Learning Journey. FINO Fintech Foundation

Transcription

1 Learning Journey FINO Fintech Foundation Leveraging technology-enabled banking agent distribution networks Contents Project Basics... 1 About the project... 1 Project Updates... 3 Key Indicators... 3 What is happening?... 4 Project Lessons On product development On distribution On technology Next Actions... 14

2 Project Basics About the project Poor financial literacy, lack of infrastructure and distribution channels, low business volumes and the availability of only few low-cost products have challenged the provision of microinsurance services to low-income households in rural parts of India. This project has sought to overcome these challenges by taking the following actions: The large existing network of banking correspondents has been used as a distribution channel, contributing to decreased distribution costs for the insurer and increased revenues for the banking correspondents. The Banking correspondents help in creation of a distribution channel by leveraging partners or own network across the country to deliver financial services on behalf of the banks to the under-banked population in urban as well as rural areas. They comprise of individual sales agents, (bandhus -friend in Hindi), local shops, loan branches and merchant outlets, such as money transfer agents. They are equipped with handheld devices connected to the central server to provide clients with multiple services, like opening a bank account, related banking transactions and government disbursements. A simplified, pre-underwritten hospital cash and personal accident product has been specifically designed for banking correspondents and sold to clients. A product that bundles hospital cash with telemedicine has been designed in order to respond to client needs and achieve significant take-up rates. A mobile technology based insurance training module has been developed to improve the understanding of sales agents about insurance. The insurer HDFC ERGO General Insurance Company, the distributor Financial Inclusion Network Operations Ltd (FINO), and the telemedicine service provider mhealth Ventures India and the research organization Centre for Insurance and Risk Management (CIRM) have joined forces to implement the project HDFC ERGO is an Indian insurance corporation. It has designed and underwritten the hospital cash product. The insurer is also responsible for seeking regulatory approval, arranging for necessary marketing support and developing and providing insurance training. Moreover, the insurer runs a call center to provide an additional point of contact for clients servicing. FINO has provided smart card based solutions to expand financial inclusion. It has established a network of banking correspondent which is present in remote rural areas in India and has a large client base. Their client base includes people who have no frills savings accounts (NFSA- no minimum balance requirements). The client base also includes participants in government disbursement activities, such as those related to the National Rural Employment Guarantee Act (NREGA). This program guarantees people who are at a productive age and unemployed 100 days of employment when they participate in government programs, such as the building of roads. Given that many of the participants do not have a bank account, the banking correspondents transfer wages from the government to the client. A few banking correspondents are already experienced in distributing insurance. They have sold a standalone simple personal accident insurance. In the financial year of the banking correspondents sold Learning Journey: March

3 over 200,000 policies of the standalone personal accident product nationwide; and in they sold some 110,000 policies. CIRM is the research partner for the project. The project is expected to provide valuable insights into the advantages and challenges of distributing insurance through banking correspondents to reach out to remote areas, using mobile technology to train agents and give more updated product information, and offering hospital cash and telemedicine services to deliver client value and stimulate demand for insurance. Therefore, CIRM conducts market analysis and impact evaluation studies to generate, synthesize, develop and share lessons from the project s experience. Project Summary Project Name: FINO Project Start Date: September 2011 Duration: 40 months Country: India Product: Hospital Cash, Personal Accident and Bundled Product incorporating Telemedicine with Hospital Cash Learning Journey: March

