Parallel session 7 The business case for customer- centricity

Hosted by CGAP and Microinsurance Master

By Kay Tuschen This session hosted by CGAP and Microinsurance Master discussed four dimensions of customer centricity (see Figure 25): why becoming customer-centric is the first step; a customer-centric organisation listens to the customer; it designs insurance solutions from there; and it structures itself around customers and their evolving needs. The session also presented experiences from the market. Over the last few years, financial service providers have increasingly understood that customer-centricity is “not a fluffy concept, but a business model.” Microinsurance is an unknown product for most insurers, and low-income communities an unknown market segment. By developing a microinsurance offering centred around a good understanding of customer wants and needs, financial inclusion providers have demonstrated that customer-centricity is a viable business model that provides a high customer value. Customer-centricity: rationale and process Before applying any ideas of customer-centricity, every organisation needs to ask the question: “Why are we considering a customer-centric business approach?” The answer is twofold: customer-centricity provides value for customers as products are tailored to their specific needs. It also brings in value for the organisation: satisfied customers remain loyal and become the organisation’s best ambassador, thereby reducing costs and boosting profitability. Pioneer Microinsurance in the Philippines accredits its growth (to 18 million microinsurance enrolments) to a large extent to its customer-centric business model.

In order to become customer-centric, insurers need to “learn to unlearn” and become better listeners to their customers. The core of customercentricity is to understand the needs of potential customers and build insurance solutions from there.

Designing a customer-centric product is a constant and iterative process. It begins with building a prototype from customer insights, testing it as quickly as possible with targeted customers and adapting it further based on users’ feedback, and then starting the entire process again. It is customers who know their lives best – the insurer needs to adapt to this, not the other way around. To develop such an approach, an organisational structure centred around the customer is required. Microinsurance solutions are built from cross-functional teams that are supported by committed leaders. Customer-centricity will play an important role as inclusive insurance continues to evolve and develop. It means giving customers a positive experience in their interactions with the organisation, and making customer satisfaction an integral part of the organisational culture and values. As CGAP says: “Financial service providers should think of customer-centricity over the long term as a means to achieve higher returns from a larger number of customers while at the same time achieving social objectives through increased financial inclusion.“11

Figure 25 4 dimensions of customer-centricity

Why Learn Design Organise

Why go customercentric? How to learn from your customers?

How to design customer-centric solutions? What does it mean to become more customer-centred?

Experience from the market Womens’ World Banking finds that if a product is designed as customercentric to women, it will most likely be attractive to men as well, although this would not work the other way around. It underlines the importance of listening carefully to the heterogeneous group of customers. Nevertheless, using customer-centricity does not mean doing whatever a customer asks.

Pioneer Insurance has been operating as customer-centric for around three years now and one of its learnings is that there is a difference between the expressed and actual needs of a customer. To design the perfect product, the actual needs must be identified.

CGAP has been working with Pioneer Insurance and six other financial inclusion providers worldwide to distil lessons and best practices for customer-centricity. These are bundled in the online customer-centric guide: http://customersguide.cgap.org/ Lessons learnt

• A customer-centric approach to product design helps insurers understand the needs of prospects as well as customers.

• Applying customer-centricity brings gains in customer retention. • For starting the change to a customer-centric business model, the first step is to understand why it would be beneficial for the company. • When transitioning to customercentricity, it is helpful to have an autonomous cross-functional team in the company that can pilot and kick-start the process. • Developing a proper product requires iterative cycles – failure, requiring corrective action, is often a part of the process.

57 — Left to right: Lorenzo Chan, President, Pioneer Life, Philippines; Gilles Renouil, Director, Microinsurance, Women’s World Banking, United States

58 — Bert Opdebeeck, Founder, Microinsurance Master, Belgium, facilitator of the session

59 — Antonique Koning, Senior Financial Sector Specialist, CGAP, United States 57 58