ANIDASO INSURANCE POLICY FOR LOW-INCOME MARKET SEGMENT IN GHANA. Prepared by CARE International in Ghana

Transcription

1 PRODUCT GUIDE ANIDASO INSURANCE POLICY FOR LOW-INCOME MARKET SEGMENT IN GHANA Prepared by CARE International in Ghana February

2 TABLE OF CONTENTS Page Foreword 4 Presentation of Partner-Agent model 5 Tasks, Proesses and Ativities 1. Setting up of Advisory Committee 6 2. Invitation to expression of interest 7 3. Study of personal insurane setor 8 4. Stakeholders' workshop Market researh Design of produt prototype Seletion of MFIs Seletion of insurane ompany Addressing regulatory issues Contratual arrangements Development of MIS software Training of projet partiipants Development of marketing materials Pilot test 23 2

3 Annexes A. Advert in Daily Graphi B. Study on personal insurane setor C. Survey of existing miro-insurane produts in Ghana D. Survey of informal funeral shemes E. Miro-insurane in Afria: Some lessons learned F. Key onsiderations in the design of miro-insurane produts G. Summary of qualitative market researh findings H. Analysis report of quantitative market researh I. Request to MFIs for additional information J. Criteria for seletion of MFIs K. Invitation for tenders L. Report on analysis of tenders from insurane ompanies M. Assessment grid for tender analysis N. Tripartite agreement between CARE, GLICO and MFIs O. Presentation of MIS software P. Fous group disussions of marketing materials R. Final evaluation report List of abbreviations and aronyms ARB BOG CARE DFID EDIF GHAMFIN GLICO MFI MIS NIC PIA RB Assoiation of Rural Banks Bank of Ghana Co-operative for Assistane and Relief Everywhere Department for International Development Enterprise Development Innovation Fund Ghana Mirofinane Institutions Network Gemini Life Insurane Company Mirofinane Institution Management Information System National Insurane Commission Personal Insurane Advisor Rural Bank 3

4 FOREWORD This Produt Guide aims to failitate the step-by-step implementation of an innovative miroinsurane produt by interested pratitioners in Ghana and other ountries. The Guide takes the reader through all proesses and ativities that were onduted in the ourse of produt implementation. The ANIDASO insurane poliy was researhed, designed and tested by CARE International in ollaboration with Gemini Life Insurane Company (GLICO), a private insurer in Ghana. The 2.5- year produt development phase lasted from Otober 2001 to Marh 2004 and was funded by DFID under its Enterprise Development Innovation Fund (EDIF). The goal of the projet was to inrease the availability and purhase of appropriate insurane produts by low-inome rural households in Ghana. This was to be ahieved by assisting a private insurer develop a demand driven life insurane produt and offer it to the targeted market segment through seleted miro-finane institutions (MFIs). The projet was implemented in five regions of Ghana namely Greater Ara, Central, Ashanti, Volta and Eastern. Seven MFIs were seleted to sell the produt on behalf of GLICO. They are: Women s World Banking Ghana, Citi Savings & Loans Company, Kakum Rural Bank, Odotobri Rural Bank, Agave Rural Bank, Akuapem Rural Bank and Upper Manya Kro Rural Bank. The produt development proess was made of 14 prinipal ativities or tasks whih the Produt Guide desribes following a hronologial order. Support materials, doumentation and tools are inluded in annex for further referening. The projet reeived on-going tehnial assistane from two international onsultants: Mrs Tamsin Wilson from Springfield Centre (U.K.) and Mr Mihael MCord from MiroInsurane Centre (Kenya). CARE is grateful to both of them for their invaluable inputs in the projet. This Guide was prepared by Mrs Peae Sagoe, Projet Manager, and Mr Pierre Markowski, Tehnial Advisor, under the supervision of Mr Laté Lawson, Mirofinane Program Coordinator. For more information, please ontat: CARE Gulf of Guinea P.O. Box CT 2487 Ara, Ghana Tel: (233-21) , , , Fax: (233-21) are@aregog.org 4

