July 21, 2020
By Rose Payne
The United Church of Papua New Guinea (UC PNG) is central to more than 700,000 Papua New Guinean’s lives. Aside from being a place of worship, it is a social centre, where members meet with friends and hear news from trusted community leaders. Many members attend several times a week. However, when COVID-19 forced Papua New Guinea (PNG) into lockdown they were forced to suspend all services and meetings. This created a problem for a project aiming to introduce bundled microinsurance to the church members.
PNG is a difficult place to launch a new financial service, let alone an insurance product. Insurance penetration is estimated to be under 2% of gross domestic product, one of the lowest rates in the world. In addition, challenging geography and a lack of mobile infrastructure can make outreach difficult. That’s why, when India’s largest insurance company Life Insurance Corporation Limited (LICL) decided to launch a bundled microinsurance product in PNG, they sought a partner to assist with outreach and distribution. The United Church of PNG was an ideal candidate due to the size of their congregation and their network of churches throughout PNG. They created a network of church members who could act as agents to sell the policies. However, despite the Church’s large membership and established channels of communication, the initial uptake was below expectations. LICL turned to the Pacific Financial Inclusion Programme (PFIP) for assistance in finding out why and how to address this problem.
Research amongst church members made it clear that two areas needed to improve to drive uptake: product design and limited understanding of insurance with potential customers. The research also illuminated a path forward. The church network could be used not only for outreach but also to raise awareness of the need for insurance and reinforce positive financial behaviour.
Untying the bundle
The project team started with the product redesign. The bundled initial microinsurance product cost 127 PGK (~ 37 USD), the majority of which went towards the premium, some into a pension product, and some into savings. This complex product design was unsuitable for the targeted customers, many of whom rarely, if ever, used formal financial services.
By simplifying the product design the project team made it more suited to the customer’s needs. Customers now pay 100 PGK (~ 29 USD), 90 of which goes towards the premium and 10 into savings. For this premium, they get a medical coverage of 1000 PGK (~ 290 USD). And Customers aged between 18 and 60 have a funeral insurance coverage of 6,000 PGK (~ 1,740 USD) and customers over the age of 60 have 3,000 PGK (~ 870 USD).
The product redesign also included a change in processes to issue the policies. Whereas previously it could take a month for customers to receive their policies after signing up, leading to a lot of frustrations, they now receive an SMS confirmation on their mobile phone as soon as their policy is issued.
How personal relationships reinforce positive financial behaviour
Aside from the product design, the team also looked at how they could extend the role of agents. Church members, particularly those in community leadership positions such as pastors, were encouraged to become agents for LICL. They could enrol customers, collect premiums, and liaise with LICL for customer support. This network of agents could also be used to educate potential customers, not only about the product features but also about insurance and savings in general. Known and trusted community members have the authority to persuade people to adopt formal financial services and, with the right training, will have the knowledge to educate them about a product so that customers remain engaged in the long term.
One of the other objectives of the project was to address the low level of access to basic financial services in PNG. This was a motivating factor behind the project team’s decision to partner with MiBank to offer customers the option to sign up for a savings account when buying the insurance policy. This allows customers to make regular savings deposits with a regulated financial institution and become familiar with more secure formal financial services in the process. This model, based on church savings groups, relies on the power of both convenience and interpersonal relationships to encourage usage. Evidence has shown that active participants in savings groups save more for a number of reasons, including peer pressure and regular reminders to save.
Convenience also influences how frequently people engage with financial services. Customers can make savings and withdrawals through the agent in a location they already visit frequently, which is important in a country with relatively few financial services access points relative to population. It’s vital they trust the agents as they are relying on them to handle their money.
Learning during lockdown
Agents, therefore, need to be properly trained. LICL are relying on their ability to educate customers about insurance and savings. If they are unable to build trust through a thorough knowledge of the product then customers won’t buy policies or use their MiBank account. This is where the challenges caused by COVID-19 began. The team had engaged an expert to begin training when the country went into lockdown and international flights were grounded. With the end of the project fast approaching, they needed to find a way to carry out training virtually.
The decision was made to use video calls, but with sub-optimal network coverage in PNG this could be a challenge on its own. Therefore, this approach was trialled in two places; Hela, a rural area in the Highlands, and Port Moresby, the capital and largest city of PNG. Churches in the two pilot areas had halls which usually held hundreds of people. The potential agents were separated into groups of 10-15. During the training, they were able to maintain distance but still have a group learning experience. As a result of these training sessions, many of the pastors and church leaders decided to buy a bundled microinsurance policy from LICL. And once the church members can meet again the project hopes that where they lead the members will follow.
By bringing financial services to a frequently visited location, delivered and explained by a trusted community-member, this project seeks to overcome the challenges presented by geography and lack of awareness of insurance in PNG. The church leaders have embraced this initiative even during the COVID-19 emergency; this bodes well for the future.