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Long Term Education Insurance

What if families could purchase insurance that would pay the cost of college when a child attends in the future?

Photo of Jim Rosenberg
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Who is the target audience for your idea and how does it reimagine the cost of college?

This concept is targeted at insurance and financial industry product developers, and at parents. It would reduce the average cost of college for families by creating a risk pool for expenses in place of individual savings, much like healthcare and other insurance.

Today families and students prepare for the cost of college by saving money each year starting in childhood, and / or taking on debt. What if we could create a third option? What if families could purchase "long term education insurance" that would pay the cost of college when a child attends college in the future? 

The Concept

My idea is a new financial product. It tackles the huge problem of families and students trying to save enough money for college or payoff large loan payments. It addresses the problem through a new type of higher education insurance that, like health and other types of insurance, spreads the costs across a population or "risk pool" so an individual family doesn't need to cover the full cost of a degree on its own.  



The Benefit: Lower Costs for Families

Education insurance is a complex financial product with new rewards and new risks for families. Our experiments suggest a solution is possible and worth further exploration. A purely market-based solution could provide families with a more affordable solution for college -- as low as 1/2 to 1/5 the cost of using savings or school loans, with options that could be as inexpensive as $25 to $100 per month for lower income families. A large-scale insurer that negotiates tuition prices with universities could help curtail tuition inflation and generate further savings. A hybrid market/government or market/donation solution could extend education insurance to reach every family at any income level.  

The Solution at Scale

Education insurance would create a new, large scale, powerful player in the education market. The financial product -- insurance -- provides the mechanism for funding education at a lower cost for each family. The insurance provider's position as the financial agent for tens of thousands of families creates something even bigger: a new collaborative system for financing higher education that brings powerful institutions and families into a single community. You can think of the full scale solution as a very large "insurance company" or as a "tuition co-op" serving thousands of members (both are accurate). 

The concept is scalable to cover all students in the US. In fact it should become more affordable and viable the larger the business scales by 1) spreading risk across a larger risk pool, and 2) creating a powerful new market player that can negotiate controls on tuition on behalf of families and students. Education insurance can be brought to scale as a product offering from an existing financial institution, a new social benefit business, or a government agency.  

Details, Experiments, and Refinements

We have used a series of prototypes over the course of this challenge to explore consumer interest in and the business viability of higher education insurance. The following documents provide all the detail on the experiments and what we learned. 

A Bit More About the Concept

Click the link to read the initial thoughts on the idea of education insurance and its relationship to long term care insurance.

A Lever for Controlling Costs

The initial thoughts on how a large scale insurance organization could act as a cost control on tuition by negotiating prices with universities.

Assumptions and Open Design Questions

We summarize the critical assumptions for the concept that need to be tested. We also capture some of the open design questions identified during this work that need to be explored in further product development.

Human Centered Stories

We look at what the buying experience could be like for a family planning for college for their first child.

Prototype #1 - Consumer Appeal

We use a short video and survey to test consumer reactions to this new approach to financing college. These initial conversations showed the excitement around the idea and the places where there was the most skepticism.

Prototype #2 - Insurance Can Be Offered Economically

We prototype the financial model for an education insurance business to figure out the cost of offering $1 of college insurance coverage. The experiment looks at a for-profit approach, a social benefit business approach, the impact of higher efficiency in operations, and the possibilities for a hybrid market/government or market/donation solution. The write up includes a summary of findings and a link to the full spreadsheet model.

Prototype #3 -- Serving Families of First Generation College Students

We use a survey to understand the financial constraints and priorities of lower income families where the  parents do not have a college education, and test their reactions to the insurance concept. The write up includes a summary of findings and a link to detailed response data.

Prototype #4 -- Pricing for Families of First Generation College Students  

We test the insurance packages and prices that could be offered to lower income families using a prototype for future college costs and education insurance. The write up describes some suggested packages, summarizes findings, and provides a link to the underlying spreadsheet model.

Roadmap for Implementation

A look at where these experiments ended up and where the project should go next.




What early, lightweight experiment can you try out in your own community to find out if the idea will meet your expectations?

(Updated 12/21/15) 1) Test consumer response: how do people react to the idea of insurance vs. savings or debt? 2) Build a prototype actuarial and financial model with an expert or two from the insurance industry to see what the numbers look like.