5 PRESENTATION OF PARTNER-AGENT MODEL CARE proposed to develop the new miro-insurane produt using the Partner-Agent model, whih is illustrated in Diagram 1 below. That model has gained international reognition as an appropriate mehanism for miro-insurane delivery to the low-inome market. The model alls for a MFI to at as the agent for a regulated insurer. The insurer an address the tehnial insurane aspets of the produt, while the MFI provides the sales and servie interfae with the lient. Both institutions do what they know best, and the low-inome poliyholder reeives a professional miro-insurane produt. Diagram 1: Traditional Partner-Agent Model REGULATED INSURER MFI AGENT INSURER / MFI CLIENTS PRODUCT MANUFACTURING: (Underwriting, Claims, Priing, SAL SER POLICY HOLDERS The model that the projet followed is shown in Diagram 2 with CARE ating as failitator between the insurer and the MFIs. CARE s role was to researh, design and develop the new miro-insurane produt and the delivery struture in whih it was to be offered, as well as to failitate the building of a business relationship between the two types of organisations. Initially, the relationship between the insurer and MFIs flowed diretly through CARE; however in the last 6 months of projet implementation there were efforts to strengthen over time the diret relationships between insurer and MFIs. These relationships were intended to beome primary with CARE falling out of the intermediary role ompletely at the end of the projet. 5

6 Diagram 2: CARE Ghana Model PRIVATE INSURER CARE MFI AGENT Insured PRODUCT MANUFAC- TURING FACILITATOR (ommuniations, basi oversight, Sales Servie Poliyholders SETTING UP OF ADVISORY COMMITTEE At projet ineption, CARE took the initiative of establishing an Advisory Committee made of representatives from key stakeholder institutions. The organizations represented on the Advisory Committee were: - Bank of Ghana (BOG) - National Insurane Commission (NIC) - Assoiation of Rural Banks (ARB) - Ghana Mirofinane Institution Network (GHAMFIN) - ARB Apex Bank CARE extended invitations to these organizations to partiipate and designate representatives to serve on the Advisory Committee. CARE requested that designated offiers: (i) would have strong tehnial skills to ontribute effetively to projet implementation and (ii) would be available to fully partiipate in monthly or quarterly meetings. Eah organization designated its senior exeutive to sit on the Committee. The roles assigned to Committee members were: i) to keep trak of projet progress; ii) to provide advie and guidane to the projet team on key deisions; iii) to partiipate in projet exeution in their areas of ompetene; iv) to report to their respetive organisations about projet implementation; and v) to partiipate in popularising the initiative with relevant 6

7 authorities and the publi at large. Committee members reeived a token ompensation for their partiipation in meetings. After the first meeting of the Committee, the Bank of Ghana no longer attended noting that suh partiipation might put them in a onflit of interest position. CARE thereby proposed inviting a former Bank of Ghana senior offiial who had turned to a private onsultant job to join the Committee and this was aepted by the other members. Committee members eventually played a ruial and deisive role in the identifiation and seletion of projet partners. Furthermore, through their networking with Ghanaian authorities and regulatory bodies, they help address and solve in a smooth and pragmati manner various legal and institutional obstales to the introdution of the new miro-insurane produt. INVITATION TO EXPRESSION OF INTEREST CARE plaed an advertisement in a well read loal newspaper the Daily Graphi informing potential projet partners (i.e. rural banks and insurane ompanies) about the projet and inviting them to express their interest in writing. This reeived muh attention from the insurane setor as all major insurers in Ghana responded to the invitation, inluding: 1. Metropolitan Insurane Company 2. Enterprise Insurane Company 3. Enterprise Life Insurane Company 4. Gemini Life Insurane Company 5. Donewell Insurane Company 6. Vanguard Insurane Company 7. Provident Insurane Company 8. Unique Insurane Company and 9. CDH Insurane Company. However, the response from MFIs did not math that from the insurane industry. For example, only 11 rural banks applied out of a potential 60 loated in the designated projet areas. This might be attributable to the lak of knowledge and understanding of the insurane business in general and miro-insurane in partiular by finanial institutions in Ghana. MFIs that expressed interest were the following: 1. Johnson s Savings & Loans Company Greater Ara region 2. Citi Savings and Loans Company " 3. Women s World Banking Ghana " 4. Dangme Rural Bank " 7

