REPORT ON THE MARKET STUDY AND PILOT TEST OF THE RISK AND INSURANCE MANAGEMENT MODULE

GLOBAL FINANCIAL EDUCATION PROGRAM

ALEJANDRA DIAZ AGUDELO COLOMBIAN INSURERS FOUNDATION

FUNDASEG – FASECOLDA

TABLE OF CONTENTS 1. EXECUTIVE SUMMARY 3 2. BACKGROUND 4 3. RATIONALE BEHIND THE INSURANCE EDUCATION PROGRAM 4

4. INSURANCE EDUCATION PROGRAM OBJECTIVES 5

5. MARKET STUDY ON THE RISK AND INSURANCE MODULE 5

6. MARKET STUDY OBJECTIVES 6

7. MARKET STUDY METHODOLOGY 6

8. MARKET STUDY STEP BY STEP 7

9. PILOT TEST ON THE RISK AND INSURANCE MODULE 15

10. APPENDICES 24

1. EXECUTIVE SUMMARY Taking into account that it is a strategic objective for the Colombian Insurers Association, FASECOLDA, to generate risk conscience, promote insurance awareness and motivate a deeper market penetration for insurance in the low-income segment, the Colombian Insurers Foundation, FUNDASEG, an organization attached to FASCOLDA, has been working on a pilot program to assess the relevance of developing a training program on risk and insurance, as an addition to the ongoing communications campaign. For FASECOLDA and FUNDASEG, implementing a training program not only contributes to the purposes of market penetration and insurance awareness, but it is also one of the most clear examples of social responsibility of the Colombian insurance sector, in that it adds value to all its interest groups (communities, clients and shareholders) and promotes a mutual gain relationship. Hence, to encourage greater awareness in poor households on the risks they face, their consequences and the mechanisms at their disposal to deal with said unexpected events, the implementation of a methodology alongside Microfinance Opportunities has been in the works for four months, which based on experience, self-reflection and hands on learning, informs and teaches people the tools to appropriately handle their risks seeking to reduce their vulnerability in case of an emergency. The following document sets forth in detail each one of the activities carried out, main findings and conclusions, which support important amendments to the original module submitted by Microfinance Opportunities to FUNDASEG – FASECOLDA to be tested and adapted to the Colombian context. The implementation of this methodology and of the module containing the information submitted to the poor underwent a thorough and detailed process which, through the use of focal groups with microfinance institutions, clients and interviews with insurance companies, and later, as a result of a few educational sessions, validated, ascertained and confirmed the relevance of implementing a program with these characteristics which offers useful information to the low-income population for sound risk decision making. Finally, it is important to acknowledge and thank the organizations and people who gave their full support for this process to become a total success, they are: Maria Eugenia Pacheco and Catalina Prieto of MAPFRE COMPAÑÏA DE SEGUROS S.A.; Johanna Contreras and Mónica Traslaviña of LA EQUIDAD SEGUROS O.C.; Tammy Castañeda of ROYAL & SUNALLIANCE SEGUROS S.A.; Humberto Acosta of SEGUROS DEL ESTADO S.A.; Paola Niño of AIG SEGUROS DE VIDA S.A.; Silvia Giraldo and David Rodríguez of CODENSA E.S.P. S.A.;

Néstor Rodríguez, Blanca Badillo and Carlos Mauricio Vásquez of COMPENSAR; Ángel Enrique Gaona of FINAMERICA; as well as Chamber Directors of FASECOLDA.

2. BACKGROUND It is no secret that low-income people are more exposed to unexpected events like diseases, flooding, accidents and job loss, and that the occurrence of any of these risks entails serious consequences for their wellbeing and household finances, since their response capacity is more limited, and protection mechanisms like insurance or savings are not frequently used in this segment of the population. According to data from the Quality of Life Survey, of the Departamento Nacional de Estadística, Dane 2003, the risks that cause a greater impact on low-income households are death of the head of the household, a serious illness or natural disaster, since they all lead to a loss of income and generate additional expenses that are generally defrayed with more debt, making it even more difficult to overcome the emergency, whose repercussions are even greater in the long run. Hence, the strategies adopted to respond to the emergency in the short term are usually informal debt, which are often times covered with the sale of assets, consumption reduction, and in other cases dropping out of school. To encourage people to transfer risk, reducing their vulnerability to emergencies, and giving them incentives to go into business for themselves, micro insurance has been evolving into a financial product seeking to protect and avoid that the occurrence of damage or loss, poor people suffer once again or deepen their condition of poverty.

3. RATIONALE BEHIND THE INSURANCE EDUCATION PROGRAM Poor households have been excluded from the conventional financial system for a long time, forcing them to turn to an informal financial system characterized by high transaction fees and elevated risks. Nevertheless, over the past decades microfinance has gained a well-deserved notoriety while promoting por people access to the formal financial system, which no doubt challenges the formal system to get to know their potential market better and consequently, to develop products adapted to the needs and expectations of the base of the pyramid, which contributes to reduce poverty. Indeed, while billions of people around the world face poverty and are being excluded from the formal financial system, microfinance arises as an alternative for low-income population that contributes to the reduction of poverty by tending to the financial expectations of the base of the pyramid, promote saving, manage and transfer their risks, leverage their productive projects and favor their access to goods and services that

guarantee the satisfaction of their needs and contribute to improve their general wellbeing. Hence, micro insurance constitutes products designed for the low-income population, with limited coverage and low rate premiums, whose purpose is to prevent that poor people fall deeper into poverty when faced with unexpected economic jolts, having to deviate their income towards the emergency, reduce their basic consumption, diminish their equity and get deeper into debt. Notwithstanding the importance of insurance as a protection mechanism and the serious poverty situation in our country, where, according to data from the Departamento Nacional de Planeación, in 2006 20.3 million Colombians earned less than two dollars a day and 5.4 million less than one dollar a day, 8.7% of poor households bought micro insurance over the total population in poverty1. In addition, according to the survey Remolina Estrada 2007, commissioned by FASECOLDA, only 10% of the low-income population has any knowledge of funeral insurance, 14% of life insurance and 58% of property insurance. On the other hand, 28% of the population in socioeconomic levels 2 and 3 consider insurance as an unreachable need, 13% as a luxury and 4% as something they do not understand. In order to promote a greater understanding about insurance and risk management in poor households, hence stimulating an improvement in their actions when faced with risks, a greater awareness on the importance of protection and, in the long term, a deeper market penetration of insurance in the low-income segment, FASECOLDA, through its foundation FUNDASEG, commits to the development of an education program in these issues.

