vimo Aagewans are expected to be more effective than generalists. Given the increase in volumes, higher retention rates and significant improvements in after-sales service in recent years, it appears that this switch is beginning to pay off despite the resultant higher distribution costs, although the data is not yet available to reach conclusions on whether this is an appropriate strategy.
1.2 Insurers Insurance companies serving the low-income market might also want to consider creating a special unit concentrating on microinsurance. This focused effort will enable them to get a better understanding of the micro market and find creative ways to respond. This was not the arrangement at AIG Uganda, where no one had an overview of the insurer’s relationships with MFIs, and there was no information about the contribution of the microinsurance policies to the company’s profits. Consequently, there was little investment in the microinsurance product, hardly any innovation over six years, and a lack of training provided to the MFIs’ employees.
In contrast, Tata-AIG created a special department for the Rural and Social Sector, with a budget and flexibility to act creatively, and a mandate from senior management. Perhaps the result of the unique regulation in India mandating entry into the low-income market, this arrangement allowed the insurer to experiment with products and delivery channels that may be more appropriate for the low-income market than the accidental death and disability cover provided by its sister organization in Uganda.
According to ICMIF (2005), the expansion strategies of Company 3 in the case study also illustrate the pitfalls of an inappropriate organizational structure (see Box 51). Serving middle- and low-income earners, its group life insurance showed early promise, but the company got into individual life insurance which is a significantly different product line. To deliver individual products, Company 3 created an organizational structure that it ultimately could not support.
274 Microinsurance operations
Organization development: How not to do itBox 51
Company 1 operates in a transition country with an annual net premium income of US$3.5 million, 27 staff members and no service centres other than its head office. In the same country, Company 2 has a net premium income of US$5.8 million, 210 full-time employees plus 85 part-timers, and 23 regional offices with 32 sub-offices “for sales and loss adjusting”. Company 3, in a developing country, had (the past tense is no mistake) a net premium income of US$2.8 million, a full-time staff of 705 plus 1,825 part-timers, and 58 service offices all over the country.
Even making allowances for the difference in products, market segments and geography, it is not hard to tell which insurer can look ahead to a stable future and which is likely to continue struggling, and why the third bit the dust. A basic, albeit rough, measure of productivity says it all: premium per employee. It is US$129,629 for one and US$19,661 for the other, and it was a mere US$1,106 for the third. The one with the highest number of employees also, understandably, had the crippling overhead burden of the highest number of service outlets.
Company 3, the one with huge overheads that died before reaching maturity, wanted to be close to its customers spread across the country. So it put all the required functions – underwriting, claims settlement, premium collection and marketing – in each of its 58 service offices, without distinguishing between frontline and support services. Good for creating jobs, but temporary ones at best.
2 Recruitment: Where to access appropriate expertise
2.1 Field staff The screening and selection of frontline staff involved in distributing insurance usually depends on the criteria for their main responsibilities, such as granting loans. Rarely does the fact that they will also be involved in selling insurance affect the decision to employ them. However, the characteristics required to sell credit are somewhat different from selling insurance. When someone gets a loan, it is much more tangible – cash in hand – than the peace of mind and security associated with insurance.
As a result, the demand for loans is generally much higher than for insurance, so loan officers do not have to have the sales expertise that insurance requires. In addition, the poor understand credit better than insurance, Organization development in microinsurance 275 so there is less of a need to explain how it works. This requirement for client education calls for a different skill set from that which a typical loan officer may have.
If an organization is interested in recruiting people just to provide insurance, it might be useful to consider the selection criteria established by TataAIG for its micro-agents, who focus exclusively on insurance sales (see Box 52). Tata-AIG also involves non-governmental organizations (NGOs) in the process of identifying micro-agent candidates since locally they are often in a good position to assess the extent to which individuals are respected in their communities (see Chapter 4.5).
Criteria in the selection of micro-agents at Tata-AIG Box 52 The criteria for the selection of a leader of a community rural insurance
group (CRIG) include:
The agents for CARD MBA in the Philippines, called coordinators, are elected by the membership rather than being recruited by the institution (see Box 53). Similarly, the selection of frontline staff in the community-based model has the advantage of involving members directly in deciding who will manage the scheme. If this decision-making process is facilitated properly, members usually select someone they trust who has sufficient aptitude to learn the administrative responsibilities.
Where frontline staff do specialize in insurance, it may be useful to consider giving them more specialized responsibilities. For example, ServiPerú has some agents that focus on sales, and others that collect premiums and process claims. This separation of responsibilities is justified given the very different skills required for these functions.