What skills, input or guidance from the OpenIDEO community would be most helpful in building out or refining your idea?

-- Insurance modeling -- Detailed population and college attendance data -- Ideas on extending insurance to cover families that cannot afford premiums

This idea emerged from

  • An Individual

Are you interested in the Path to Pitching track we've developed for this challenge?

  • No

Evaluation results

22 evaluations so far

1. Does this idea make college more accessible, especially for low income students in the U.S.?

Yes! - 36.4%

To a degree - 50%

Not that I can tell - 13.6%

2. Does this idea think beyond current cost structures of college and activate new sectors or partners?

Yes! - 68.2%

It's attempting to - 27.3%

Not that I can tell - 4.5%

3. How excited are you about this idea?

I'm so excited I just can't hide it! - 59.1%

I'm pretty neutral in my excitement level - 31.8%

I don't feel very excited about this idea. - 9.1%

74 comments

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Photo of Eric Geisterfer
Team

Hi Jim,
Congrats on making it to the final phase. I used to be in insurance and I see a fundamental problem with the insurance route. Approximately 65% of US kids go to college which means you will have an insurance claims rate of 65%. If you look at Property & Casualty insurance, the claims rate is in the single digits and the people purchasing it pay premiums throughout their lives (think how long you'll be paying for auto insurance or insurance on your house - over your entire lifetime). If the claims rate in P&C were in the 65% rate and buyers would only be paying premiums for 17 years (the time frame you use for paying into the college insurance policy) , the premiums for P&C would be much much greater - to the point where they would be prohibitive. The same goes for term life or long term care. You're paying in over a much longer time period, and the older you get the more you pay. Unfortunately, this is the fundamental reason why the insurance concept doesn't work for college tuition. The time period where you collect premiums is too short and the claims rate is too high. I don't want to be negative, I'm just pointing out reality.

Photo of Jim Rosenberg
Team

Hi Eric,

Thanks for the note. Your definitely not being negative, just challenging -- which is what I think makes this community work so well. You are pointing at the critical "technology" question here: is there a financial model for the insurance that can work for the provider and the consumers? Education insurance would fall in the "high frequency, high severity" bucket which I've learned is a tough space to make insurance work (e.g. the current challenges in long term care insurance). My current thinking is that it could only work in a nonprofit model (forgoing profits and using investment returns to lower premiums),  perhaps only for the population with lower college attendance rates (families where the parents do not have college educations), and perhaps then still needing subsidies. Even with those limits, education insurance or a "co-op model" (the same concept) may still be a more effective way to bring together personal investment and public investment to lower the cost of college for families. If a large scale insurer / co-op creates a powerful player that can represent family interests and negotiate against the large annual tuition increases we see, then we have another benefit.  

It's definitely very speculative at this point. My next step is to talk with more industry people and see if we can build (or rule out) a real financial model.  Did you have a chance to look through my prototype on costs (https://docs.google.com/document/d/1AESbY_6nQtUfPGJ5fHapCCO11cOGgcM10kFp7-nonUA/edit)? I'd love to hear any further thoughts on that, to help me see the holes.

Thanks!

Jim 

Photo of Darryl
Team

Jim, well done becoming a Top Idea selection. You have a concept that has real merit if you can find an insurance company and reinsurer. I hope you continue to flesh this out.

Best,

Darryl

Photo of Jim Rosenberg
Team

Thanks Darryl, I really appreciate the support and encouragement. I'm hoping as a next step to start improving the idea with insurance people who have experience bringing new insurance products to market. If I can find the right partners, this idea could get some momentum. 

Photo of Logan Powell
Team

Congratulations, Jim!

Photo of Jim Rosenberg
Team

Thanks Logan! And thanks for the help thinking through prototypes along the way.

Photo of OpenIDEO
Team

Congrats on your winning idea Jim! What an amazing journey it has been. We're excited by the potential of this idea to disrupt how higher ed financing can be made more affordable at a larger scale. We've also been inspired by how you've engaged with the community in a human-centered way as you iterated on this idea. Looking ahead to the next step, we would love for you to share your story in the upcoming Higher Ed Impact Phase. The Impact Phase is a space where the OpenIDEO community can share updates on how our projects are progressing beyond the challenge. For reference, here's a template for writing an Impact phase story: http://ideo.pn/1U9DrSN Well done!

