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Presentation to the LOA Convention 2005 - The Banking Association

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               Presentation to the LOA
                     Convention 2005:
        Meeting consumer expectations
                  Jeremy Leach, Executive Director
                                   FinMark Trust




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           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




                                                FinMark Trust
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           Poor people need financial
           services
            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?
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        A picture of South Africa

                                    Funeral:   16%
                                    Life:      11%
                                    Burial:    22%



        %




                    Current usage in South Africa
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        CONSUMER EXPECTATIONS:
             5 ASSUMPTIONS
          …..beyond affordability




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        Assumption 1: Insurers should be trustworthy


             Ideal financial provider overall
             Banks (52%)
             Micro-lenders (2%)
             Mashonisas / cash loan shops (2%)
             Furniture/food/clothing retailers (1%)

             Insurance companies (3%)

             … therefore starting from a low base.


                 Consumer expectation 1: Trust
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        Assumption 2: Insurers will pay out for claims and   7

        on time


           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
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                                 management
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        Assumption 3: Accessing insurance should be
          simple:




           Consumer expectation 3: Simplicity
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           Assumption 3: Insurance will deal with the risks I                              9

             care about




        Average
          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
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         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
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        BUT ITS NOT ALL BAD NEWS




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           It is also clear that that funeral cover is BOUGHT   12


           not SOLD




        Informal burial societies and stokvels also
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                          do not meet expectations
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        POTENTIAL STRATEGIES




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        Definition:
        “…. 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
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        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
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              components of FinScope’s FSM
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        The Financial Summary Measure in practice




                                   780,108
                                   (14.8%)




                         16,247
                          (0.1%)




                   As well as predicting usage…
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                                          FSM 1-3 =
                                          55% pop‟n


                          Sophisticated




                 Unsophisticated




        …it can assist in developing different
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                                   strategies.
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                      Source: ECIAfrica, 2005

        In time of need: recourse?
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          IF you can find your way
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        CONCLUDING THOUGHTS




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        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
              enable access.
            – Support consumer education and consumer recourse.


                               Source: FinMark Trust & Opportunity International, 2005
                        What do consumers expect?
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•Demand side information – FinScope /
Financial Diaries
•Working with regulators to assess regulatory
impact on access to financial services




                www.finmarktrust.org.za

•Opening up Assistance Business
•Support organisations in seeking new
dedicated bank licences
•SUPPORTING INNOVATION

				
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posted:4/12/2011
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