Explaining insurance: how to do it?

This is a guest post from Aparna Dalal, independent consultant and former FAI Director of Special Projects.

A new briefing note by the Microinsurance Network’s Insurance Education Working Group (of which FAI is a member) outlines emerging practices in risk management and insurance education. The note, targeted at practitioners, outlines basic principles that practitioners should incorporate into their education programs such as: 
1.    focusing on risk management and insurance content; 
2.    relating education to people’s risk exposure; 
3.    using a mix of channels and tools; 
4.    delivering ongoing education as opposed to one-time programs; 
5.    linking education with products; 
6.    leveraging existing institutions and pool resources; and
7.    incorporating monitoring and evaluation activities from the start. 

(For more information on these topics visit the consumer education thematic page on the new knowledge portal of the ILO’s Microinsurance Innovation Facility – registration required)

The note is largely based on the experience of practitioners, some of who presented their programs during a session on insurance education at last month’s microinsurance conference. The presentations provided a fascinating glimpse into the diversity of insurance education efforts and the challenges they face.  Here is a round-up of the organizations and topics:

•    GRET (health insurance education for garment workers in Cambodia) 
•    South African Insurance Association (community workshop, teacher development, and commuter awareness programs)
•    CARE India (life and livelihood protection through multiple distribution partners in India)
•    Microinsurance Academy (Treasure Pot game and Bollywood-style feature film)
•    CNSeg (community-based video shown in favela in Rio)
•    Microfinance Opportunities (radio campaign in Kenya) 

My sense is that while education may not be the single determining factor of whether a household purchases an insurance policy - price and relevance, for instance, play a big role - it may be the critical ingredient for sustainability. For an insurance product to be sustainable, clients must be retained. Clients will buy insurance for the second and third time only if they understand the product. For this reason, education is essential for first-time microinsurance clients so that buyers understand the principles of insurance, its application as a risk management tool for the specific risks they face, and the mechanics of the product they purchase.