The lack of financial education is a major obstacle to insurance coverage for billions of poor people. Can puppets do the trick?
 | An audience in Tamil Nadu, India awaits a puppet theatre performance about insurance (Photo: Allianz) |
Puppet theater is not the most modern of artforms. But in India, it is being used to deliver a distinctly modern message - the benefits of insurance.
The plot is pretty straightforward: a poor household's top breadwinner dies suddenly, but the surviving family members avert devastation because they are covered by low-cost life insurance. While it's not the kind of parable one might expect from a village puppet show, it is a story that some development experts believe needs to be told many more times. Only 80 million of the world's 2.5 billion poor have insurance.
"Many of these potential policyholders have little understanding and experience of, or trust in insurance," says Richard Leftley of Micro Insurance Agency, an intermediary between insurers, microfinance institutions, and charities.
"We see education as a major building block in creating more widespread demand for the most appropriate and beneficial microinsurance products, and take-up will accelerate with a more informed market," says Leftley.
Microinsurance is low-premium risk management designed to protect the poor against risks to their health, their family's livelihood, and their homes. Michael J. McCord of the MicroInsurance Centre says that too often, the poor are not aware of the financial instruments to manage that risk, even when they are available.
"Market education should have the goal of preparing people in a mass way so that they have some understanding of what insurance is and how it works," says McCord. "But more importantly, how it can help them address the major risks in their lives."
 | Microinsurance Coverage (click onthe image to enlarge)Compare coverage in Asia and Africa |
"We have to help people bridge that link between ‘I need to figure out how to prepare to pay for health costs' and the conclusion that health insurance is the right way to do that," he adds.
Puppet theater is just one of many ways that insurers and microfinance organizations are doing this. Village meetings, street performances, or even adding new, insurance-themed lyrics to popular songs are other techniques used to boost awareness of microinsurance. One provider, AIG-Tata, has even produced a Bollywood-style video about the benefits of insurance, complete with singing and dancing.
According to Monique Cohen, president of Microfinance Opportunities, a non-profit research and training organization in the United States, it is not only important to make people aware of insurance, but also to tell them precisely how it works.
"There's promotion material, which a lot of people would like to pass off as education," says Cohen. "And there's the other side that addresses the more fundamental questions: "Why should I buy insurance?" and "What do I need to know before I buy insurance, i.e. what is the premium, how frequent are the payments, how does the claims process work, what is the payout?"
Consumer education, says Cohen, can guide the poor out of the "world of information asymmetry," where the seller - in this case insurers and microfinance institutions - discloses only what helps sell the product. A more transparent picture of insurance would help people choose it over the informal alternatives.
"There are a lot of reasons why people won't buy insurance," says Cohen. "When people don't have a lot of money, putting down money for something where the probability is unclear isn't going to be very exciting. In that sense, savings is more attractive. So it's not just about insurance about a product; it's insurance in relation to the alternatives."
But even after formulating a message about insurance, the next challenge becomes delivery. How do you reach the millions of uninsured people in poor rural villages? How do you reach the growing number of mobile banking customers - who can be anywhere - with consumer education? And who pays for it?
These are all questions and challenges facing experts seeking "massification" of microinsurance in the developing world - or expanding microinsurance coverage beyond the reach of microfinance institutions. Earlier this year, the Micro Insurance Agency committed a million dollars to client education programs in India, the Philippines, and some African countries.
More investment will be needed in such projects from insurers, governments, industry associations, or charities. As they gradually recognize that the poor are viable insurance clients, it is the poor that will need to be convinced that insurance providers deserve their money.
editor: Valdis Wish
publishing date: May 09, 2008