4 Project Updates Key Indicators Product details: Details ILO HospiCash 260 HospiCash 350 ILO MD HospiCash 400 Premium (Rs) 260/- 350/- 400/- Age Band 18 to 60 years 18 to 60 years 18 to 60 years Validity One Year/365 Days One Year/365 Days One Year/365 Days Sum Assured -Accidental 100,000/- 100,000/- 100,000/- Death Benefit Sum Assured - 100,000/-* 100,000/-* 100,000/-* Permanent/Partial Disability Benefit Hospital Cash Benefit Rs 750 for 7 Days and deduction of 1 day Rs 750 for 10 Days and deduction of 1 day Rs 750 for 7 Days and deduction of 1 day Other Benefits NA NA Unlimited call to a qualified Doctor for medical consultation. Incentive Bandhu Rs 25 Rs 25 Rs 40 Incentive BC Rs 2 Rs 2 Rs 4 Incentive-DC Rs 3 Rs 3 Rs 1 * also see table of benefits for disability cover below Table of benefits for disability cover The disablement Compensation Expressed as a Percentage of Total Sum Insured 1) Permanent total disablement 100% 2) Permanent total loss of two limbs 100% 3) Permanent total loss of sight in both eyes 100% 4) Permanent total loss of sight in both eyes 100% 5) Permanent total loss of sight of one eye and one 100% limb 6) Permanent total loss of speech 100% 7) Complete removal of the lower jaw 100% 8) Permanent total loss of mastication 100% 9) Permanent Total Loss of the central nervous 100% system or the thorax and all abdominal organs resulting in the complete inability to engage in any job and the inability to carry out daily activities essential to life without full time assistance 10) Permanent total loss of hearing in both ears 75% 11) Permanent total loss of one limb 50% 12) Permanent total loss of sight of one eye 50% Learning Journey: March

5 Sales financial year Location HospiCash 260 HospiCash 350 Total Jaunpur Chandauli Jalgaon Mau Varanasi Total Sales financial year Location HospiCash 260 HospiCash 350 MD HospiCash 400 Total Jaunpur Mau Chandauli Sangli Kolhapur Mumbai Suburban Satara Yavatmal Varanasi Total What is happening? Phase 1 - September 2011 to February 2012 A feasibility study was carried out by mhealth to analyze the interest of FINO s clients in telemedicine and their willingness to pay for insurance. The findings highlight that clients are unwilling to pay more than Rs 500 for insurance. Among the surveyed, 27 per cent consider a premium of up to Rs 250 as appropriate and 39 per cent said that they are willing to pay between Rs 251 and 500. Premiums in excess of Rs 500 were only accepted by a minority of the clients. The results also show that clients are interested in telemedicine, since 9 out of 10 clients said that they are interested in the doctor on phone concept. The project s hospital cash product - HospiCash 350 has been designed, while taking feedback from various stakeholders into account. While considering the findings of the willingness to pay analysis, the product was priced at Rs 350. Its benefit package includes a hospital cash benefit covering 10 days of hospitalization at Rs 750 per day; and it also includes accidental death coverage of Rs 100,000 and permanent disability coverage of Rs 100,000. The hospital cash benefit was initially designed to cover 30 days of hospitalization at Rs 250 a day, but based on feedback from hospitals regarding hospitalization expenses and average days of hospitalization, and the field officers, the number of days covered was reduced and the per day limit increased. Learning Journey: March

6 The district of Varanasi in Uttar Pradesh has been chosen as the first location, where the product will be launched. Regulations require FINO to acquire a corporate agency license in order to be allowed to sell an insurance product. Regulator defined process are being followed for getting this license. Once FINO has acquired this license, it will launch the sale of the product. Phase 2 March to August 2012 System integration between FINO and HDFC ERGO was advanced, so that real time acceptances of policies could be done. The software for distributing the Hospicash 350 product through mobile technology and POT machines has been put in place. mhealth has also developed a web interface for the telemedicine service, discovering that the software is so far not able to capture and update the contact numbers of clients. Thus, the web interface will be upgraded during phase 3. The launch of the telemedicine service has been prepared. CIRM met with villagers and banking correspondents in July to discuss the benefits and potential challenges of a product that bundles insurance with telemedicine. The discussions with villagers highlighted that they would welcome telemedicine to improve their access to healthcare, since they are often unsatisfied with existing healthcare services. For example, in Chowka - a village in the district of Varanasi - a small private sector clinic provides villagers with healthcare services. Yet, the clinic s staff has no medical qualification and lacks experience in primary healthcare. The unqualified medical personnel in villages also pose a challenge to the project because they complicate the verification of claims. HEGIC and FINO have designed and implemented product and process training modules for the hospital cash product which does not include telemedicine (HospiCash 350). The first round of training started in July, educating 330 banking correspondents in the Varanasi district in Uttar Pradesh about the product and processes. The training material has made use of comics and examples to support the banking correspondent s understanding of the product and processes. After training sessions, banking correspondents took part in a role play to demonstrate that they are well equipped to distribute HospiCash 350. The role play highlighted that banking correspondents tend to portray insurance as an investment rather than a security net, which is likely to contribute to low renewals when then investment does not pay off (when no claim is submitted). Consequently, training modules will be redesigned to ensure that banking correspondents have an adequate understanding about insurance. In addition, training sessions have also been provided through mobile phones. These provide refresher training and an opportunity to the bandhu on the ground to test his understanding of the product and processes. Any updtaes on the product are also provided through the mobile phone.. An example of the mobile training module is illustrated in the graphic below. By August 2012 FINO had received regulatory approval for a corporate agency arrangement to distribute insurance products, so that HospiCash 350 was launched in Varanasi. After selling approximately 40 policies in one month, it was recognized that the management information system did not generate reports, leading to problems in data sharing between FINO and HDFC Ergo. Learning Journey: March