8 5. Sinapi Aba Trust Ashanti region 6. Odotobri Rural Bank " 7. Dumpong Rural Bank Eastern region 8. Atiwa Rural Bank " 9. Mumuadu Rural Bank " 10. Upper Manya Kro Rural Bank " 11. Akuapem Rural Bank " 12. Anlo Rural Bank Volta region 13. Agave Rural Bank " 14. Kakum Rural Bank Central region 15. Union Rural Bank " For further referenes, onsult the following doument: Annex A Advert plaed in Daily Graphi STUDY OF PERSONAL INSURANCE SECTOR The Insurane Setor In Ghana as in other ountries the insurane industry has mostly foused on the upper inome market. An important differene in Ghana is that there is reognition by insurers that they need to move down market in order to inrease the sale of their ativities. As stated by the National Insurane Commissioner: Owing to inreased ompetition, the urban insurane market [in Ghana] is beoming saturated, and as insurers, our best bet in terms of growth opportunities lies in developing new produts whih an meet the needs of the rural and low-inome populations. Insurers are thus motivated in addressing the needs of the lower end of the market, but they often lak an effiient mehanism to aess this large number of potential lients. The projet assumption was that the Partner-Agent model ould help insurers to aess the low-inome market through MFIs without having to build an expensive infrastruture to manage suh business. 8

9 Consultants were ontrated to ondut a personal insurane setor study whih objetive was to review what produts were urrently being offered to the low-inome market in Ghana. The study onfirmed the gap in the ommerial supply of insurane produts to low-inome households, opening the door for the development of innovative produts adapted to the needs of this market segment. Do not skip the informal setor when researhing available insurane produts. In addition, a researher was sent out to review the ativities of informal funeral soieties. This helped the projet team understand why people like to partiipate in informal shemes (onveniene and sense of belonging) and how these soieties were unsuessful at satisfying the needs of the market (orruption and insuffiient over). This study led to reognise that we should not aim at replaing these informal produts, but rather reating an additional, omplementary set of produts. The MFI Setor We should not aim at replaing loal informal mehanisms, but rather reating additional, omplementary risk management produts MFIs in Ghana have experiened repayment diffiulties with lients as a result of insurable events (suh as death or health related problems). Many of these institutions have identified a demand for insurane produts from their lients, but they have been unable to respond to that demand beause of limitations to their own institutional apaity. Indeed, the development of an insurane produt by a rural bank or MFI on its own, would pose signifiant finanial, institutional, and legal issues that make suh independent provision unattainable for these institutions. MFIs have been unable to respond to insurane demand from ustomers beause of limitations to their own apaity Nonetheless, MFIs do have the ability to work losely with lowinome lients in their servie areas. This is preisely the skill and knowledge that insurers are laking. The Partner-Agent model provides for mutual synergies between the MFIs and a regulated insurer. Utilising suh a linkage allows MFIs to aess the insurane produts their lients are demanding, while minimising the need for developing the skill base and legal requirements to offer an insurane produt. Additionally, they do not put their apital at risk by ating as an agent for an insurer. For further referenes, onsult the following douments: 9

10 Annex B Study on personal insurane setor Annex C Survey of existing miro-insurane produts Annex D Survey of informal funeral shemes STAKEHOLDERS' WORKSHOP One the initial researh was ompleted, the projet team alled for a major stakeholders workshop. MFIs and insurers who had sent an expression of interest to partiipate in the projet were invited to attend. The purpose of the workshop was to provide an overview of what was learned through the researh, as well as outline the proess that would be followed for projet implementation. At the meeting there were several speakers, all of whom ontributed to provide ritial information and redibility to the projet: - The NIC Commissioner pressed the attending insurers to look at the low-inome markets to expand business - The Head of Miro-Insurane Centre who made a thorough presentation of issues and lessons learned in international experienes with the provision of miro-insurane - The onsultants who worked on the personal insurane setor study presented their results - The onsultant from Springfield Centre addressed key onsiderations in the design of miro-insurane produts. In the afternoon, MFIs were separated from insurers and the two groups were led to disuss their interest, expetations, and roles of eah party in the new produt development and serviing. The workshop was extremely suessful in briefing stakeholders about this opportunity as well as getting information from them on their onerns and issues about the projet. It also built redibility that was leveraged throughout the next phase of the projet. The meeting also helped CARE to understand the onerns and apaities of the two groups (MFIs and insurers) so that those issues ould be addressed in further planning. Based on the suess of the stakeholder s workshop, it is reommended to hold one in any large-sale miroinsurane projet. 10

