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 two percent, one of the lowest rates in the Pacific and globally. In addition, challenging geography and a lack of infrastructure often makes outreach difficult. That’s why, when the Life Insurance Corporation PNG 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 also an ideal partner for LICL due to the size of its congregation and network of churches throughout PNG. LICL and UCPNG first launched their United Life Insurance Plan (ULIP) in September 2017, a bundled insurance product with funeral and medical cover. However, the uptake was very limited.
To try in and increase customer uptake, LICL turned to the Pacific Financial Inclusion Programme (PFIP) for assistance in finding out why and how to address the problem. PFIP support was through grant and technical assistance.
Research amongst church members made it clear that two areas needed to improve to drive uptake: product design and process for administering the product. The research also illuminated a path forward. The church network could be used not only for outreach but also to raise awareness about the need for insurance and reinforce positive financial behaviour. The project delivered on three core areas;
- Redesign the ULIP product using customer centric design tools to enhance the value preposition for customers.
- Develop a robust and efficient insurance distribution channel to leverage on UCPNG’s vast network and proven cash handling capabilities.
- Piloting UCPNG to act as agent on behalf of formal financial service provider(s).
Untying the bundle
The project team started with the product redesign. The initial bundled microinsurance product cost PGK 127 (~ US$ 37), the majority of which went towards the premium, some into provision for long term 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 a reduced amount of PGK 100 (US$~ 29), PGK 90 of which goes towards the premium and PGK 10 for the customer to start a life of savings with MiBank. For this premium, the customer gets a medical coverage of up to PGK 1000 (US$ 290) annually. This policy is very unique as it does not have an upper age limit. Customers aged between 18 and 60 have a funeral insurance coverage of PGK 6,000 (~ US$1,740) and customers over the age of 60 have PGK 3,000 (~ US$ 870).
Changes were also made in the policy issuance and claim process. Whereas previously it could take a month for customers to receive their policies after signing up, leading to a lot of frustrations, the Turn Around Time has now improved considerably. The claim process has also improved with ULIP agents able to initiate the claims process for the customer from the agent point.
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 regular and committed members such as youth leaders were encouraged to become agents for MiBank (The partner financial institution). After meeting the eligibility criteria and undergoing the training, they could enrol customers 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.
One of the other objectives of the project was to address the low level of access to basic financial services in in the country. This was a motivating factor behind the project team’s decision to partner with Nationwide Microbank PNG Limited (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 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.
Learning during lockdown
As part of the project, consultants hired by PFIP were supposed to train agents and ambassadors of ULIP in order to build their capacity for sales, marketing and awareness. The training was to be conducted by the consultants through a face-to-face interaction with the different teams. This is where the challenges caused by COVID-19 began. The country went into lockdown and international flights were grounded and so the consultant could not travel into PNG. 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 to conduct the training virtually, using different technological tools. Therefore, this approach was trialed 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 had a group learning experience. As a result of these training sessions which also included leadership of the church many of the pastors and church leaders decided to buy ULIP, an indication that the leadership of the church believe in and understand the product and will encourage their congregation members to also sign up.
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.
© United Life Insurance Plan, Pidgin Productions