7 Consequently, these operational issues needed to be resolved and sales only restarted in December In December, the HospiCash 350 was also launched in the districts of Surendra Nagar (Gujarat) and Jalgaon (Maharashtra). The research design for evaluating the project has been modified. The impact of telemedicine on claim ratio will now be evaluated in Uttar Pradesh and the impact of telemedicine on renewals will be evaluated in Maharashtra. Furthermore, it has been decided that telemedicine will be randomly provided free to half of the clients, so that price differences do not result in selection bias in evaluating the impact of telemedicine. Phase 3 September 2012 to February 2013 Training sessions for the distribution channels have continued to take place. As part of these sessions, feedback about the product and processes was again gathered from banking correspondents. The sessions confirmed earlier discussions with banking correspondents, highlighting that they appreciate the client value of the product. The product design of the telemedicine service has been finalized. The product has been named Mera Doctor (which is Hindi for my doctor). It provides clients with unlimited calls to a qualified doctor for medical consultation. It has been priced at Rs 150 (USD 3) and the premium of the HospiCash product was changed from Rs 350 (USD 7) to Rs 260 (USD 5.2) in order to bring down the price of the bundled product to Rs 400 (USD 8). This is expected to contribute to increased acceptability of the product by the target market. Regulations have made it impossible to offer a composite product by the insurer, so that insurance and telemedicine have been bundled at FINO s level. For this purpose, a new product has been created - MD HospiCash 400. Learning Journey: March

8 Marketing material for MD HospiCash 400 has also been created, which includes a single page leaflet with product features for hospital cash and telemedicine. The marketing material will be distributed among banking correspondents. However, due to systems issues, sales continued only for the hospital cash product. In January, the product with the reduced premium HospiCash 260 was launched in Jaunpur and Chandauli. Systems have been updated to remove deficiencies that had been reported in the earlier phase. First, the planned upgrade for the web interface for telemedicine has been completed my mhealth. The interface is now able to capture and update clients contact numbers. Second, the claims processing system has been modified to enable shorter turnaround times. This was necessary because timely claims processing emerged as a major challenge for the project. (In the Varanasi district there was a delay in claims settlement of almost 4 months, mainly due to a delay in claim intimation and the physical transfer of claim documents from the villages to the insurer). The new system enables FINO to directly generate claims registration in order to avoid delays in claim intimation. Claim documents are now also digitized, so that they can be more quickly transferred to the insurer. FINO expects that these changes will facilitate quick claims settlement and reduce turnaround times. Phase 4 (March August 2013) A total of 575 policies were sold during the financial year The HospiCash 260 product accounted for 255 sold policies and the HospiCash 350 product accounted for 320 sold policies. The sales performance has lagged behind expectations and has not reached the sales volume of the standalone personal accident product which has also been distributed by banking correspondents. FINO assumes that there are three major explanations for this: First, the hospital cash product is more expensive (Rs 260 and Rs 350) than the standalone personal accident product (Rs 100). Second, fewer government disbursement activities have taken place. Therefore, clients have found it more difficult to afford the product, which has contributed to lower take-up. Third, hospital cash is a more complex product than personal accident insurance and banking correspondents may have found it more difficult to convince clients about the product s benefits. FINO has employed two new instruments to raise awareness about insurance and telemedicine and promote sales health camps and independent sales promoters. In cooperation with HDFC and local hospitals, FINO organized and held health camps at 3 locations in Uttar Pradesh for 6 days. FINO has also decided to introduce independent sales promoters, who accompany banking correspondents, helping them promote and sell the bundled product. The allocation of additional sales staff was triggered by the poor sales performance of banking correspondents in the districts of Jaunpur, Chandauli and Mau. In these districts banking correspondents only sold 31 policies within the first two months after the product s launch Learning Journey: March

