Know Your Customer (KYC) is a much-used mantra for insurance companies, but more recent developments in behaviour change insights, nudge theory, empathy building, design thinking, and lived experiences may leave you somewhat bewildered. If you were wondering how this applies to you, the recent MiN Expert Forum putting customer research under the spotlight is a good place to begin.
“There was an idea prevalent in insurance that we were the experts. We had to let go of that and admit that we really didn’t know anything about the lives, experiences, and struggles of our customers,” says Geric Laude of Pioneer Life in the Philippines. “We had to go out and immerse ourselves. It started by just talking to people, but now we have a programme where staff stay with the families of clients so they can live their lives.”
Old-fashioned, top-down product development and roll-out simply won’t cut it anymore. As Steve Jobs said, “You’ve got to start with the customer experience and work back to the product, not the other way around.” Or as Siani Malama of APA Insurance in Kenya told the forum, “I don’t like the word product, I prefer to talk about solutions which address the needs of customers. Too many companies design products in the boardroom without engaging the views of the people they are trying to serve.”
But how do you engage those views? Demand-side studies aimed at understanding customers’ needs – and providing services to fulfil them – are one part of the picture, but there is no ‘one size fits all’ approach and there are barriers to undertaking these successfully.
Aside from this, genuine understanding only comes from personal experience. “You can ask questions or do multiple choice surveys, but it is not until you start having those in-depth conversations that some of the more nuanced insights start to surface,” said Bert Opdebeeck, Founder of Microinsurance Master, who moderated the Expert Forum, and is a long-time champion of customer centricity. “You need to build a conversation, and that’s tricky because you need to build it on the answers you are getting. A lot of microinsurance companies quickly default to a survey.”
There are any number of customer insight consultants offering different ways of getting under your clients’ skin. According to 17 Triggers, a ‘Behaviour Change Lab’ based in Cambodia and South Africa, “After a few too many broken projects, we realised what was missing – no one was looking at projects from a user or system perspective.” 17 Triggers’ Tyler Tappendorf told participants at the forum that one of the most common mistakes microinsurance companies make when carrying out market research is to dive in with questions before making sure that customers are comfortable. “Don’t go in with a pitch. Having a conversation and getting to know more about their lives first is important,” he advised.
Putting a digital twist on traditional market research are companies such as Freshly Ground Insights Africa, who are pioneering the use of mobile and online data collection quickly and relatively cheaply, reporting that it has no impact on quality. Another up-and-coming data provider, Africa Eye, has made its name in FMCG insights but is moving into hospitals, pharmacies, and financial services – all of which are of interest to microinsurance companies.
That’s not to say that conventional market research no longer has a place in KYC. “Knowing your customers better is key for a business to succeed,” says Ovia Tuhairwe, CEO of Radiant Yacu Microinsurance Company in Rwanda. “But how can we get to know our customers? It all starts with market research. Through market research we get to know the problems faced by our market segment. Customer research is key.”
Collecting in-depth customer insights, however, can be costly – sometimes out of the price range of small inclusive insurance start-ups and established players alike. The MiN’s recent country workshop in Kenya, for example, heard that insurers in that country are often reluctant to invest in market research, while pooling costs and knowledge between several companies – all of whom would benefit from the data – is also seen as a competitive risk.
One answer could be for donors to step in and fund customer research, as happened with What People Want: Investigating Inclusive Insurance Demand in Ethiopia – a report on a scale rarely seen in the insurance industry with 3,000 household surveys, 32 focus groups, and countless follow-up interviews, authored in 2018 among others by MiN members Michael J. McCord and Katie Biese of the MicroInsurance Centre at Milliman and Craig Thorburn of the World Bank Group. “Many companies say taking the time and effort to understand your customers thoroughly is too expensive. But if a product doesn’t work well, it’s usually because the company doesn’t understand the customer. If you launch a product without doing the research, it’s going to fail, it’s going to pollute the market and customers won’t be served well,” Thorburn told an Expert Forum last September.
“The most useful demand-side studies I have found originate from local or national governments commissioning the reports in the first place,” says Shamim Ashraf, a Consulting Senior Actuary. “Conducting these reports from the bottom up, starting with what are the risks and needs that insurance needs to tackle in the first place – what are the worries that keep people up at night?”
Insurers, authorities, and civil society organisations could also look at buying off-the-shelf customer insight data – for example, Finscope from FinMark Trust, which includes “low-cost mobile data collection capability, geospatial solutions, [and] a data portal housing numerous financial inclusion data.”
Nigel Bowman, an expert actuary, inclusive insurance consultant and long-standing MiN member indicates there are also other ways around this information gap. “Use data from a different country, a different market segment – or both – and apply judgement to adjust pricing assumptions,” he suggests, whilst emphasising that significant experience is usually needed to adjust appropriately. “Publicly available population data can be used by someone with experience to ensure relevance to the product being priced and the target market segment.”
There are many different KYC approaches, and no one model fits all requirements. But it’s clear that across all regions, a lack of customer insight data hampers the ability to accurately price inclusive insurance products – with a knock-on impact on uptake. As the ILO’s Microinsurance Pricing Guide points out, “In some countries, even mainstream insurance data is not available due to lack of insurance market …programmes often face the difficulty of collecting quality data due to lack of management information systems.” However, Bowman is undeterred. “I’ve often heard it mentioned that certain products cannot be developed because there is no data on which to price the risk,” he says. “My view is that this is a convenient excuse. There is usually some data available that can be used to make initial estimates.”
Putting yourself in your customers’ shoes, as Bert Opdebeeck reminded us, is the first step to offering inclusive insurance solutions which add value for vulnerable populations. As the MiN continues to advocate for a customer-centric approach – there will be a session dedicated to demand-side studies during our upcoming JMM – we would be interested to hear from anyone in the sector who has experience of demand-side studies (whether qualitative or quantitative), which could help develop our insights.