> Posted by Camyla Fonseca, Knowledge Management Analyst, International Labour Organization

Remember when you were a kid, and your father lectured you about the value of money when you asked him to buy you the new videogame your friend just got for his birthday? You certainly don’t remember how much the videogame actually cost, but you can probably still hear your father’s voice saying money is hard to earn and shouldn’t be spent without caution. Your father may not know, but he used a teachable moment to transfer you some of his knowledge. These are instances when we are more likely to remember something because it was taught when we needed to use that information and hence were most likely to be engaged. A good teacher can leverage or perhaps even create teachable moments by adapting the lesson to the situation.

In the area of personal finance, teachable moments usually occur when someone is taking a financial decision or using a financial service. As a recent report published by the Center for Financial Inclusion notes, individuals are more likely to change their financial behavior or recall information if it is conveyed during these teachable moments. This insight has clear implications on the way financial education interventions are designed. Interactions that happen along precise moments in a financial service provider’s value chain may be more effective than traditional stand-alone classroom interventions. And, financial service providers, due to their repeated interactions with clients at crucial teachable moments, are in a unique position to contribute to financial capability efforts. Every customer touch point is a teachable moment.

The report also provides several examples of financial service providers leveraging such moments. In Zambia and in the Philippines, Microfinance Opportunities has seen positive results from partnering with financial service providers to leverage contact points with clients for education. Activities include, for instance, equipping agents with flip books that contain simple scripts and pictures to help them provide accurate explanations to clients. Juntos, a US-based SMS service, partners with banks to offer educational messages to low-income customers that are new to banking services. Initial messages are sent just after clients enrol to the service as if written by a friendly advisor, and as clients start to reply, the data is used to customize the SMS so that a useful and educational dialogue is created.

Insurance providers can adapt and apply such insights to the insurance domain. By embedding education components within their current operations, such as when conducting the sales of an insurance product, replying to a complaint, paying claims, or sending a renewal reminder, they can help customers to think about their needs and adopt more effective risk management strategies. In the case of index insurance, for example, the end of the season can be an appropriate opportunity to explain how pay-outs are calculated. Health insurers, on their side, can find creative ways of engaging with clients to transfer key messages when they are receiving health care.

An example of the potential of this approach is featured in a study carried out in Colombia by the Microinsurance Center and EA Consultants on a crop insurance product bundled on a voluntary basis with credit by the microfinance institution Crezcamos. As part of the study, loan officers were trained and equipped with a standardized approach to selling this complex product which involved a short educational video, a worksheet, key talking points, and guided answers to common client questions.

Qualitative interviews suggest that the approach had positive results in helping farmers to understand crop insurance. Immediately after viewing the video and hearing the loan officer’s explanation of the product, they could explain the basic features of coverage, including the events covered and the damage their crop must suffer to be eligible for a claim. Furthermore, a 23 percent take up was achieved, which is a good result for voluntary crop insurance sales. This suggests that with appropriate and informative sales tools, even farmers with low levels of education and knowledge of insurance can understand the main features of a relatively complex product and decide whether or not it fits their needs.

When surveyed a few weeks after the sales, however, most farmers that took part in the study did not recall important features of the product, while some forgot having bought an insurance coverage in the first place. A slightly better recall rate was shown by clients who were offered insurance together with their loan, which may suggest that conducting sales at the time of loan application, when farmers are thinking broadly about their investments, may lead to greater understanding and retention. Still, even in this group of farmers overall recall levels were low. These results reinforce the idea that an on-going support beyond the sales moment is needed.

It is true that insurance providers will always have an interest in increasing sales, but by responsibly leveraging customer touch points as teachable moments they can benefit from stronger customer relationships, reduced misuse, and better financial habits that may increase customer loyalty in the long term. As the access to insurance products increase, providers can contribute to the financial capability agenda through the responsible provision of this financial service.

Image credit: Accion

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