4. INSURANCE EDUCATION PROGRAM OBJECTIVES Provide knowledge tools through an education program that contributes to increase awareness of risk in low-income people, improve their behaviors when faced with them, increase their knowledge about insurance and improve their perception of it, with the intention that they make better and more informed decisions on risk management, hence reducing their vulnerability when faced with the occurrence of unexpected events that may cause them great financial impact.

5. MARKET STUDY ON THE RISK AND INSURANCE MODULE With the purpose of confirming the relevance and viability of a program, that provides low-income population with useful information on risks and insurance, the Market Study

_____________ 1 Micro Insurance Centre. The Landscape of Micro Insurance in the World´s 100 Poorest Countries 2007

In addition, Pilot Test on the Risk and Insurance Module of the Global Financial Education Program led by Microfinance Opportunities was carried out in Colombia during the period May - July 2008. After submitting its name, FASECOLDA was chosen to develop, through its foundation FUNDASEG, the market study with the purpose of collecting information from various players who might possibly be users or beneficiaries of financial education, such as insurance companies, institutions that promote microfinance, clients of such institutions and compensation funds, among others, looking to adapt the contents of the module and methodology to the local context. The information gathered from the different interest groups in the education program, guaranteed that the teaching contents and methods respond to the reality and needs of potential trainees and of the institutions through which the program will be offered. Hence, the market study takes into account actual people´s behaviors in the face of risk, their greatest fears when faced with them, the events that causes them the greatest financial impact, the measures adopted to recover from an unexpected event, their knowledge, perception and experience with insurance and their tastes regarding the education they wish to acquire on risk and insurance. On the other hand, the market study gathers relevant information on the experiences of the institutions (insurance companies, microfinance institutions, etc.) in client training, the importance of such training in the fulfillment of goals set by the institutions interviewed, their facilities, the subjects addressed in their training programs, the announcement mechanisms, as well as the duration and frequency of the courses, among others.

6. MARKET STUDY OBJECTIVES To identify training experiences in the institutions that promote microfinance and assess the skills, abilities, knowledge and deficiencies in risk management for the target population of the study, as well as their perception of insurance and their preferences in training, with the purpose of adapting the content and methodology of the financial education program in its risk and insurance module.

7. MARKET STUDY METHODOLOGY For the implementation of the market study qualitative survey methods such as focus groups and individual interviews were used, which although not representative of the total low-income population or all of the microfinance institutions, do allow a greater knowledge and understanding on the skills and deficiencies of the target population when managing risks.

The market study on the module was based on a study commissioned by FASECOLDA in 2007 on the behavior towards risk of the population in socioeconomic levels 2 through 6, with 2 being the second lowest level, as well as on the Quality of Life Survey 2003, of the Departamento Nacional de Estadística, DANE, whose results are representative.

8. MARKET STUDY STEP BY STEP To FASECOLDA, insurance awareness and market penetration are an objective that can be reached not only through the efforts of companies to offer new products, but also with training strategies on risk and insurance management, that provide people with relevant information that allows them to make adequate decisions to cover their risks and protect themselves. The purpose of an education program aims to create greater awareness of risks and a greater knowledge of insurance mainly in micro entrepreneurs, the unemployed, wage earners and other people that constitute the base of the base of the pyramid, in other words, people with low-income, hence the sample used involved institutions whose client profile coincides with the program´s target population. As a result of the focus groups with clients and individual interviews with institutions, through which the financial education might possibly be offered, due changes were made to the module and subsequently the pilot test on the risk and insurance module was carried out with three sets of clients, having previously trained six (6) coaches, employees of the insurance companies responsible for the micro insurance business. Thus, some of the sessions of the module were coached in three different courses with three groups of clients, one of them from CODENSA (a public utilities company), another one from FINAMERICA (institution that offers micro credit for the promotion of small businesses) and finally a group of unemployed beneficiaries of the unemployment welfare granted by the Government through Compensations Funds. Both the training of the coaches and of the clients evidenced the need to incorporate new changes to the module, with the purpose of making the content more understandable. Following, each one of the steps taken to arrive at the generic module for Colombia is analyzed in depth. 8.1 TRANSLATION After submitting the names of FASECOLDA AND FUNDASEG to take part in the market study of the risk and insurance module, and the respective approval by Microfinance Opportunities, the professional translation from English to Spanish of the original text was commissioned.

8.2 PRELIMINARY ADPTATION The project leader began making the first changes to the module, especially regarding changes in the language used like management for administration and risks for dangers, among other concepts somewhat difficult to grasp by the program´s target population. New sessions were included on mandatory vehicle insurance, and within the session on life insurance the explanation of this coverage was broadened, and some other types of insurance were included like accident and health insurance, credit insurance and funeral insurance, while mentioning earthquake, flood, vehicles and riot coverage within property insurance. In all these cases, fun-learning activities were suggested to facilitate understanding of the terms and operation of insurance. On the other hand, some of the names were changed, while some examples mentioning mototaxi services and funeral homes were altered to avoid encouraging unhealthy practices, which, although legal, constitute unfair competition to the insurance industry, as is the case with funeral homes. Given the political inconvenience of encouraging practices that are rejected by the Government, as is the case with mototaxi services, and by the insurance industry, as is the case with insurance services provided by funeral institutions, both of which were eliminated, and replaced with different examples. 8.3 REVIEWS BY THE INSURERS ASSOCIATION AND INSURANCE COMPANIES After the preliminary adaptation, summons went out to employees from the insurers association responsible for each type of coverage mentioned in the module, as well as employees from three insurance companies who volunteered to help review the module. Each of them suggested additional elements to simplify the language and to broaden and clarify the information to be shared with the participants in the financial education program. In addition, within the session of property insurance some changes were proposed to some of the examples used, as well as the inclusion of answers to the cases of study in the original module. 8.4 INDIVIDUAL INTERVIEWS WITH MICROFINANCE INSTITUTIONS The market study included interviews with institutions that promote microfinance and through which the financial education is to be imparted to their clients. Four individual interviews were performed with managers of the institutions or and/or staff members responsible of handling client information.

