Ostraa - Overview
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- ostraa conducted research using human-centered design methodology to understand perceptions of risk and inform the design of their mobile-based micro-insurance product for low-income customers. - Interviews revealed that financially vulnerable customers are interested in risk mitigation products but barriers like cost, complexity, and access limit ownership. - Participants supported micro-insurance and provided insights that will help ostraa design messaging and features addressing real needs to test and launch an affordable product.
Ostraa - Overview
- 1. www.ostraa.com 息 ostraa Insights and Implications from an ostraa Research Venture Carolyn Hall McMahon & Elizabeth Tutella Straghalis January 2016 PURSUING INNOVATION IN AFFORDABLE INSURANCE: MOBILE NATIVE MASS MARKET MICRO-INSURANCE Abstract ostraa pursued a hybrid research initiative aimed at exploring perceptions of risk and chal- lenging assumptions in its product and distribution design. Using an intensive, human-cen- tered design methodology, the research team aimed to better understand peoples values, attitudes, and behaviors in relation to the problems they face and to gauge specific reactions to and suggestions for a new ostraa product offering. Researchers conducted in-person, in- depth interviews with the goal of achieving the following research objectives: The research revealed deep insights about peoples perceptions of risk and practiced mitiga- tion techniques. The data suggests strong support for the hypothesis that financially vulner- able customers are interested in owning risk-mitigation products. Practical design implica- tions, based on participants articulated fears and aspirations have set the stage for the test- ing and launch of a tailored product whose messaging and features address real, felt needs. An overwhelming customer familiarity with and demand for affordable insurance policies was both striking and promising for the future utility of an ostraa offer. 1. To specifically quantify and size the perception of risk; 2. To understand perceived risk hierarchies and desired benefits in low and moderate income households so as to inform final product design; 3. To understand the perceptions and challenges related to messaging around free insurance through a mobile device; 4. To quantify around which key indicators we will use on an on going basis to measure Impact.
- 2. Pursuing Innovation in Affordable Insurance | January 2016 CONFIDENTIAL REPORT www.ostraa.com 息 ostraa 2 3 4 10 17 19 TABLE OF CONTENTS Introduction ostraa: A New Social Venture A Need for Research Methodology: A Hybrid Approach Review of Literature ostraas Central Hypothesis I4 Methodology Human-Centric Design: A Rigorous, Qualitative Method I4 Methodology A Commitment to Social Impact Findings The Risk Game: Results Top Research Insights Perceptions Values Behaviors Product Design Recommendations Features Messaging Measurement Conclusions Validating Desirability, Debunking Barriers Questions for Further Research I4 Interviews in a New Geography Market Research A Larger Consumer Panel Pilot Test with Strategic Partners Appendix 3 3 4 4 5 5 6 9 10 11 11 11 12 13 13 14 14 15 16 16 16 17
- 3. Pursuing Innovation in Affordable Insurance | January 2016 CONFIDENTIAL REPORT www.ostraa.com 息 ostraa 3 INTRODUCTION ostraa: A New Social Venture ostraa is the first mobile native, mass market, micro-insurance company in the United States. Its goal is to harness the power of mobile technologies to offer prepaid phone customers new value added services that create meaningful social benefit for the customer and sustainable long term customer relationships for ostraa, partnering insurers and mobile operators. The model functions by delivering a suite of free insurance products to prepaid mobile phone users in return for the renewal of their plan. After months of enjoying free insurance, customers have the option to purchase more coverage at a discounted rate. ostraa pursued a hybrid, customized research initiative aimed at exploring perceptions of risk and chal- lenging underlying product assumptions. The research began with a thorough sweep of the existing competitive landscape. The research team conducted a desk analysis of program evaluations and mar- ket segmentation studies in the areas of financial capability and access, microinsurance, and mobile phone adoption and usage. Secondary sources were examined to determine current information avail- able on the topic of financially vulnerable households interest and take-up rates of risk mitigation products, specifically insurance policies. A Need for Research Still in its nascent stages, ostraa set out to conduct substantive behavioral economic and human cen- tered design research to address four primary issues. Research Objectives: 1. To specifically quantify and size the perception of risk; 2. To understand perceived risk hierarchies and desired benefits in low and moderate income households so as to inform final product design; 3. To understand the perceptions and challenges related to messaging around free insurance through a mobile device; 4. To quantify around which key indicators we will use on an ongoing basis to measure Impact.