11 For further referenes, onsult the following douments: Annex E Miro-insurane in Afria: Some lessons learned Annex F Key onsiderations in the design of miro-insurane produts MARKET RESEARCH Qualitative market study The miro-insurane onept was new to rural areas of Ghana and knowledge about demand for this produt was limited. The qualitative market study aimed to provide CARE and its partners with bakground information to develop an insurane produt onept adapted to the needs and preferenes of benefiiaries. This exploratory researh would be followed up by quantitative testing of produt prototypes. The study aimed to: - understand the market for miro-insurane produts; - identify lients' needs and preferenes; - identify opportunities for development of miro-insurane produts. Detailed speifi objetives are presented in Table 4-1 below. 11

12 Table 4-1: Speifi researh objetives Core issues 1) Risks and oping mehanisms Detailed aspets to be investigated Types of risks faed life yle, strutural o-variant risks, risis risks (death, property, health, disability) Identifiation of the risks that an be insured Exposure to risks (whih are most prevalent and whih are most devastating to the family frequeny and severity of risks) Risk response strategies Pathways out of poverty and apaity of households at different poverty levels to ope with rises 2) Cash flows 3) Existing redit, savings and insurane servies 4) Pereption of insurane Patterns and seasonality of inome, expenditures and savings Terms and onditions of loal redit, savings and insurane servie providers Aess to servies by wealth ategories Use of redit to mitigate the risks Savings (and other oping mehanisms) vs. insurane shemes differenes in preferenes, pereption and usefulness Importane of insurane produt attributes Awareness and absorption of life/health/property insurane (pereption of benefits of the shemes) Effetive demand for miro-insurane (Do lients want assistane in reduing vulnerability to risks? Is insurane the most appropriate finanial servie for providing this protetion? Are lients willing and able to pay a prie at whih the insurane an be delivered profitably?) The researh methodology was Fous Group Disussions (FGDs) driven by Partiipatory Rapid Appraisal (PRA) tools whih were adapted from the MiroSave-Afria toolkit. In total 12 FGDs took plae in three ommunities. Eah group was omposed from 6-8 villagers that were seleted by partiipating Rural Banks staff taking into aount the following riteria: sex, vulnerability, salaried status. Quantitative market study Based on the findings of the qualitative market researh, the projet team was able to define life insurane with a retirement plan omponent as the most desirable and suitable produt for the targeted populations. A questionnaire was designed to investigate in more depth potential demand for suh a produt. Enumerators from three MFIs (Citi Savings and Loans, Sinapi Aba Trust and Upper Manya Kro Rural Bank) interviewed a total of 759 lients (of whih 62% were women) in Ashanti, Eastern and Greater Ara regions. 12

13 The survey sought to eliit feedbak from potential poliyholders on a low ost life insurane onept and assess the demand for speifi levels of benefits, overage, premiums and frequeny of payment. It also olleted soio-eonomi profiles of potential lients with regards to inome, age, household size, and family deaths in the last twelve months. Though the response was generally very positive, it was somewhat overshadowed by negative preoneptions about insurane. Respondents were partiularly onerned about the trustworthiness of insurane ompanies and the time taken to proess laims. On average, respondents wished to purhase a life insurane poliy pried at approximately 20,000 Cedis per month and offering a laim amount of 5 million Cedis. They wished to pay the premium monthly and would like the poliy to over death by illness and aident, permanent omplete disability and probably permanent partial disability, too. The produt should over their spouse and hildren and possibly also their parents. A suessful produt should be based as muh upon the way the servie is provided as on the produt provided. Therefore as well as attempting where possible to meet the requirements expressed by respondents the insurane providers should work hard to be transparent, reliable and trustworthy. In addition, laims deisions should be made rapidly, refleting simple and effiient systems. The study's findings were extremely helpful in providing a prototype that CARE ould then offer to develop with the projet partners. For further referenes, onsult the following douments: Annex G Summary of qualitative market researh findings Annex H Analysis report of quantitative market researh 13