The individual interviews focused on identifying aspects surrounding training in those institutions, topics, mandatory nature of the training cycles, timetables, intensity, frequency of sessions, cost and facilities. 8.4.1 The objectives pursued were the following:

Learn about the training experiences of the institutions interviewed, all of which are distribution channels for micro insurance.

Identify the type of training offered by the institutions (classroom, remote, virtual,

seminars, videos, etc.), the topics of training, the profiles of trainees and coaches, announcement mechanisms and incentives granted to participants in the programs.

Learn about issues regarding content in financial education that might of interest to clients of the institutions interviewed.

Identify the types of risks most frequently faced by their clients, the consequences of such risks and the strategies adopted to face counteract them, as well as to protect themselves from them.

Understand protection outlines for low-income households.

Establish perception levels on the development of a training program on risks and insurance for their clients.

8.4.2 La institutions interviewed were:

MICROEMPRESAS DE ANTIOQUIA Y ACCION INTERNACIONAL: Microfinance institutions that grant loans for business setups and develop training programs for clients of micro credit and the general public on how to set up and make small businesses sustainable.

COMPENSAR: Compensation Fund that receives mandatory contributions from

formal employers for the development of wellbeing of Colombian workers and their families through family subsidies and the provision of recreational, sports, entertainment and even financial services such as loans and insurance. In addition, Compensation Funds are responsible for the delivery of unemployment welfare to heads of household who have lost their jobs. This subsidy granted by the Government, guarantees the family access for six months to vouchers for education, health and food with the purpose of ensuring their wellbeing despite the loss of income due to unemployment by the head of the household.

CODENSA: public utility Company that supplies energy to Bogotá and, in addition,

provides credit opportunities, especially to households that are otherwise excluded from access to formal credit. Almost six years ago it added insurance to its portfolio of services, making it today one of the distribution channels that successfully reaches the lower socioeconomic levels of the population.

8.4.3 The main findings in the interviews were:

All the institutions interviewed have a training program for their clients.

The topics of training are mainly about how to setup small businesses, how to prepare a budget, how to produce a profit and loss statement and about various arts and crafts, among other topics that encourage the setup of small businesses.

The education in all cases is a combination of theory and practice, in other words, workshops are used to promote a hands-on learning experience, which allows putting in practice the concepts acquired in a theoretical manner.

Course loads vary in the training programs, with the maximum being 60 hours, once or twice a week for no more than two hours a day. Normally training programs are offered in short cycles of 10 to 20 hours per course.

Acción Internacional, Microempresas de Antioquia and CODENSA, offer free training for their clients, which, according to them, guarantees the success of their programs.

The training programs are offered in the facilities of the institutions interviewed.

Acción Internacional has a line of credit for which training is a requirement for the disbursement of the funds.

The most frequent risk faced by their clients, according to their own perception and not as a result of an investigation, is death of the head of household or some relative.

The institutions that lend money like COMPENSAR and the microfinance institutions, state that they are covering these risks with the life insurance associated with the loan, case in which the debt is settled, however, they are aware that risks such as the loss of income by death of the death of the head household, funeral expenses derived from the death of a family member or property damages like fires, earthquakes and alike are not covered.

They consider a training program in risks and insurance useful, but it must be accompanied by an effort from the companies to offer products more tailored to the reality of their clients.

8.5 FOCUS GROUPS WITH CLIENTS Focus groups were the method used for the interviews with clients of the institutions, and with them a tool called P.R.A. of Life Cycles and Adaptation Strategies (see Appendix 2), which was previously adapted. Four focus groups were carried out where the facilitator led the survey to gather valuable information on risks, behaviors and perceptions. In total, 36 clients participated (see Appendix 3). 8.5.1 The objectives of the focus groups were the following:

Determine what is understood by risk.

Identify the types of risks to which the population is exposed.

Assess the risk with the greatest financial consequences.

Identify the awareness on their risks and their consequences.

Assess measures taken to respond or protect themselves from risks.

Identify their perceptions towards insurance and experiences with it.

Assess their preference in relation to learning methods.

8.5.2 The client profile: The interviews with focal groups had lasted for two hours each. Four focus groups were carried out in total, two of which were with clients of the utilities company CODENSA (see numeral 8.4.1), one with 10 and the other with 12 clients, with and without insurance purchased through the utilities company and belonging to socioeconomic levels 2 and 3. The selection of the clients was carried out randomly among clients belonging to socioeconomic levels 1 thru 3. The sessions took place in Bogotá. On the other hand, the other two focus groups were carried out in Neiva, Huila with clients of Cooperativa ULTRAHUILCA, one with 5 and the other with 9 clients of the institution and users of micro credit. This institution promotes the development of small businesses and access to the formal financial system for its members giving them the opportunity to gain access to services like savings, credit and insurance. The selection of the clients was random.

8.5.3 The main findings were: It is necessary to point out that the methodology is qualitative and not quantitative, and as such, it is not representative; thus, absolute data regarding behaviors, habits or other characteristics of low-income population, cannot be inferred from it. However, the findings are illustrative and allowed for substantial adjustments to the risk and insurance module. Furthermore, the findings listed below are the result of statements made by the majority of the participants in the focus groups and not just to opinions from 3 or 4 participants. Among the most relevant findings of the market study, we could highlight the following: Occupation:

Most of the participants are micro entrepreneurs, owners of grocery stores, fruit stores or clothing workshops.

Most of the women work in the clothing industry.

Concept of risk:

They understand the concept of risk and associate it with danger, emergency, calamity, damage, loss or unexpected situation that alters the peace.

Types of risk:

The last risk faced by some of the participants was a serious illness at home.