9 during phase 3. The allocation of additional staff to Jaunpur, Chandauli and Mau has contributed to increased take-up. In May the MD HospiCash 400 product was launched in Maharashtra in the districts of Jalgaon, Sangali and Yavatmal. Loan branches have been chosen as the distribution channel for the product. Initially, the districts of Thane and Raigarh were chosen as locations for the product launch; but the lead bank in these locations has not allowed cross-selling of insurance. Thus, the product was launched in Jalgaon, Sangali and Yavatmal. The enrolment software needed to be modified to enable the distribution of the bundled product. The changes were first made for the POT machines and then for mobile devices. Given that loan branches only use mobile phones, they needed to wait until changes to the software for mobile devices were completed, which delayed the launch of the bundled product. FINO has decided to replace the POT machines of all its distribution channels with mobile phones. One problem of the POT machines is that they impose a daily cash limit for loan branches, meaning that loan branches can only sell a limited number of policies per day. As a result, loan branches were forced to send clients back home and ask them return on another day. A further advantage of mobile phones is that they send instant text messages to clients as compared to POT machines which require sales agents to manually send messages to clients. The training of banking correspondents has continued and incentives for selling the product have been increased from Rs to Rs It is expected that the increased incentives will contribute to an increased take-up. The product that bundles hospital cash, personal accident and telemedicine (MD HospiCash 400) has been launched in Kolhapur, Chandauli, Mau and Jaunpur, while the distribution of HospiCash 260 and HospiCash 350 has continued. Although it is still too early to evaluate the impact of telemedicine, the increased take-up made it possible to launch the survey for impact evaluation of hospital cash in Uttar Pradesh. Clients were asked about general household details, healthcare utilization, health status, household income and consumption and use of financial services, and client acceptances of insurance distribution through banking correspondents. Unfortunately, the survey encountered two major challenges: First, the clients mobile numbers were not recorded at the time of sales, so that banking correspondents from the villages have been contacted and asked to locate the respondents. Second, several clients relocated, so that they had to be dropped from the study. However, 610 clients from 203 villages could still be interviewed. The surveys results are expected to be presented during the next phase. Phase 5 (August December 2014) After a lot of re-thinking and realignment of systems and sales locations, a bundled product was launched initially in one district of Maharashtra through 30 bandhus in June The product bundled hospital cash insurance with a telemedicine service. Through the telemedicine service, the customer could call a number, describe his or her symptoms and receive advice from a qualified doctor over the phone. The service, called Mera Doctor, is available 24/7 and is operated by mhealth Ventures India Private Limited. Reportedly, there was good response to the idea of telemedicine. However, actual sales Learning Journey: March

10 took some time to pick up and up to January 2014 only about 1,200 policies had been sold. The reasons for low sales include: a) New product: Telemedicine is a new product and unfamiliar to the potential customers. Skepticism about service quality among prospective clients is a big challenge. b) New service for the delivery channel: The bandhu channel had up to that point only provided bank accounts and simple financial transactions in villages. Telemedicine is a different kind of offering, and it takes time to build the credibility of bandhu to offer healthcare services. c) Technology: New product had to be added to bandhu s front end software with an additional field to capture customer s mobile number (needed to activate telemedicine). In the initial phase of the launch, this part of the system was still being tested, which caused a loss in momentum for sales. FINO also plans to provide these services to its bandhus, Centre Manager and Branch Manager and therefore make them customers of insurance. They hope that their own experience of the service will help them build trust in it. Learning Journey: March