14 DESIGN OF PRODUCT PROTOTYPE In summary, the produt prototype was designed on the basis of the following researh work: - Personal insurane setor study - Informal funeral soieties study - Analysis of existing life insurane produts in Ghana - Review of miro-insurane produts developed in other low-inome ountries - Fous group disussions - Quantitative market survey. The projet team organized a meeting with insurers to pull the data together and begin the basi design of a miro-insurane produt that would satisfy the requirements and expetations of potential lients, while fitting appropriately within the urrent struture of insurane provision in Ghana. This meeting was helpful for several reasons: - It provided another formal opportunity to disseminate the market information gathered by the projet to all insurers - It further larified the objetives of the projet - It brought pratial inputs from insurane professionals on the produt design - Even though the insurer had not been seleted at this point, all insurers were given an opportunity to own the produt. The produt prototype that emerged from this meeting is desribed below. Table 6-1: Produt prototype Plan Component Base Plan Family Plan Retirement Plan Super Plan Coverage Life insurane for the prinipal poliy holder Life over for the spouse and two hildren A long term savings produt Combining all three produts 14

15 SELECTION OF MFIs Eah MFI whih responded to CARE invitation was visited by the projet team to gather additional information required to make a final seletion. Key determinants inluded size of the lient base, number and loation of branhes, finanial performane, board quality and ommitment, basi infrastruture, and partiipation in other mirofinane programs (to minimise potential onflits). Out of fifteen appliants, seven were seleted. Ultimately two left this group. Sinapi Aba Trust did not have savings aounts from whih insurane premiums ould be deduted. It was eventually replaed by Women World Banking Ghana. Upper Manya Kro Rural Bank management was purged by Bank of Ghana, though they were invited bak to partiipate and ommened sales in November The final list of MFIs involved in the pilot test was as follows: Kakum Rural Bank Odotobri Rural Bank Agave Rural Bank Akuapem Rural Bank Upper Manya Kro Rural Bank Citi Savings and Loan Women s World Banking Ghana For further referenes, onsult the following douments: Annex I Request to MFIs for additional information Annex J Criteria for seletion of MFIs 15

16 SELECTION OF INSURANCE COMPANY The projet team prepared a tender doument as a means for generating ompetition among insurers for the development and delivery of the new miro-insurane produt. The tender provided information on the proess that was being followed, a summary of the market information gathered from the researh work, and an outline of the produt prototype. Bidders were requested to define the speifi onditions under whih they would offer those produts inluding premiums, overage limitations, and ommissions to be paid to the MFIs. The tender doument also requested several ritial ommitments from bidders, inluding partiipating as part of this proess, regular reporting to CARE, marketing requirements, and finanial responsibility. It also required submission of the ompany finanial statements over the last three years. Eight insurane ompanies responded to the tender: Gemini, CDH, Unique, SIC, ELAC, Provident, Metropolitan, and Vanguard. The bids were opened in presene of Advisory Committee members. The Miro-insurane Centre onsultant also failitated the bid analysis and seletion proess. The Committee developed a matrix to assess the tender offers by identifying and weighting fators they deemed ritial to the seletion of the insurer. These inluded: Fator Basis Maximum sore Institutional apaity Finanial and non-finanial measures of growth, 170 profitability, effiieny, branh network, and relative volume of life business Terms and onditions for the four produts Coverage, premiums, benefits, interest rate for the 500 retirement plan, and perentage of premium going towards administration ost Limitations Related to age, underwriting requirements, and 100 possibility of withdrawals from the retirement plan Commissions Perentage of premiums paid to the MFI agents in first year 50 Other relevant Management apaity, years of experiene, 80 information responsiveness to the market, reputation of the ompany, and innovation Total 900 Final sores ranged from 467 to 697. The best rated tenderer, Gemini Life Insurane Company (GLICO), was unanimously reommended by all ommittee members. 16

17 The projet team met with GLICO management to onfirm the terms, onditions and other ommitments made in their bid. Without diretly working with the other tender partiipants, it is diffiult to know whether the seletion of GLICO as projet partner was the most appropriate. However, GLICO has proven to be a strong ompany, ommitted to suessfully serviing the lowinome market. In retrospet, it is hard to see how another ompany ould have provided more than GLICO did to develop the new produt. The proess of tendering is therefore reommended whenever the partner-agent model is implemented and there is more than one possible insurane partner. The tender proess worked extremely well in seleting an insurer. The other insurane ompanies were not informed immediately of the results as CARE was negotiating with GLICO on important issues for projet implementation. The reason for this was that should CARE and GLICO be unable to agree on those issues, CARE would need to link up with the seond highest bidder. One CARE had reahed a firm and workable agreement with GLICO, the others insurers were informed about their standing. For further referenes, onsult the following douments: Annex K Invitation for tenders Annex L Report on analysis of tenders from insurane ompanies Annex M Assessment grid for tender analysis 17

