Product design approaches for inclusive property insurance
There are a few different approaches to developing inclusive insurance solutions. In this blog we consider two such approaches, specifically as they relate to inclusive property insurance, and with reference to recent experience in Kenya. Regardless of the approach, what is clear is that the resulting solution needs to be based on the actual (rather than perceived) needs, priorities and preferences of the target market.
An appropriate product development process is critical for creating an inclusive insurance product. This helps ensure that the real needs of the consumer segment are carefully researched and that the resulting product is better understood and used. This is hard to achieve and so the process is usually iterative. A standard product development process has multiple steps which may vary depending on the type of product, target segment, mode of distribution (physical or digital), distribution partners and time to market. This includes:
- Pre-development phase, consisting of idea generation, idea evaluation and concept development
- Development phase, including business case preparation and product prototype
- Post-development phase, including test marketing, product launch and monitoring and evaluation
In the ILO’s partnership with Habitat for Humanity’s Terwilliger Center for Innovation in Shelter and Britam Kenya —to create property insurance products for the low-income segment — the steps followed were partially based on the above process. The pre-development phase included research to understand the property risks low-income segments in Kenya face and to understand their existing coping strategies, availability of insurance options in the market (in terms of products and distribution partners) and the existing challenges with the inclusive property insurance.
Based on the research findings, a few insurance ideas were evaluated and some concepts were developed, keeping the target segment, feasible distribution channels, affordability and simplicity in mind. Though the research established a need for inclusive property insurance in Kenya, additional research was needed to fully understand the situation and to get consumer feedback on the initial prototypes. Subsequent market research was conducted with possible distribution partners, such as banks, microfinance institutions and savings and credit cooperatives. Research with distribution partners is important to understand what motivates and benefits both the distribution partners and the beneficiaries. Based on the discussions and feedback, product prototypes were improved, including establishing the pricing and the claims processes. Two products were then piloted with some of Britam’s partners to gain experience and refine the products and processes before scaling them up.
In this approach, the starting point was to understand the overall market scenario, to identify the gap from the supplier side and then validate it with the targeted segment.
Over the years, insurers have often faced challenges with not meeting customers’ needs due to circumstances in the market, distribution partners or regulatory requirements. This led to low consumer confidence in insurers, which, along with other negative experiences, stopped consumers from seeing insurance as an effective risk management tool. This obstacle is even more pronounced in inclusive insurance, as the customer segment is more sensitive to such experiences due to poor understanding of the products and limited resources.
To address this challenge, the “Human Centred Design” (HCD) approach is recommended for developing inclusive insurance products. It is a problem-solving approach that primarily focuses on the user, identifying their problems and needs and finding a solution to address them. The HCD approach is an iterative and feedback-oriented process that brings clarity about the designed product, its processes and the overall solution to the problem.
As part of the project with Britam, the HCD approach was used to develope different initial product prototypes. In these cases, the research was done first with the client segment, for example, small business owners and micro-entrepreneurs. We would understand the risks they face on a day-to-day basis, their prioritization of these risks based on severity levels and frequency, property-related risks they face, their current coping mechanisms and their willingness to use property insurance to protect their businesses and dwellings.
Based on the initial findings, we defined problem statements and the probable cover options (risk covers) that may help them address their problems. Using further insights from discussions and deliberations with the client segment, a few product structures were designed with only specific risk events being covered, cover options and indicative premiums. The structures were then shared with prospective customers for their reactions and feedback. Based on their feedback the structures were refined to align them with the client’s requirements. This led to an iterative process of modifications and feedback until the team reached a stage where the clients, the insurer and distribution partners were comfortable with the proposed insurance solution. Noticeably, in this approach the primary focus is on the client’s need and other external and internal factors are dealt with later.
Both the standard product development approach and human-centred approach have their benefits and shortcomings; with the standard approach the products may undergo changes after the launch based on customer response and distribution feedback on processes. Meanwhile, with the HCD approach, the customer requirements have already been addressed before the launch, while the partner’s requirements may be addressed later.
What are the advantages of a standard development approach?
- Less time consuming
- Steps can be managed (altered/skipped) as per requirement
- Less dependency on distribution partners or target segment
What are the drawbacks of a standard product development approach?
- Supply side approach can be misleading
- Focusses more on external factors, such as market, competition and distribution
- May not prioritize client’s needs while focussing on external requirements
What are the advantages of a human-centred design approach?
- Better understanding of the needs of the customers
- May help in increasing customer retention
- Issues and challenges can be resolved from the root
What are the drawbacks of a human-centred design approach?
- Iterative and may be time consuming, especially for bigger organizations
- Difficulty in getting commitment from distribution partners and clients for iterations
- May ignore other external factors
While both the approaches have their own advantages and disadvantages, taking one specific approach will not necessarily ensure success of the product. The success of the product depends on multiple factors, some within and some outside of the insurer’s control, such as a changing economic environment and levels of financial education amongst stakeholders. Even just these two factors have implications on product affordability, the degree of process simplification needed and the distribution partner’s willingness to promote the product.
In addition to the above and from experience of this project to date, the HCD approach is helpful if there is a direct engagement with the end-clients by the insurer — this enables receiving their feedback first-hand. However, for cases where distribution partners are involved and the insurer is targeting their clients, it is equally important to get the distribution partner’s feedback.
The ILO’s Social Finance Programme organized a webinar “Scaling inclusive property insurance: Findings from market research in Kenya” on 14 December 2022, that explored the relevance and need for inclusive property insurance for boosting financial inclusion. Two Kenyan insurers shared their experiences and findings from their initial research in serving emerging consumers with inclusive property insurance.
This blog was written by Sarita Mohanty and Lisa Morgan.