11 Project Lessons On product development Gathering feedback from various stakeholders provides valuable input for product design. Taking into account the opinions of clients, hospitals and other stakeholders has enabled the project to improve client value being offered. Initially, a market analysis survey was conducted, which also included questions about the clients willingness to pay for insurance. The findings highlighted that clients would be unwilling to pay more than Rs 500 for insurance, so that the none of the subsequent products (HospiCash 350, HospiCash 260, MD HospiCash 400) has had a premium in excess of this amount. Moreover, the product was initially designed with a benefit covering 30 days of hospitalization at Rs 250 a day. But feedback from hospitals suggested that coverage of 10 days of hospitalization at Rs 750 is more appropriate. On distribution Using role plays during training sessions for sales agents helps identify misunderstandings of sales agents. The training modules required banking correspondents to take part in role plays to demonstrate their adequate understanding of the product and processes. These role plays demonstrated that agents tended to sell insurance as an investment rather than a security net. Given these findings, training modules and marketing materials have been redesigned, ensuring that the concept of insurance is properly explained. Training agents should focus on the key message which should be delivered to clients. Training for distribution channels is usually concerned with sales techniques and insurance. The experience of FINO illustrates that it is important that training sessions should focus on a key message a punchy line - which sales agents should deliver to clients. As previously mentioned, some banking correspondents sold insurance as an investment, while the concept of a security net is more representative for insurance. Therefore, FINO has sought to put across the message that insurance is an insurance net in its training sessions with the objective of avoiding mis-selling. Upfront commissions can be more attractive for agents, since they help them cover their daily expenses. Commissions are a major incentive to motivate agents to sell insurance. The project began with commissions which were paid up front, enabling agents to collect their commission from the premiums and forward the remaining amount to the insurer. Then the decision was made to require agents to forward the entire premium to the insurer and receive commissions at the end of the month with the objective of verifying and validating premiums first before disbursing commissions. The problem with this approach is that agents require small commissions to meet their daily expenses, so that the monthly payments are less attractive for them. Hence, the incentive mechanism was again changed to up front commissions in order to provide sufficient incentives for agents. Linking up sales for insurance with the disbursement of other government activities contributes to increased take-up. Banking correspondents have provided multiple services to their clients, including disbursement of government activities. These government activities have encouraged clients to seek the service of banking correspondents, while also providing clients with the financial means to purchase insurance. Prior to the project s launch, these activities contributed to significant take-up for a standalone personal accident product. Yet, fewer government disbursement activities have taken place since the project has started, impeding the hospital cash product s take-up. Learning Journey: March

12 Banking correspondents are good at distributing simple products, while finding it more difficult to sell more complex products. Banking correspondents have distributed a standalone personal accident product, which has achieved scale. Yet, they have so far not managed to sell significant volumes of a hospital cash product. FINO assumes that this is partly related to the increased complexity of hospital cash in comparison to personal accident insurance. FINO also plans to provide these services to its bandhus, Centre Manager and Branch Manager and therefore make them customers of insurance. They hope that their own experience of the service will help them build trust in it. Long turnaround times for claims do not only cause dissatisfaction among clients but also among sales agents. It is well known that long turnaround times for claims undermine client value of health insurance. But the project has found that long turnaround times also discouraged banking correspondents to sell insurance. Two banking correspondents reported that they had stopped selling insurance due to pending claims, although there was demand for the product. In interviews they said that their sales performance strongly relies on whether clients perceive them as credible and trustworthy. Consequently, they feared that long turnaround times could undermine their credibility and trustworthiness, so that they were less willing to distribute the product. Basic processes for the distribution channel need to be tested and refined. The experience of FINO highlights that it is highly problematic to rush into a project without testing and refining processes. Distribution channels can facilitate enrolment, premium collection and claims processing; but they fail to unlock this potential when processes are not tested and refined. For example, the claims settlement process was not piloted and some clients experienced long turnaround times. When the process had been tested, the lack of accountability for claim intimation and the long duration for transferring claim documents from villages to the insurer could have been identified and solved. Similarly, loan branches have used POT devices for selling policies. But these devices could only handle premium collections up to a certain cash limit. This forced sales agents at loan branches to send clients back home and ask them return on another day.. Only after the long turnaround times and the adverse consequences of daily cash limits were identified in practices was FINO able to refine its processes to improve client value and efficiency. Poorly designed processes also undermined the research dimension of the project. The clients mobile phone number was initially not recorded during the enrolment process, so that clients could not immediately be interviewed for an impact evaluation study. Instead, banking correspondents were required to locate the clients. First-hand experience can be critical for adoption of a new service like telemedicine. However, it is not really possible to arrange a demonstration for every client. Therefore, Fino found that holding a camp to allow potential customers to experience the product or service was an effective method to support sales. There was a spurt in enrolments when such camps were conducted. About 400 policies were sold as a result of such activities. Agents also reported that when a village elder bought the product, this helped persuade others to do the same. On technology Mobile technology based training is beneficial but not sufficient on its own. Mobile technology can facilitate cost-effective training. Designing and implementing mobile training modules has indeed helped FINO educate its sales agents about the product and processes. However, the feedback of banking correspondents highlighted that physical training is still required in order to help sales agents grasp the Learning Journey: March