The risk they fear the most are illness and an earthquake, the latter may be explained by the fact that one week before the focus groups were held, a strong tremor occurred in Colombia.

They are aware that the occurrence of unexpected events causes a loss of income and an increase in expenses, like medicines for example, or transportation and medical consults, among others.

Given that, their businesses operate in the same property they express concern for the damages the property might sustain and particularly the business.

They express concern about the death of one of the household heads since they fear for the future and wellbeing of their children in their absence.

For most of these participants, unemployment is not a risk they fear, given they are micro entrepreneurs and not employed workers.

Despite the fact that illnesses and an earthquake are the risks that would most seriously affect their family´s finances, they also expressed concern towards risks like fire, flooding, disability, accidents and death.

Strategies adopted to face these risks:

Faced with a risk, participants said they would borrow money from a friend or relative. As a second choice, they would borrow money from an institution, microfinance NGO or a loan shark.

Faced with a risk the first thing they do is go into debt, reduce spending on

recreation and in some cases substitute some foods. The expression used by most of them was “tighten your belt”.

In addition, participants stated that depending on the situation they would seek

additional income.

They would not sell productive assets like machinery, for example, however they would consider selling home appliances.

They save in informal saving schemes or family or community funds, however

these savings are short term and mainly for consumption purposes debt payment, but not for emergencies.

Purchase en perception of insurance:

6 of the 26 clients interviewed have funeral insurance and of those six, three purchased it from a funeral company, while the other three purchased it from an insurance company.

One client has property, and accidents and health insurance.

They are familiar with and actually have credit insurance, and understand its

benefits.

They don´t know about mutual aid institutions in their communities, they have never heard about them, and when explained to them they associate them to informal saving schemes, but it is not clear to them that the money is not returned after some time, even if no losses occur.

They understand insurance as a need to be protected, but they consider that there are too many obstacles when filing a claim.

They do not understand insurance concepts. For instance, they think an insurance

premium is an amount of money they will receive from the insurance company. They confuse it with a vacation or Christmas bonus.

They deduce that exclusion is being left out, but it is not clear to them what it is in

insurance terms. They understand a claim as a complaint, and not as a right.

They claim not having insurance due to a lack of information and clarity.

Those that have not had any experience with insurance, no more than 10, claim that the agent spends a lot of time selling them the insurance, but no time at all advising them after the sale.

The insurance of their dreams must be cheap, delivered to their homes, cover the

entire family, easy to claim and must be a single product with extensive coverage.

Training They wish to receive training on insurance, what is covered and what is not

covered, operation aspects, rights and obligations and claim procedures.

In addition, they want to be trained on emergencies, on how to react and protect themselves.

They prefer hands-on learning, i.e. workshops, and not lectures or classroom

teaching.

They agree on the notion that a workshop should be held once (1) a week, for no more than two (2) hours per day and for a maximum of five (5) weeks.

These findings not only allow adjusting the content of the module to their reality, but also make it easier to design the curriculum, in other words, to define the sessions that must be emphasized and the way in which the financial education is offered. As a result of the focus group sessions, it was necessary to adjust concepts like insurance premium and claim. The session on mutual aid institutions was eliminated, a session on savings and credit to face emergencies was included (advantages and disadvantages) and the session on health insurance was eliminated. The latter is explained by the fact that health insurance offered by insurance companies is an expensive product that does not reach the low-income population. Nevertheless, a new challenge emerged from the pilot

test and that is to include the social security system on health and pensions as explained hereinafter.

8.6 INTERVIEWS WITH PRESIDENTS OF INSURANCE COMPANIES The presidents of AIG LIFE and MAPFRE were interviewed to learn about their perception towards the feasibility and usefulness of the education program promoted by FASECOLDA and FUNDASEG. The results of the focus group sessions were shared with them, and they were informed about the purpose of developing a training program, the preliminary work schedule, as well as the content and methodology. The presidents stated that the program is useful and falls within the strategy of promotion of insurance awareness. They think that FUNDASEG should lead the program because letting the companies develop the program in an autonomous and independent manner might not produce the expected results and might end in the short term. They expressed that the program should be free for clients and very low-cost for the companies, and that it must be used to educate clients in their current distribution channels, otherwise expectations could arise that would not be met in the absence of an adequate product offer through adequate channels. They are aware that to develop that program they will have to appoint one of their employees to oversee the program within the company. On the other hand, one of the companies stated that it would train its low-income insurance agents on the methodology.

9. PILOT TEST ON THE RISK AND INSURANCE MODULE Upon conclusion of the market study, and having made all the necessary adjustments, the pilot test was carried out, which included training the coaches and clients of the institutions that promote micro finance. 9.1 TRAINING THE COACHES Once the module was adapted according with the results from the interviews and the focus groups, the companies that had originally been proposed to take part in the market study were summoned and invited to train as coaches of the global financial education program. The people trained were:

Paola Niño, AIG SEGUROS DE VIDA

Mónica Traslaviña, LA EQUIDAD SEGUROS María Eugenia Pacheco, MAPFRE SEGUROS Catalina Prieto, MAPFRE SEGUROS Humberto Acosta, SEGUROS DEL ESTADO

For the training of coaches a two (2) day work schedule was adapted to fit in one and a half days (see table 1.). Subsequently, preparation of the work schedule began, which included printing the material, adapting the examples and adjusting the time, among other aspects. The objectives of the training were:

Learn the methodology of Financial Education Identify the principles of adult education Get to know the structure coach training workshop Review the content of the insurance module

Having trained the coaches on the principles of adult education and studied in depth the principles of participation, security and recognition, and after having reviewed the structure of the module of each of the study sessions, the participants selected the sessions they wanted to coach and started the preparation of these sessions with an allocated time of two hours.