Photo of Jim Rosenberg
Team

Thanks so much! It's been really fun being part of this challenge and this community. I really appreciate all the smart, thoughtful questions folks threw at this idea along the way. I'll plan to share updates in the Impact Phase down the road. 

Photo of Karen Sorensen
Team

Congrats Jim on making to impact!

Photo of Jim Rosenberg
Team

Thanks Karen. Congratulations to you too!

Photo of Darryl
Team

Jim, I really like your concept but how do you get market it to parents? A couple of thoughts. My assumption is that if this is designed as a term policy, it will be maxed out at 18 years of age which is when college begins? After that date, parents would not be required to contribute anything more and the student's tuition will be paid for 4-5 years? Does that include housing or just tuition?
Families will be able to enter at any grade or will they have to be enrolled by the 8th grade or prior to start of high school? This would present a shorter window for savings, plus higher premiums for the parents but for many of them, they and their child begin to recognize that college is on the horizon.
The downside of term is that the money is lost at the end of said term and it will not be tax deductible for the parent. As a selling point, many term policies offer conversion to a whole life policy which is priced higher but also has a payout. Normally it is at the 10-year mark of the term policy.
Branding should be open to all students. I think the concept will have broad appeal beyond 1stGen if you can price it under $100 per month. Once you start going above that, it becomes a real cash flow concern. If you have not, take a look at insurers like NY Life that have programs for kids; parents can pay on monthly, every 6-months or annual basis for a death benefit with a maximum payout of $25k. Final thought is that maybe you can form a partnership with charter schools, they are easier to access and have more control. They may not be able to endorse the product initially but you may find them more willing to allow you an opportunity to give presentations to parents with children who just starting the educational journey.

Photo of Jim Rosenberg
Team

Hi Darryl,

Thanks for the additional ideas and questions. Again, really great stuff. I haven't dug into the marketing and sales questions yet. I like your idea of engaging charter schools as a way to reach families -- I think this could be great for further research as well as for marketing.

Here's some thoughts on the questions you asked:

-- The education insurance would look like term insurance. So once the parents pay the premiums over the term (in my models I've been working with 13 years, from the start of kindergarten) they don't pay anything after that.

-- The coverage could be for different dollar amounts, like with life insurance or long term care insurance. A family could choose to cover tuition and fees only, all expenses, public college or private, all four years or a portion, etc. This would give families more options to match their financial situation.  My current thinking is that we would offer the insurance in packages (e.g. "4 year public college, tuition and fees only") rather than a dollar amount (e.g. "$10,000 per year for four years") to make it easier to understand the value. However, I'm not sure at this point if that is a practical way to price and sell the insurance. In "prototype #4" I talk about some of the options that might work for lower income, first generation families: https://docs.google.com/document/d/1m_jV3cI3LD4z7xgS0rvYG405URYpMIx7dIF4ZLJkVbk/edit?usp=sharing

--  I've been thinking that parents should be able to start the insurance at different times. The premiums would change based on the age of the child, since there is less time until the potential pay out for college expenses and the risk profile of a student changes. That is, with older kids, the parents and the insurer would have more information about the child and the likelihood of attending college as the child progresses through school. I expect we would need to use that data to determine the insurance risk.

-- I would definitely want to have the insurance open to all families. The trick is making it an attractive financial option to families where the parents have a college education. 82% of those kids go on to college, which doesn't leave a lot of risk to spread out across the insured pool. There is more to explore here, but you can see how far I got (and didn't) in "prototype #2": https://docs.google.com/document/d/1AESbY_6nQtUfPGJ5fHapCCO11cOGgcM10kFp7-nonUA/edit?usp=sharing

Thanks again! And I'm curious -- are you in the insurance field? You clearly know your way around insurance concepts.

Jim

Photo of Jim Rosenberg
Team

Darryl  -- I forgot to say. I also really like the idea of the unused insurance converting to another type of insurance (maybe disability or life insurance) for the young adult originally insured for education. If the education insurer is a larger insurance company, this could be easily done within its product family and help them keep a customer. If the education insurer is a stand-alone organization, it could be done via a partnership with a large insurer, helping them acquire new customers. We would need to look at the financial impact of this -- how does the retained value for the family affect our ability to cover costs and payouts? I've added the idea to my list of assumptions and design questions linked to the concept above. Thanks again!