18 ADDRESSING REGULATORY ISSUES Under the by-laws of their establishment and operations, rural banks and other MFIs in Ghana are not expliitly allowed to engage in the insurane business. Similarly, the existing insurane law does not allow for institutions to at as agent of insurane ompanies, although the National Insurane Commission (NIC) is moving in that diretion in a bill that is before parliament for onsideration and passing into law. Aording to the existing legal framework, only individuals an at as agents for insurane ompanies. The Advisory Committee was very instrumental in addressing these regulatory hurdles and making the Partner-Agent model aepted by authorities. The projet team had to negotiate the following exemptions: (i) Approval was sought and seured from Bank of Ghana to try the new miro-insurane produt on a pilot basis. CARE had to demonstrate that rural banks and MFIs would not put their apital at risk by partiipating in the projet, but in the ontrary would atually gain from olleting fees and attrating new lients. (ii) A speial waiver was granted by NIC to authorize the partiipating rural banks and MFIs to designate Personal Insurane Advisors (PIA) among their staff, to at as agents for the private insurer and servie the new miro-insurane produt. (iii) The projet requested and obtained NIC approval for the new produt after the Commission s atuarial servies were satisfied of the reasonable risk that the private insurer was to assume. Agent issue addressed by the Bank of Ghana During the personal insurane setor study, the onsultants identified a potentially projet terminating problem. The Bank of Ghana did not liense the rural banks to offer insurane as agents. This onflited with the intended delivery mehanism for the projet. Rather than note this in their report so that CARE ould follow up the issue, the onsultants took the initiative to write to BOG for a formal determination letter on the ability of rural banks to at as insurane agents. Follow a ontrolled and loally speifi proess for addressing issues with government i 18

19 This blunder resulted in signifiant lost time, effort, and money. An indiation of the serious nature of this issue is that it arose in February Eduate regulators 2002, and projet management was unable to obtain a letter of no before requesting objetion from the Bank of Ghana until November Addressing the learanes issue required several attempts by projet management, and finally the hiring of a well-respeted loal onsultant to work with the Bank of Ghana to resolve the matter. This inident points out the importane of following a ontrolled and loally speifi proess for addressing issues with government agenies. It is entirely likely that a more professional approah with the Bank than was taken by the onsultants might have resulted in a muh more amiable resolution. It is usually better to arefully work to get key Central Bank managers to understand what the projet is doing and then approah them for learane, rather than pushing them for a determination before they understand the intended proess. Additionally, it was not the plae for onsultants, or even CARE itself to submit the request. It should have been one or more MFIs to request approval. Produt approval by NIC In Ghana, the NIC must approve all new insurane produts. This approval overs poliy omponents and desription, as well as priing. An independent atuary onfirms the assumptions and auray of the priing and that with suh priing the insurer will not put apital at signifiant risk. The produt prototype was thus submitted to the NIC in February Approval was obtained in May 2003 with slight adjustments to the premium proposed, inluding a mandated redution in the ommission (from 30% to 25% in this ase). The delay was partly a result of a strong suggestion by one of the external onsultants that updated atuarial tables for 1986 through 1990 be used as a better refletion of the likely mortality rates, than the traditional tables of Both of these are questionable given that they are generated from South Afrian tables, and do not partiularly reflet the mortality rates of the low-inome market. It was however onsidered that with the AIDS pandemi not even refleted in the earlier tables, at least the newer tables would better reflet likely rates. Thus, the produt was pried based on the newer tables. The independent atuary refused these newer tables, and required that the premiums be realulated using the tables. This was done, but the hange delayed the proess by up to two months. This was signifiant beause at this point everything had been deemed ready and the only matter delaying the launhing of the pilot test was the approval. This delay held up the pilot test, and fored a seond round of training sine too muh time had gone by to expet rural bank/mfi staff to remember the initial training. 19