Table 1 Coach Training Plan

¡Insurance for Everyone! Plan for a 1 ½ day workshop

Opening and General Review

Technical Information and Tools

Training Sessions

Closing and Next Steps

Welcome and Introductions

Objectives and Workshop Plan

Review of the principles and practices of adult education

Participation

Security

Recognition

Open Questions

Review of Insurance Topics

Identifying the difficulties people face to get insured

Comparison between real and desired behaviors associated with

Review of results of the market study

Review of objectives, steps and methods of the training sessions

Introduction to the training sessions

Structure of the training sessions

Preparation for the training sessions

Review of the local adaptation chart to adjust the training sessions according to the target population

Review of the principles to make and receive comments

Facilitation of the training sessions

Making and receiving comments on the facilitation of the training sessions

Revéis of te workshop plan

Individual Evaluation

Closing

In total, coaches facilitated 5 training sessions, and a as a result of this exercises some changes to the activities were suggested to make them more clear, short and simple. Thanks to the study sessions conducted by the coaches in preparation for the pilot workshops, it became evident that the sessions have a logical order, reason why dispensing with any session or beginning the facilitation in a different order made it

necessary to go over the content of previous sessions. Nevertheless, this did not guarantee total understanding by the participants and, on the contrary, it brought about some confusion. Session 1 Step 2, examples on happy memories, in which the trainees must close their eyes and think of happy memories, did not make everyone comfortable. Thus, it was suggested that this exercise be eliminated, and start by mentioning the some events may be altered by unexpected situations. In the same session, Step 3, there was some confusion among the participants regarding the exercise of thinking about the effects of certain events mentioned in the cards, for instance, “… a fire destroyed the business”. They did not know if the exercise referred to any family or their own, which led to different answers. For clarity purposes, it was then mentioned in the module that they had to reflect on their own households and not theoretical ones. Session 1 was shortened in Steps 3 and 4 since some of the content may prove repetitive. In Session 2, which was very easy to develop and understand, the time allotted was very short causing certain aspects to be presented by the facilitator rather than be produced by the participants. For example, the advantages and disadvantages of protection and reaction strategies. This time shortage is explained by the fact that in Step 1, the facilitator read aloud the entire three cases like the module suggested. To correct this, the instructions in the module were modified to indicate that the facilitator should hand out a case to each group, thus, only having to read aloud the introduction, and the case being later explained by each group to the rest of the class. Session 3 Step 2 was difficult to facilitate, so some changes were made to make the instructions more clear, and some questions in the Juan’s case were shortened for being repetitive. Furthermore, facilitating this session contributed to understand the need for thorough preparation before each session, since not understanding the information and activities for each session fully might confuse the group and bring about a perception of improvisation. Session 5, on mutual aid institutions, was facilitated but later eliminated because this type of protection scheme is not frequent in Colombia. Despite this, some elements, like the exercise to understand shared risk, for instance, were adapted and used to understand how insurance works in the session on introduction to insurance.

Session 8B Step 1 on property insurance brought up the need to eliminate two examples that had been introduced by FASECOLDA in the first adaptation, because they were not easy to understand and refer to products that are out of reach for the low-income market, like machinery breakdown and business interruption for small businesses. Finally, in Step2 of the same session, regarding the true or false exercises there was some confusion among the participants because the answers had multiple interpretations, in other words they were not closed (yes/no – true/false), but open (depends), what required some changes. 9.2 CLIENT TRAINING After all the changes resulting from the training sessions for coaches, clients from COMPENSAR, CODENSA (see numeral 8.4..2 and 8.5.2, respectively) and FINAMERICA, financial institution that offers micro finance services to clients in socioeconomic levels 1, 2 and 3, were called to participate in the pilot workshop. Three workshops were held on three different days, and 35 clients participated in them (see Appendix 3). 9.2.1 The objectives of the training were:

Confirm the relevance of the content of the module Verify the interest of the participants in the topics Assess the difficulty of the language used and the activities carried out Confirm the adequacy of the time frames allotted to each session and each step Identify deficiencies in content and form and assess strengths

9.2.2. The notification: In the case of CODENSA, the selection of clients was made taking into account the notification made for the focus groups, in other words, those clients that agreed to participate in the focus groups were called again and invited to participate in the pilot workshop. Clients of FINAMERICA were selected based on the proximity between the branch they belong to and the offices of FASECOLDA, place where the training was carried out. On the other hand, COMPENSAR, by request of FASECOLDA, gathered a group of people beneficiaries of the unemployment subsidy, who at the time were taking a course on leather goods. The session on the insurance module was held making use of this course. 9.2.3 Client profile, sessions coached and changes made:

9.2.3.1 Pilot Test: Clients of FINAMERICA The first workshop was held with t clients of FINAMERICA, who, in addition to being micro entrepreneurs, are a bridge between people in need of a micro credit in their communities, and the financial institution. In this first workshop, 2 sessions were facilitated: session 5 Introduction to micro insurance, and session 6 what you need to know about micro insurance. In relation with session 5, the adaptation made to the exercise to understand shared risks, in this case called “step 3: understanding how insurance works”, turned out to be very satisfactory since it made it easier to understand the topic and was fun. This exercise evidenced the need to clarify in the module the amount received for claims after the occurrence of a loss, are far greater than the premium paid by the client to the insurance company. On the other hand, in session 7, step 2, a couples’ game to learn the concepts of insurance, the need for permanent facilitation became evident given the complexity of some of the concepts to the participants. Bottom line, they were held up finding the meaning to a term assigned. 9.2.3.2. Pilot Test: Beneficiaries of COMPENSAR The second workshop took place with 22 beneficiaries of the unemployment subsidy granted by the Government through Compensation Funds, in this case COMPENSAR. The beneficiaries with which the pilot test was carried out were unemployed peoples, who at the time were taking a course on arts and crafts, and additional benefit to the food, health and education vouchers. The group of beneficiaries to the unemployment subsidy received training in session 6: Savings or Insurance for Emergencies. As an introduction, and to get people familiarized with the topic, it was necessary to go over the definition of risk, the risks with a greater impact on family finances and the strategies to react or face those emergencies. Only after the participants identified saving and getting insured, as some of the strategies to protect themselves, the facilitation of this session began, which made the two-hour period allotted for the session insufficient. In the development of this training session, there were no difficulties regarding content and form, therefore no changes were made to session 6 resulting from the pilot test. Nevertheless, given the size of the group, getting everyone´s attention was not easy and the area where the session was held was too small. 9.2.3.3 Pilot test: Clients of CODENSA