- 4. Pursuing Innovation in Affordable Insurance | January 2016 CONFIDENTIAL REPORT www.ostraa.com 息 ostraa 4 METHODOLOGY: A HYBRID APPROACH Review of Literature A literature review focused on the perceived interest, access, and ownership of insurance as a risk-mit- igation tool in financially vulnerable households. Specifically, the research focused on both term and cash value (whole) life insurance products, with limited focus on health insurance. The scan suggested that overall, households are interested in owning life insurance, and that an opportunity exists to increase rates of ownership. According to the 2013 Survey of Consumer Finance, the percentage of all families holding cash value life insurance policies has steadily declined from 35.5% to 19.2% over the years span- ning 1989-2013. On average, 13.4% of households in the two lowest income quintiles held cash value life insurance policies, compared to 31.6% in the upper three quintiles.1 Interestingly, from 2010-2013, households headed by single parents were more likely to take on a new cash value life insurance policy, increasing by 5% despite a decline in coverage in other groups.2 The Bureau of Labor Statistics Consumer Expenditure Survey (2010) reported that the households in the lowest two quintiles spent on average $89 and $148, respectively, on life insurance premiums per year. Despite limited incomes, lower income households demonstrated demand for life insurance products in a period of overall decline of demand as a whole. Many studies noted product complexity as a common barrier to wider adoption. Ernst & Youngs 2012 Global Insurance Survey highlighted the need for insurance companies to respond to customer demands to simplify products as a way to build customer retention. This advice runs concurrent with needs assess- ments of low-income household financial products. Studies demonstrate that in the face of complexity and or hassle in a product or service, paralysis in decision-making ensues, particularly when scarcity of time or money are at play. Cutting out unnecessary complexity and steps has been shown to be universally appealing.3 ostraas Central Hypothesis Financially vulnerable consumers are interested in owning risk-mitigating products, but factors such as cognitive biases, cost, complexity, and barriers to access impede ownership. 1 BLS Consumer Expenditure Survey Charts, 2010 2013. 2 Ibid. 3 Driving Innovation in Financial Services, Ideas42. 2014. A need to substantiate this secondary research with rigorous qualitative interviews emerged. Once the preliminary landscape review was completed, a tailored human-centered research approach was designed to assess ostraas central research hypothesis: SEE FULL REPORT FOR MORE
- 5. Pursuing Innovation in Affordable Insurance | January 2016 CONFIDENTIAL REPORT www.ostraa.com 息 ostraa 5 ostraa RESEARCH TEAM Carolyn Hall McMahon is an independent Finan- cial Inclusion consultant, focusing on human-cen- tric design, with expertise in managing complex, multi-stakeholder programs in the fields of finan- cial empowerment, innovation, and leadership. Her current work leverages the I4 Human-Cen- tered Design framework to guide the messaging, design, and measurement of new financial prod- ucts for the U.S. market. Previously, she oversaw strategy and operations for the Fletcher Leader- ship Program for Financial Inclusion, an interna- tional executive fellowship for financial regulators, and as an Innovation Strategist for D2D Fund, a U.S. financial services nonprofit, where she drove the organizations work on mobile financial tech- nology. Carolyn managed the Microtest Impact Study for 2010 for ACCION USA and served as a translator for Kiva.org. Carolyn holds a Masters degree in Development Economics and Conflict Resolution from The Fletcher School at Tufts Uni- versity and a B.A. in Peace and Conflict Studies from the University of California, Berkeley. Elizabeth Tutella Straghalis is a Financial Inclusion and HCD Consultant.油 She has 12+ years of expe- rience in commercial banking, community eco- nomic development and human centered research and design. She previously served as a Senior Strategist at D2D Fund, focusing on the research, design, and testing of new financial products for financially vulnerable households. Prior, she spent seven years working in the financial services sec- tor in risk management roles. In addition to her pri- vate sector experience, she also spent time in the community economic development field, working as a Program Manager for a Boston-based Com- munity Development Corporation. Her graduate work focused on increasing financial access for East Bostons Latina immigrant mothers through community ESOL programs. She holds a Mas- ters in Community Economic Development with a specialization in Microfinance from Southern New Hampshire Universitys School of CED, and a Bachelors of Political Science and Economics from the College of the Holy Cross. Carolyn Hall McMahon Elizabeth Tutella Straghalis THANK YOU We appreciate your interest. For more information, please contact: Maximilian Weiner maximilian.weiner@ostraa.com Ostraa and the authors extend sincerest thanks to each interview participant, whose time, generosity, and candor were foundational to this research endeavor. Similarly, they would also like thank Abraham Espinosa and Assemble Studios for their time, patience and insight whilst providing the design and layout for this report.