By invitation: Solène Favre explains how to tackle education and affordability issues

By Rishi Raithatha

Solène Favre recently joined the Board of Directors of the Microinsurance Network. Solène is the Global Insurance Director at VisionFund International and her work focuses on setting up insurance operations for microfinance institutions’ customers. As part of our ongoing learning series from industry leaders, we asked Solène about the changes she has witnessed in the microinsurance space, and her work on improving education and product affordability. 

You’ve been working in microinsurance for over 15 years – how has the sector changed?

There are now more accessible and tailor-made microinsurance products; providers are more perceptive to the needs of potential customers and are more open to personalising their services. Technology has played a crucial role in enabling faster processes and multiple distribution channels, meaning that products have evolved. This is especially true for health and hospi-cash products, which are industry mainstays. More innovative offerings, such as primary health services and crop insurance, have been successfully launched in some markets. This progress has been helped by regulators that have adapted regulations to better serve users.

VisionFund operates in Africa, Asia, Latin America and the Middle East. As you meet different needs in different markets, how does this affect your operations?

As an intermediary, we work with local insurance providers. A market’s maturity can determine how we design simple, affordable products that offer real value, such as health services bundled with a hospi-cash insurance product. Sometimes, achieving this can be challenging. However, our global experience allows us to apply examples from one country to another, to add value and educate insurers to take some risks, to go beyond what we need to do, and ultimately to create impact.

Much effort is still required to overcome distribution challenges. What are some of the best examples of distribution that you have seen from VisionFund’s markets?

We are less affected by distribution issues as we are part of them. Distribution via microfinance institutions (MFIs) has become less attractive than other channels: using MFIs is often more expensive than bundling with a telco. Further effort is therefore needed on client education to ensure a quality service, especially as we lend our brand to a partnership.

Distribution channels are fraught with risks. As a channel ourselves, we find that reputational risk is the most severe as we are close to the communities we serve. When they buy insurance, they see it as “VisionFund insurance”. This means we must ensure that the product will benefit the users and offer value. As part of this service, we also prepare educational materials for clients before we help launch it.

Based on your experience, what needs to be done to overcome some of the most pressing challenges the industry faces?

One of the main challenges is awareness and education: this remains a significant barrier to adoption. After 15 years in the industry, I generally see little progress in this area. When launching in new markets in remote areas, we use a comprehensive financial education curriculum. To make this work, we rely on communication that is simple and easy to understand – this is essential when educating communities on the concept and value of insurance.

Affordability is another important challenge. Despite more affordable premiums now, this remains the biggest barrier for the people we serve. One of our ways around this is to match innovative pricing models with users’ seasonal income. We recognise that for agricultural insurance, subsidies can play a role – but so too can bundling these products with savings accounts in some markets.

How is VisionFund’s work likely to meet or overcome these challenges?

Before implementing a product, we typically carry out a field survey to learn about the risks our communities face, their coping mechanisms, their insurance knowledge, their needs and their ability to pay a premium. We can then determine how to work with insurance providers. Ultimately, we bundle adjacent services that can offer a tangible benefit to users more frequently than what the insurance product might provide.

On education, we work with World Vision, our sister organisation, to reach underserved communities and educate them on how to use insurance and how it might benefit them. To lower costs, we are trying to implement products on an opt-out basis using the operational processes of our core products, such as loans. Our current processes ensure that field staff do not have a disproportionate workload and ensure good uptake. 

Opt-out brings volume that can drive growth while keeping premiums and administration costs low. This could also lead to more satisfaction as individuals may hear from friends or colleagues who have claimed. Word-of-mouth is an important way of promoting claims or services – this is something we monitor globally.

Significant resources are being devoted to improving climate resilience. What is required for microinsurance to succeed in improving climate-related outcomes?

Most of the products are very complex for smallholder farmers and distribution staff to understand and use. Trying to customise a product to a specific geographical location or type of crop can lead to a product with multiple premiums, and that might be harder to explain and sell. Premiums are often so unaffordable, that our MFI may not even be able to easily build into the loan. A simple and affordable product distributed using technology and with a training module to build capacity feels like the way to go, as with any microinsurance product. Microinsurance has a role to play in improving climate resilience – as long as these factors are considered.

Based on your experience, how has the regulatory environment for microinsurance changed and what more needs to be done for microinsurance services to grow?

Many countries have developed regulatory frameworks and standards for microinsurance sales and claims-handling processes. However, further efforts should be made to reduce capital requirements or product approval and licensing. This could reduce barriers to entry and lead to more microinsurance providers, which could result in better pricing and customer service. Some countries have strengthened consumer protection measures to ensure that products are fair and suitable for target users. Despite this, some still need to embrace a fully digital process that could reduce operational burdens and costs.