The third workshop took place with 6 clients of CODENSA, three of whom had attended the focus groups. All the attendees are freelance workers. The participants were trained in sessions 8A, 8B and 8C, on life and benefits insurance, property and mandatory vehicle insurance, respectively. The facilitation of this session was carried out successfully and the participants acquired basic knowledge on life insurance, funeral insurance, health, debt, fire, earthquake, theft, flooding and professional risk insurance and mandatory vehicle insurance. In session 8B it was necessary to emphasize the compensation nature of insurance. In other words, that the amount of the claim will never be greater than the cost of the item prior to the loss, since some of the participants had some confusion with this concept. These were cleared with some specific examples and later included in the booklet. 9.2.4 Findings during the training sessions: The following findings are not representative, and consequently, nothing can be inferred from them. Nevertheless, they are valuable for the purpose of this exercise since they reflect feelings, perceptions and attitudes from the participants towards risks and insurance. The statements gathered here as findings, represent the most popular answers from the participants in the pilot training. Perceptions:

People confuse the social security system in health with private insurance offered by an insurance company.

People have a negative perception of insurance offered by an insurance company,

derived from their experience with the social security system in health.

Five people stated having filed a claim and having been paid by an insurance company. These people have a positive perception of insurance.

Some participants expressed they did not want anything bad to happen to receive the benefits of insurance.

Three people expresses that having insurance was bad luck.

People are aware that insurance offers protection against an unexpected situation.

Concept of Risk:

While in the focus groups, where the majority of participants were a micro entrepreneur, the risk causing the greatest fear and impact on family finances was illness, death of an income generator and earthquake, in their order, in the pilot training sessions, where the majority of the participants were unemployed, the greatest risk was unemployment, followed by illness and death.

People recognize that a risk implies the reduction of income and an increase in

expenses and debt.

People claim not having enough savings to face losses.

Insurance:

Of the five people who filed claims with insurance companies, four corresponded to funeral insurance and one to liability coverage from an auto policy.

The participants stated that insurance policies are not clear and have too many

conditions and “fine print”.

They argue not having insurance for lack of sufficient information.

People expect a single product with extensive coverage.

Insurance is not considered a need.

9.2.5 Evaluation of the program by participants: At the end of each training session, some volunteers were asked their opinions on the content of the sessions and the methodology used. Below is a selection of the statements that were common to the majority of volunteers. It is noteworthy, that 19 people out of 35 participated in the evaluation (7 clients of FFINAMERICA, 4 clients of CODENSA and 8 beneficiaries of COMPENSAR). These are some of the most relevant expressions from the evaluations of the workshops. It is noteworthy that there were no negative evaluations on either the content or the methodology: The content:

“It is a useful tool to learn how to be protected”.

“The content of the program helps create awareness and knowledge”.

“The workshop provides clear and simple information”.

“The workshop makes you change your perception and image about insurance”.

“The workshop makes clear what an insurance is, when to use it, how to use it, and

what to ask when going to purchase insurance”.

“The workshop makes us think about our fears and failures when facing emergencies”

Methodology:

“It is practical and dynamic”.

“It does not allow you to fall asleep or get bored”.

“You are always doing something”.

“Makes you think about risks and insurance”.

“Work in groups allows you learn from other people’s experiences”.

“The sessions must have more than 10 participants and less than 16”.

“Each training session must last less than two hours”.

9.3 FEEDBACK After the whole process took place, the results were presented to Microfinance Opportunities during a one-day work session, during which all the experiences, findings and changes were shared with them, and specifically with the authors of the original module, to end up with the generic booklet for Colombia.

APPENDIX 1

INTERVIEW QUESTIONNAIRE – INSTITUTIONS

MAIN QUESTIONS EXPLANATORY QUESTIONS

I. Current Training: Content/Teaching

1. What type of training do you offer your clients? a. What information/topics do you convey in these courses? b. How do you inform your clients about your products and services, like courses?

2. Who teaches these courses?

a. Who provides training to your clients on your products and services, credit advisors, coaches, etc.? (payroll, freelance) b. What is their profile

3. What incentives do you offer your clients to participate in your training programs?

a. What do you think about incentives? b. Do you offer incentives to participants? Do you hand out a diploma at the end of the program? Do you offer a discount? Do you hand out gifts? c. If you agree with incentives, what kind of incentives do you like for your clients?

II. Content of financial education

1. What topics on financial education have you developed within the Company?

a. What topics have you already introduced during the sessions with your clients? Budgets? Savings? Debt management? Use of financial services? Insurance?

2. What topics would be of interest to your clients? a. What topics are the most appropriate for the financial needs of your clients? Budgets? Savings? Debt management? Use of financial services? Insurance?

3. ¿What risks do your clients face? a. What risks do your clients face during the development of their business or in their daily lives? b. How frequent is the occurrence of these risks? Never? Sometimes? Frequently?

4. What risks are most important for their impact on the lives of your clients? What risks cause them more privations?

a. How severe is this impact in terms of pressure or financial privation on these families? Grade it 1 through 5.

5. How do your clients face or react to the emergencies or risks mentioned, as they occur? (Ask about each risk individually)

a. How does your family respond to risks when they occur? (sell assets, get into debt, reduce spending, take a child out of school) b. How do you get the money you need (if you need any) to face the risk?

6. How effective is each one of the strategies (or the combination of strategies) mentioned?

a. How well do these strategies work? What do you like about these strategies?

b. What do you dislike about these strategies?

7. How do your clients protect themselves against risks before they occur? (Ask about each risk individually)

a. What measures do your clients take to reduce the impact of these risks (insurance, savings, mutual aid) b. What other non-financial measures? (prevention campaigns)

8. How effective is each one of the strategies (or the combination of strategies) mentioned?

a. How well do these strategies work? What do they like about these strategies b. What do they dislike?

III. Proactive Strategies …………….………………………………………….....

1. Do you believe your clients know about insurance?

a. What do they know about insurance? b. What perception do they have?

