Presentation to the LOA
Meeting consumer expectations
Jeremy Leach, Executive Director
Independent trust formed in April 2002
Initial funding from UK‟s DFID
Mission of “Making Financial Markets Work for the Poor”
Facilitating and catalysing the next generation of
development around access to financial services
Poor people need financial
To provide a path out of poverty
So that a temporary misfortune
won‟t push them into destitution
But in addition:
A political and social priority
A priority for growth
HENCE it affects everyone
Why does access matter?
A picture of South Africa
Current usage in South Africa
Assumption 1: Insurers should be trustworthy
Ideal financial provider overall
Mashonisas / cash loan shops (2%)
Furniture/food/clothing retailers (1%)
Insurance companies (3%)
… therefore starting from a low base.
Consumer expectation 1: Trust
Assumption 2: Insurers will pay out for claims and 7
32% of respondents to FinScope 2004 say
they can not get their money on time.
Problem exacerbated by choice of language:
One woman stated: “If my husband dies
from a heart attack – that is an accident!”
“A fire that destroys my market stall and
no one else‟s is a catastrophe for me and
the insurance should pay.”
Consumer expectation 2: Claim
Assumption 3: Accessing insurance should be
Consumer expectation 3: Simplicity
Assumption 3: Insurance will deal with the risks I 9
cost R945 R2,289 R3,572 R2,693 R4,080 R8,737 R1,771
Source: Financial Diaries Project 2004 (www.financialdiaries.com)
Consumer expectation 4: Relevance
Assumption 5: My insurer will communicate with 10
me in the way I prefer.
But highest at LSM 6 to LSM 7
Electronic media is CURRENTLY not a popular
means of communication. But changing with 30% of
the unbanked having cell phones. Think MTN Bank.
Consumer expectation 5: Communications
BUT ITS NOT ALL BAD NEWS
It is also clear that that funeral cover is BOUGHT 12
Informal burial societies and stokvels also
do not meet expectations
“…. The ability to make informed judgments and
to take effective decisions regarding the use
and management of money.” UK National Foundation
for Education Research:
But what is the level in South Africa?
No clear answer. However,
– FinScope shows:
• Only 34% of respondents knew the correct word to
describe „annual price increases‟.
• Confusion on financial matters among banked is 45%.
• And among the unbanked it is at 61% .
Source: ECIAfrica 2004, FinScope
Getting to grips with financial literacy
Need to understand the Market
– Financial Penetration
– Attitudes Towards Money
• Financial Knowledge And Control
• Financial Discipline
– Physical Access To Banks
– Connectedness And Optimism
Towards a holistic measure – the broad
components of FinScope’s FSM
The Financial Summary Measure in practice
As well as predicting usage…
FSM 1-3 =
…it can assist in developing different
Source: ECIAfrica, 2005
In time of need: recourse?
IF you can find your way
In a nutshell. The simpler the better. If a product cannot be
easily explained to clients in a few sentences, it probably
will not succeed. Things to consider:
– Cover fewer eventualities more completely, instead of
many risks partially.
– Avoid loading policies with lots of riders and benefits that
are difficult to claim.
– Minimise the number of exclusions.
– Avoid contestability clauses so that pre-existing conditions
can be covered.
– Use technology innovatively to address market –
potentially linking with the innovators in the market to
– Support consumer education and consumer recourse.
Source: FinMark Trust & Opportunity International, 2005
What do consumers expect?
•Demand side information – FinScope /
•Working with regulators to assess regulatory
impact on access to financial services
•Opening up Assistance Business
•Support organisations in seeking new
dedicated bank licences