20 CONTRACTUAL ARRANGEMENTS CARE entered into a tripartite agreement with GLICO and the seleted MFIs with roles and responsibilities of eah partner learly spelt out and sales targets set for eah MFI. CARE also indiated learly in this doument, the finanial support it was prepared to give eah partner throughout the projet period but most espeially over the pilot test period. Diret finanial support to GLICO amounted to 160 million Cedis (approximately $25,000) and inluded: - Fees and expenses related to 2-week training of MFIs staff; - Travel allowanes for site visits; - Fees for atuarial work; - Fees for MIS development; - Reimbursement of marketing and promotional materials, as well as produt launhing expenses. Finanial assistane to the MFIs amounted to 100 million Cedis (approximately $15,000), whih inluded training osts and salary osts of one Projet Offier (Personal Insurane Advisor) for 6 months. Targets were set for eah MFI to attain over the 6-month produt trial. These targets related to what ould make the business viable and profitable to both partners. In ahieving these targets, expetations of the donor would have been signifiantly exeeded and put all parties in a winning situation. The Projet Manager disussed with eah partner MFI about sales targets required to basially over the PIA s ost not taking into aount other overhead ost required to arrive at profitability. For further referenes, onsult the following doument: Annex N Tripartite agreement between CARE, GLICO and MFIs 20

21 DEVELOPMENT OF MIS SOFTWARE GLICO adapted its regular MIS software to the new miro-insurane produt. This software provides for lient appraisal, appliation proessing, premium omputation, standing order generation, laim proessing, and reporting. The PIAs assigned to sell the produt were trained in the use of the software and reeived regular on-site support from GLICO. It has some seurity features that prevent unauthorised users from entering into the system and manipulating data aptured in the software. The use of pen drives for data transmission was introdued later in the pilot test period following hallenges posed with the use of diskettes by the MFI staff. The premium dedution and laim proessing proedures are outlined in the MIS manual developed by GLICO. The proess starts with a standing order generated on the proposal/appliation form of the lient. Ation is then taken on the standing order with the lient aount debited with the premium amount. Premiums olleted are lodged in a orporate aount of GLICO at the rural bank/mfi. GLICO then deides what withdrawals would be made for investment purposes. However GLICO ensures that funds will always be available to meet laims as and when they are due. There was a first laim in the last quarter of the projet and GLICO honoured its promise to pay laims promptly. There were on-going disussions at the time to give this event press overage. The benefiiary did not give his onsent to this for personal reasons. For further referenes, onsult the following doument: Annex O Presentation of MIS software 21

22 TRAINING OF PROJECT PARTICIPANTS CARE Projet Manager followed an initial training program in basi insurane priniples, underwriting, reassurane, laims and marketing of life insurane produts. Though with expertise in the mirofinane setor, the field of insurane was quite new to her and there was a need to build her redibility in that area and more espeially in managing the projet partners. Board Diretors and Managers of rural banks/mfis were also exposed to general insurane priniples and onepts during a 2-day seminar, whih put emphasis on the life insurane business. They needed this exposure to be able to provide the required support to the Personal Insurane Advisors (PIAs). Last but not the least, the PIAs went through a number of training programs on insurane priniples, produt presentation, losing of sales, handling objetions, et. GLICO and CARE ontinued to offer on-site assistane to these PIAs throughout the projet period as some of them were very slow in getting aquainted with the use of the software and selling the produt. DEVELOPMENT OF MARKETING MATERIALS Marketing issues were addressed during the period preeding the pilot test. GLICO developed some posters, brohures and advertising text for produt promotion and marketing. These tools were tested with the target groups through fous group disussions. Following this exerise, dramati hanges were made to the materials to make them resonate better with the targeted market. For GLICO, understanding that the low-inome market required different marketing strategies and methods took some time. Initial versions of the posters and advertising materials were learly foused on the upper level market and not likely to have an impat on the low-inome market. Even the produt name needed to be related to this market. (Anidaso means "hope after grieving" and is well understood by the rural populations). For further referenes, onsult the following doument: Annex P Fous group disussions of marketing materials 22