2. What type of insurance do they purchase? a. Funeral b. Life

3. How do your clients insure themselves? a. Formal Insurance b. Mutual Aid Funds

4. What is your clients’ perception of formal or informal insurance?

a. Have they shown any interest in being insured? Do they see insurance as an obligation? etc.?

5. Do they know of any mutual aid institution? (Groups in which members contribute Money to a fund to help each other)

a. What do your clients like about a mutual aid institution? b. How does that group work? c. What work well in that group? d. What does not work well?

6. Why don’t families use insurance products? a. What are the greatest barriers for insurance? Explore cost, accessibility, understanding, etc. b. Were there no barriers would your clients show more interest in insurance?

7. What type of financial services do your clients use on a regular basis? (informal/formal)?

a. What are the financial products they use the most?

IV. Teaching

1. How do your clients learn better? (i.e.. videos, courses, books, etc.)

a. What format are your training sessions in now? (videos, classroom, booklets) b. What kind of materials would you need to offer financial education to your clients

2. How much available time do your clients have to take a course on financial education?

a. What timetable would be most adequate to offer a financial education course to your clients? b. Frequency? Sessions per week? Per month? c. On what day of the week? Weekends?

Weekdays? d. How many hours per session?

3. How and when could you offer education courses to your clients?

a. What is the most appropriate place for your clients? (institution, community meeting room)

V. Benefits of financial education

1. How would your institution benefit from providing financial education in insurance?

a. Increase client retention? b. Improve services to your clients? c. Increase your competitive advantage? d. Improve the quality of receivables? e. Strengthen your position as a socially responsible institution?

2. What else should we take into account when developing a financial education program with clients of microfinance institutions?

APPENDIX 2

FOCUS GROUP QUESTIONNAIRES P.R.A TOOL FOR LIFE CYCLES AND ADAPTATION STRATEGIES

Introduction: Thank you very much for meeting with us. We are very thankful for your time. I work with a training team and we are conducting a research to better understand the way in which people face emergencies. La información que yo obtenga de esta reunión se va a usar para desarrollar cartillas de educación cómo manejar los eventos inesperados que causan problemas a las finanzas de las familias. Any information gathered from these meetings will be used to elaborate educational booklets on how to handle unexpected events that cause problems to family’s finances. The meeting will last approximately 1 hour, please feel free to express your ideas; they are all valuable to us. We want to know how you feel, how you interpret different concepts regardless of whether you know the or not. Te begin I would like each of you to introduce yourselves, tell us your name, your occupation, etc.

Discussion Guide – Test Guide on the Micro Insurance Module

Concept of Risk

Main Questions Follow-up

What does the word “risk” mean to you?

If you had to explain the Word “risk” with another Word, which one would you use? (Write down the synonyms in a card )

What we mean when we use the word “risk” is “the possibility of an unexpected economic loss”

Risks and Adaptation Strategies

What was the last risk or unexpected event you faced? (write them down in the cards) In addition to the risks you just mentioned, what kind of events can happen that could threaten your happiness? (write down each risk on a different card) From the risks you just mentioned, which one causes you the greatest fear, and why? (Ask the participants to organize the cards with the most important risks on top)

What are the risks you and your family face? (ask them to think of everyday life risks, unexpected events at home or at the office) Which of these risks are most important for their impact of your family?

How would these events in particular affect your family´s finances? (ask them to classify the risks using a scale of 1 thru 5, with 5 being the most serious)

What are the consequences of these events? What risks generate the most privations?

Take the 5 main risks and read them aloud. Ask the participants questions 4 thru 7 (depending on the available time, more risks can be included).

How often do the risks you just mentioned happen to you or your family? Many times, few times, sometimes, never?

Regarding the risk of_________How have you (or your family) responded or would respond when face with it? (ask for each risk individually).

What strategies or measures do you take to face these risks? Explore: Get into debt Spend their savings Sell assets Seek additional income

How well do these strategies work? What do you like about these strategies? What do you dislike about these strategies? (Ask for each strategy)

How effective is each one of the strategies you just mentioned?

We have already seen how you respond to risks after they occur. Could you know tell me what do you do to protect yourselves from these risks, before they occur?

What preemptive measures do you take before the occurrence of these events? Explore: Savings Mutual aid groups Insurance Prevention

How well do these strategies work? What do you like about these strategies? What do you dislike about these strategies? (Ask for each strategy)

How effective is each one of the strategies you just mentioned?

Reaction Measures

Some of you said you borrowed money after an emergency to respond to it, where do you get the money?

Bank, other financial institutions, friends, pawnshop, loan shark, chains, NGO’s?

Some of you said you spend your savings to face an emergency. Where do you usually save? Are your savings enough to respond to the risks mentioned?

Marriage, emergencies, buy a house, set up a business.

Some of you said you would sell your belongings to respond to an emergency. What would you sell?

Home, car, animals, jewels, appliances, machinery

Some of you said that after an emergency you sought additional income. What do you do get that additional income?

Does a relative go out looking for a job? Do you look for another job?

Protection Measures

Some of you said that you saved for emergencies. Where do you save? What other type of savings do you have?

Home, banks, funds, chains Do you participate in chains or alike? (ask for the name of this savings scheme and ask the how it works)

Before an emergency, some of you said you participate in mutual aid groups, do you do that?

Several people get together and contribute money for emergencies? (ask for the name of this savings scheme and ask the how it works)

Do you purchase insurance as a protection measure before an emergency occurs?

Do they purchase insurance, what type?

Do you use preemptive measures?

Do they have preemptive campaigns? Flooding, for instance? What other type of strategy do they use?

Formal and Informal Insurance

Do you know any kind of mutual aid institution in your community? (these are groups in which their members contribute Money to a fund to help themselves in case of an emergency)

What is it called? Who can participate? What emergencies is it used for? How much is the contribution? What benefits do the participants get? What happens to the money if there is no emergency? What do you like about the mutual aid group? What works well in this group? What does not work well in this group? How is it similar to resorting to savings?

What do you know about insurance? What experience do you have with insurance? What type of insurance do you have experience with?

A lot, a Little, nothing, not interested None, good, bad, so so, great

Explore: Life, property, funeral, other

What do know on how insurance works?