13 concept of insurance. Thus, FINO has used mobile training as refresher training for agents, while physical training is provided for introducing agents to insurance and telemedicine. Technology enables streamlined processes. The project s delivery of client value was initially undermined by long turnaround times of up to 4 months but employing technology made it possible to improve the claims settlement process and reduce turnaround times. First, a module for electronic claim intimation was developed and implemented, enabling the automatic registration of claims. This established accountability for intimation and avoided delayed caused by manual intimation. Second, the physical transfer of claim documents from villages to the insurer used to take time and resulted in long turnaround times. But digitizing claim documents accelerated this process, contributing to shorter turnaround times. Aligning and simplifying processes to account for on-ground conditions helps in building trust by improving customer experience. As part of this project, a number of process changes were introduced with two objectives: a) Improving customer experience: Servicing customers in remote rural areas is a major challenge for any insurer. As insurance business is affected by customer s trust, it is important that overall experience of the customer is improved. FINO and HEGIC achieved this by simplifying policy origination and claim settlement processes. The shift from physical copies of proposal forms and claim documents to digital copies has decreased the turnaround time considerably, which directly affects customer s satisfaction with the insurance product. b) Improving efficiency of business practices: Insurers face major challenges in managing data and cash flow from rural areas. This is especially true for microinsurance policies, for which premium amounts are small but insurers still have to collect all the information required to meet the regulatory conditions. In this context, FINO s presence and use of technology has provided HEGIC a platform to provide its services. Integration of FINO and HEGIC s servers enabled seamless sharing of data, decreasing the processing time in policy origination and booking. Similarly, the innovative cash management process in which FINO deposits a fixed amount with HEGIC to start policy sales has also reduced the challenges inherent in managing small premium amounts from rural areas. Sales agents in rural areas prefer using mobile phones over other technologies. The bandhus use two types of devices for insurance sales, point of transaction (PoT) machines and mobile phones. Bandhus were asked to compare these two on various parameters. The results are below: Parameter Mobile phones PoT machines Ease in typing 66% 34% Screen size 47% 53% Battery backup 80% 20% Network connectivity 79% 21% Ease in carrying 66% 34% More frequent Service failure 31% 69% Source: CIRM survey Mobile phones are preferred on almost all parameters, with 66 per cent of bandhus reporting that it is easier to type on mobile phones. Similarly, 80 per cent preferred mobile phones for their battery backup Learning Journey: March

14 and network connectivity, and the majority also found them easier to carry. It can also be observed that 69% of bandhus reported that PoT machines face more frequent service failure. Screen size is the only parameter where PoT machines are marginally preferred over mobile phones. These findings make a convincing case for the transtition to mobile phones for insurance sales. Learning Journey: March

15 Next Actions FINO will continue to improve on ground processes to sell the bundled hospital cash and telemedicine product both through the bandhus and at their branches. Renewals of the product will also be tracked. Since the product is new and unfamiliar, clients are skeptical about the quality of the service without experiencing it and usually request a demonstration. Although this is not possible for all individual sales, further mass demonstration through camps is planned to help improve understanding of the product. Learning Journey: March