23 PILOT TEST Pilot testing is a ritial proess that helps an institution to onfirm (i) that there is atually effetive demand for the tested produt, (ii) that the systems developed to manage the produt are suffiient, and (iii) that staff are effetive in offering the produt. Clear quantitative objetives should be set in advane to enable suffiient assessment of these aspets of the test. The proess must be strutured so that these areas an be properly reviewed. A protool was prepared for the testing phase of the projet. This tool detailed the ativities to be onduted, the start and due date, person(s) responsible to arry out the ativities and the resoures required. This kept the team foused and ensured the pilot was on trak. In order to manage the pilot test launh in six institutions it was deided to stagger their startup. This was important beause GLICO, like most other ompanies, did not have the ability to be at all sites at one to make sure the start-up went effetively. This helped to ensure that if there was a signifiant problem it ould be aught before spreading. The size of a pilot always warrants serious thought, and with a miro-insurane produt, this is even more the ase. The fundamental need for large numbers of poliyholders to make spread the insurane risk omes against the need for ontrolled numbers in a pilot test. In this ase, initially seven institutions were seleted with a total lient base of 143,000 lients in 56 branhes. The intention then was to restrit the sales to one or two branhes from eah institution. Additionally, it was thought that some institutions might not atually get to the pilot testing stage so extras were seleted. In fat, two of the initially seleted pilot testing institutions did drop out of the projet, although one returned at the end of the test and another MFI registered. Training of rural bank/mfi staff The projet team realised the impat of the training was variable in terms of marketing (for example, some staff interviewed were onfused about the produt, neither staff nor lients ould explain the return on the retirement plan), or the omputer system. The MIS manager at GLICO noted that he has had to alloate staff to input the lient appliations beause these were not being done in the field as was agreed. This reated delays and frustration for GLICO and rural bank/mfi staff. Future programs should develop key riteria for the skills required by insurane agents or at least an in-house lead agent who an manage the proess. Minor exams at the end of training might also assist in determining who should manage different levels of ativities within the institution. 23

24 Salary subsidy and inentives Another important issue with the PIAs is that there was not only no ommission to elevate inentives to sell and properly manage the produt, but the MFIs were atually subsidised for the salary of these staff members for a period of six months. It was argued initially that MFIs would not partiipate in the program without suh a subsidy. After the fat, one of three With a skewed inentive struture and virtually no aountability, training was not effetively utilised. MFIs visited noted that they would have partiipated without the subsidy. In fat, this rural bank was the most produtive and more effetive of the three visited. One of the three was still looking for more subsidies, and the other said they would not have partiipated without initial subsidies but would ontinue without them. Though the subsidy may have gotten more pilot test organisations to partiipate, their effetiveness is questionable. Many of the seleted PIAs, who were funded by the projet, spent little time atually working on the projet. This led to extremely low growth versus projetions. It was to an extent lear that most MFIs in the pilot had simply used the funds as a general operating subsidy. This was among the hallenges that the projet team had to grapple with and indeed a great lesson learnt. The projet evaluators suggested other ways in whih the funds ould have been utilised to improve performane in a system of aountability. Some examples inlude: - The projet ould have used the funds as an initial boost to an institutionalised inentive or ommission system designed for the insurane produts. This fund ould provide for a delining addition to the ommission to allow for an institution and its staff to build to a ore level of poliyholders that make the ommission signifiant. This would be entirely prodution based. - The funding ould have been used to provide signifiant one-off prizes for prodution. Maybe for the rural bank that sells the most, a television for their head offie, or for the PIA that sold the most an all expense paid trip. These an be highly effetive at inentivising people to sell, and ould be repeated on a quarterly basis, or sooner for lesser prizes. The key here is pay for performane. 24

25 Marketing Marketing effetiveness has to be adequately traked. The projet needs to understand what marketing has been effetive so that resoures an be hannelled to those ativities that are most effetive at getting ustomers to inquire about the produts. It was noted during the pilot test that staff were providing variable information to potential lients leaving some with an inaurate understanding of the produt they had purhased. In some ases, as with the return on the retirement pakage, PIAs simply invented an answer. This was not good for an insurane produt. Effetiveness The proess of new produt development with this projet has been mostly exemplary. The proess itself has been followed, until the pilot test, in a very preise manner with signifiant researh into market demand and supply. The tender offer proess was suessful, as has the transfer so far of the produt to GLICO. Expansion strategy After 2.5 years of projet implementation, GLICO has assumed a leadership role and full responsibility of the new miro-insurane produt. GLICO intends to involve a lot more rural banks/mfis in the selling of the produt in the oming years. However, based on lessons learnt, GLICO will hoose these agents more arefully to assure itself of the ommitment of board, management and staff, good standing of the bank, resourefulness, adequate failities, et. GLICO is now in a better position to make sure that they do not miss any step in their future business with the rural banks/mfis. For further referenes, onsult the following doument: Annex Q Testing protool Annex R Final evaluation report 25