¿What do you understand from each one of the following terms: Premium Policy Beneficiary Claim Benefits Exclusion Deductible Waiting period Pre-existing Condition

Why do you think families do not use insurance products?

What are the greatest barriers for insurance? Explore: Cost, accessibility, insufficient information, understanding

Would you like to cover any type of risk or emergency with insurance, which one?

Explore: death of a relative, funeral expenses, healthcare, etc.

How much would you be willing to pay each month for an insurance that covers the risk you just mentioned?

Training

Would you like to learn, through a short training program with no cost to you, how to deal with these events that cause financial impact to your families? Would you like to learn about how to be protected against risks? Would you like to know the advantages and disadvantages of the measures we take to respond to emergencies, like borrowing Money, or spending our savings? Would you like to learn how insurance Works?

What do you need to improve your capacity to manage the financial risks your family faces?

How would you like to learn about these topics, a seminar, workshop, videos, booklet, etc.? What type of training have you had in the past? On what topics? What did you like the most in that training session? What did you like the least?

How would you like to acquire this information?

How much time would you have available for training? 1 hour? 2 hours? With what frequency? Once a week? Once a month? What day of the week? Weekends? Weekdays? At what time? What place would be most convenient for you?

What do you deem important about the timetables?

What type of incentive or premium would you like to receive when you finish the training program?

A certificate? More training opportunities, prizes, etc.

APPENDIX 3

FOCUS GROUPS LIST OF PARTICIPANTS

No. LAST NAME FIRST NAME ID No.

1 FORERO MIRIAM 41.555.745

2 GUERRERO MARIA EDITH 25.149.214

3 HERNANDEZ MARGARITA 23.799.350

4 PARDO OSCAR

5 PORRAS JOSE ARTURO

6 RIVERA ANA TILIA 51.720.337

7 ROA JOSE MANUEL 1.064.253

8 ROJAS MARIA LUCY 41.776.289

9 SANCHEZ ROBERT 79.750.980

10 VALERO VIRGINIA 20.499.426

No. LAST NAME FIRST NAME ID No.

1 ALVAREZ HECTOR 17.051.295

2 CORTES XIMENA 52.274.636

3 GAMBA JEIMY 1.022.947.287

4 GOMEZ RIGOBERTO 17.136.532

5 GUTIERREZ JOSE BENITO 79.113.504

6 JIMENEZ EDGAR 7.670.822

7 MEZA DEISY 52.065.763

8 MONSALVE FRANCEDY 5.702.107

9 PLATERO HELENA 41.606.370

10 PRADA GERARDO

11 ROBLES ANA 21.008.477

12 SACHICA VIRGINIA

FOCUS GROUP 1

CLIENTS OF CODENSA

FOCUS GROUP 2

CLIENTS OF CODENSA

No. LAST NAME FIRST NAME ID No.

1 CASTRO BERTHA 36.167.616

2 LOPEZ PAULA ANDREA 36.065.606

3 NAVARRO LUIS HUMBERTO 79.701.621

4 RODRIGUEZ HAMILTON 7.708.337

5 TRUJILLO ANDERSON JAVIER 1.075.212.090

No. LAST NAME FIRST NAME ID No.

1 BONILLA BLANCA 36.156.436

2 MEDINA RENE 7.687.705

3 OLAVIA MILCIADES 12.257.226

4 QUINTERO MANUELA 36.278.061

5 QUINTERO JOSE LIBARDO 4.897.146

6 ROJAS CARLOS 7.686.640

7 SANCHEZ OVIDIO 6.109.898

8 SILVA ISLENA 36.182.480

9 TRUJILLO MERCEDES 26.592.176

FOCUS GROUP 3

CLIENTS OF ULTRAHUILCA

FOCUS GROUP 2

CLIENTS OF CODENSA

APPENDIX 4

PILOT TRAINING WORKSHOPS – LIST OF PARTICIPANTS

No. LAST NAME FIRST NAME ID No.

1 MALAGON MANUEL 6.756.626

2 MEDINA FANNY 31.249.878

3 RODRIGUEZ ENRIQUE 19.129.625

4 ROJAS ROSALBA 28.440.283

5 SANCHEZ ANA MERCEDES 20.678.424

6 VALDERRAMA JOSE VICENTE 19.189.892

No. LAST NAME FIRST NAME ID No.

1 GUTIERREZ JOSE BENITO 79.113.504

2 RAMIREZ ANA ISABEL 41.709.765

3 CASTELLO SUSANA 41.324.230

4 ALVARAEZ HECTOR 17.051.295

5 PLATERO HELENA 41.606.370

6 HERRERA DIANA 52.084.523

PILOT TRAINING WORKSHOP 1

CLIENTS OF FINAMERICA

PILOT TRAINING WORKSHOP 3

CLIENTS OF CODENSA

No. LAST NAME FIRST NAME ID No.

1 BASANTE SANDRA PATRICIA 52.368.571

2 BELEÑO BLANCA 35.503.310

3 CASTIBLANCO YEIMY 52.524.067

4 CHACON EDWIN 79.827.059

5 CHIVATA RUBY 52.072.855

6 CORRECHA MARTHA 51.968.475

7 GALLO MIRIAM 52.803.841

8 GUTIERREZ MARTHA 39.651.195

9 HIDALGO GLORIA 65.710.949

10 LEGUIZAMON LYDA 52.842.220

11 LLANO JANETH 52.101.716

12 MARTINEZ YOLANDA 52.243.404

13 ORTEGA ANGELICA 52.360.086

14 PETIT JOSE LUIS 19.252.123

15 PINILLA MARTHA 39.640.128

16 PITA LUZ MERY 51.932.742

17 PULIDO MARTHA 51.826.484

18 RODRIGUEZ GLORIA 35.320.040

19 TRIANA MARIA JOSE 35.461.918

20 VARGAS EDWIN 80.187.486

21 VARON CLARA INES 51.555.865

22 VERA MARTHA 39.644.625

PILOT TRAINING WORKSHOP 2

BENEFICIARIES OF UNEMPLOYMENT SUBSIDIES - COMPENSAR