Frontline staff at CARD MBABox 53
Frontline staff or coordinators at CARD MBA are members of the scheme, elected by their peers to fulfil a customer service function. Their activities include claims verification and payment, educating current and potential clients and addressing questions from CARD’s staff or clients. They also work with branch managers to ensure timely collection and transfer of premiums as well as document compliance.
According to the MBA’s immediate past president and former coordinator Pilar Garcia, a coordinator’s tasks are delegated to trusted members with good standing at CARD. Coordinators commit to working at least one day per week on MBA business, although the responsibilities often demand more time. The work involves irregular hours, as claims verification must be done immediately to ensure that settlements are processed in three days.
People are selected to be coordinators for a one-year term. Although this short period requires a lot of training, the term limit reduces fraud since it does not allow coordinators time to get too clever. Perhaps more importantly, by involving many members in the insurance operations, it generates more knowledgeable policyholders, improving their effectiveness in MBA governance.
New coordinators undergo a day’s training at the March annual membership convention; in the period between their election (in December or January) and the training, they perform their duties in cooperation with, and under the supervision of, the outgoing MBA coordinator for their region.
The bulk of the training occurs on the job, which is possible because the business processes and products in the MBA are simplified.
Source: Adapted from McCord and Buczkowski, 2004.
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2.2 Back-office staff As for management and back-office staff, given that microinsurance is a new field, insurers and their distribution channels are unlikely to find too many existing microinsurance specialists. So organizations can act in one of two ways: either they can recruit intelligent people with development experience and teach them about insurance or they can employ insurance specialists and help them understand the low-income market.
Delta Life (Bangladesh) and Tata-AIG both took the first approach, staffing their initial microinsurance operations with social-sector specialists since the organizations already had insurance expertise. In both cases, the organizations realized that they needed new thinking to overcome the obstacles to extending insurance to the poor, which was not likely to come from traditional insurers. CARD MBA, on the other hand, needed to hire insurance expertise to solve the problems that were created when microfinance specialists were running the insurance operations. SEWA essentially adopted both approaches, handing the reins of VimoSEWA to a long-time SEWA manager, but recruiting someone from the insurance industry as Chief Operating Officer.
Of course, microinsurers do not have to have all of the expertise in-house as long as they can access it. In fact, many conventional insurance companies do not have in-house actuaries, but rely on actuarial consultants. TUW SKOK, for example, used an actuarial consultant for years. When it was granted a licence to start a life insurance company along with its general insurance company, the organization felt that it had sufficient need for actuarial services to employ an actuary; yet at the same time, it decided to outsource its investment management since life insurance investments required greater expertise than it had in-house (see Box 54).
It may not be possible or cost-effective for each microinsurance provider to retain full-time experts. However, identifying suitable sources of expertise in the areas of product design, client-needs analysis, processes mapping, product costing, distribution, reinsurance and actuarial support would be prudent prior to launching a new microinsurance venture.
TUW SKOK’s outsourcing model Box 54
the brokerage to credit unions comes from TUW SKOK, but as the insurer is not licensed to offer all types of insurance, the brokerage will go to the open market if TUW SKOK does not offer the required product and issue a tender for services to several insurance companies.
This arrangement allows the SKOKs to offer products, such as car insurance,
for which TUW SKOK is not licensed. Besides the relationship with the brokerage, TUW SKOK outsources other key activities:
– Market research: TUW SKOK undertakes modest market research activities in-house, but it outsources larger studies to a market research firm.
– Actuarial services: When it was a relatively small insurer, TUW SKOK contracted an actuarial consultant for a few days a month. With the recent purchase of the life insurance company, the business has grown to a sufficient size to justify recruiting an in-house actuary.
– Software development: TUW SKOK is part-owner of the software firm that develops the MIS for the credit unions. H&S Software, housed in the same building as TUW SKOK, NACSCU and the Foundation, also develops some of the software used by the insurance company.
– Sales: Besides the corporate sales outsourced to the brokerage firm, TUW SKOK (via Asekuracja) outsources the retail sales activities to credit unions and their staff.
Organization development in microinsurance 279 – Claims adjusting: For its property insurance policies, TUW SKOK relies on independent claims adjusters to assess and document the damage. For disability products, the insurer also has a list of medical doctors whom it trusts to determine the degree of disability.
Source: Adapted from Churchill and Pepler, 2004.