I am reposting this piece because I have seen so many efforts over the past two months to adapt and redesign our work in the face of COVID-19. All seems very well intentioned. However, I would like to emphasize that we ought to keep the client in mind as we come up with solutions. In particular, 1) what do our end-users want to learn? and 2) what channels and language are most effective to convey this? The capacity for people to understand financial products is generally very high. Often, what we think is lack of cognitive capacity is actually our own lack of cognition. if we dont think there is cognitive capacity, we may not be seeing the broader picture, the constraints, interests and contexts in which our clients live. Here's a story of Kevin to bring it to light.
Published January 2020. Microcapital Monitor, "Ear to the Ground" column
Over the past month, I have spent many days bouncing around towns in northern Peru and northeastern Colombia searching for insights into how to make insurance work for farmers who are increasingly vulnerable to climate change. One of my takeaways has implications not only for insurance, but for all of the work going on in the financial inclusion space. As the business models of financial services providers evolve, there is a growing need to bring customers up to speed by explaining new concepts, products and services.
In Colombia, we were testing out ways to explain parametric insurance to smallholder farmers. We discovered that farmer awareness of satellites is low. This isn’t terribly surprising - I don’t know the inner workings of a satellite myself. But to me, at least, it’s a familiar concept. Explaining to farmers that a satellite will help measure rainfall in their municipality, which will then trigger an insurance payout in case of excess rain or drought, is a challenge. Then convincing them that this insurance is a good thing to buy is even trickier, especially when they realize the same satellites are behind the weather predictions they are accustomed to hearing. Referring to weather forecasters on the radio, one farmer replies, “They always get it wrong.”
I tested out some visual explanations that I hoped would be simple and not intimidating. I mocked up drawings and tried personifying satellites. “Imagine Tony the Satellite,” I said pointing to a rough cartoon I had scribbled in my notebook. My audience, a woman who had just inherited a farm from her in-laws, listened politely with her 11-year-old stepson, Kevin. Kevin suddenly chimed in with some advice for us: “Don’t make your explanation childish, and always be truthful.” Point taken. There is no need to infantilize a young mother who is supporting her family by growing and selling coffee - or a man who has braved the forces of nature to draw from the earth enough to feed his extended family for over 40 years.
Instead of risking over-simplification with trite cartoons and cute nicknames, we need to do much harder work. First, we need to get better at explaining new concepts by identifying information asymmetries and responding with clear and realistic explanations, using only appropriate media. We should reconsider cartoons altogether, while we’re at it. Second, we need to improve our products. If we are tempted to gloss over product flaws in our sales conversations, it means we have a lot more work to do. We must innovate responsibly.
In the case of selling parametric insurance, “responsibility” might include owning up to the fact that satellites are not as good as humans at assessing damage. As such, there might be disadvantages when it comes to filing a claim on a satellite-based insurance product. Your farm may suffer from heavy rains, but if the rest of the region does not, you may not get a payout. It is essential to explain this “basis risk” as part of a responsible sales effort. While many researchers suggest basis risk is too complicated to explain to poor farmers, our experience is that it is merely inconvenient. Any effective explanation will reveal product flaws as well as advantages.
As Kevin wisely told me, “People want to hear the truth.” So those of us looking to deploy new ideas, products and services need to remember to be responsible by both being transparent and continuously striving to improve our products. That way, over time, there won’t be anything we are tempted to hide.