Top-up now! Using reminders to promote contributions to savings-linked insurance products
Recent results from behavioural economics indicate that people may prefer products that offer structured savings to products with more flexibility. Studies have also shown that reminders that create a mental link between contributions and a personal savings goal can promote savings. These lessons can be applied to MNYL’s 10-year life insurance endowment policy, which includes an initial premium payment of Rs. 1000 and optional “top-ups” for savings. The policy is more flexible than traditional endowment policies because customers are free to make top-ups as they choose, and savings are not required to keep the policy in force.
MNYL expected the flexible structure to encourage savings. Only 22% of 90,000 policies were ever topped up, however, raising questions of whether the product was too flexible and whether additional structure, such as requiring quarterly top-up, would have been more effective in promoting savings. Although top-ups increased to 51% during a three-month intensive marketing campaign, the number of top-ups dropped significantly after the campaign, suggesting that customers save more often when given reminders.
For more on behavioural economics principles that can be applied to microinsurance products, see Briefing Note No. 4: The Psychology of Microinsurance – Small Changes can make a Surprising Difference.
For more on MNYL, see their Learning Journey. The Learning Journey is a narrative account of the lessons being learned by the Facility's innovation partner as it implements its microinsurance project.