Photo of Kaye Han
Team

Jim, this is some really great work. I love the video that you put together, that's the quickest and easiest way to explain the idea! Excited to see the future of this. 

I'm very curious to see the reaction of low-income parents to this idea, as the risk is if their child never attends college then they completely lose all the money they put in. I wonder how much of a sticking point this will be for them. 

Photo of Jim Rosenberg
Team

Thanks Rob. I really appreciate the support. And I agree with you, the emotions (and logic) around the risk of paying for insurance and getting nothing back is a big question that still needs to be figured out. I dug up some feedback from lower income families with kids who would be the first generation to attend college (in prototype #3) and reactions were mixed. A bit more than half were excited about the idea, a bit less than that were on the fence. It has me really curious to dig into that specific customer question as a design challenge. What could we design to ameliorate that resistance? Would it make a difference if the whole service was structured / framed more like an education co-op, where people feel they are coming together as part of a (large) community to self-insure and advance their community? Would it make a difference if there were additional benefits to being part of the community (tutoring? college advice?...)? Is the critical lever that low income participants see subsidy coming from government or donors too -- so a family makes a contribution and takes some risk, and society / those who are financially better off match them and take some risk too? Wish I could say I had that one figured out already :-). 

Photo of Joanna Spoth
Team

GREAT questions. Loving the dialogue and the update to the format of your idea, Jim.

Photo of Jim Rosenberg
Team

Thanks Joanna!

Photo of Kaye Han
Team

Yeah, this is a tough aspect that definitely needs a lot of validation as the whole idea rests upon this assumption that people are willing to take that risk. I believe this will vary across demographics as well. Asian families (pretty much in every country) deeply value education and are always willing to put that above everything else - even food. It is less of a 'choice' to go to higher education for Asians, it's the highly expected route; just like getting married or buying a house is. In that sense, it would be a much lower 'risk' for them as risk is a perception thing. 

"Is the critical lever that low income participants see subsidy coming from government or donors too -- so a family makes a contribution and takes some risk, and society / those who are financially better off match them and take some risk too?" There might be something here. Much like when celebrities or companies do donation matches (we will match every dollar raised), this incentivizes people to put money in due to the extra value. I don't have any answers unfortunately, but I do see this area as the most critical in validating. 

Photo of Jim Rosenberg
Team

I agree. It's part of the reason I highlighted in the video the risk of losing your insurance payments. I wanted to make sure that people who say they like the idea have that fact about insurance in mind. My initial tests are nowhere near sufficient to prove or disprove the market potential, but I was encouraged to see in conversations and in the surveys the number of people who were excited by the idea even with the risk. I think the question could be prototyped and tested at a sufficient scale to find an effective solution, before any big investment bets would need to be made. 

Photo of Kaye Han
Team

Awesome! I'm looking forward to seeing the progress, Jim! I hope you become a top pick! :) 

Photo of Jim Rosenberg
Team

Thanks Rob! I hope you and your team are a top pick too!

Photo of Darryl
Team

I think the least costly insurance based on the timeline would be more like a term insurance policy. I agree Jim, no one likes to pay for insurance of any type. Look at the low rate of insurance for earthquake and hurricane protection. However, I do think everyone even low income families recognize the importance of insurance, life, car, medical as a hedge against the possibility of a bad event in their life.
Consumers purchase insurance when mandated (auto and medical) by law or when they can manage the premium cash flow. Medicaid does not hold the answer as it fully funded government program and costs over $500bn per year. The ACA is not the model because of the heavy subsidized tax credits and that the majority of people on it are not paying anything but are receiving insurance as a result of Medicaid expansion.
Medicare is a closer alignment design when you think about the fact that you contribute a percentage of income the entirety of your working life until age 65. Medicare also has rules that in 0rder to have this coverage, you must contribute moneys for at least 40 quarters. There are mitigators for people who are 65 or younger, significant medical issues and have not reached the quarters requirements can qualify. But Medicare is a $600bn annual program and growing. I don't like the idea of government involvement because of the potential that elected leaders will raid the funds like they have done with Medicare and Social Security. What is needed is an insurance model that has the features of both a Co-Op and term whereas when the funds have a rate of return higher than rate of inflation members would receive a dividend check which they can cash or reinvest in the insurance pool. One thing that I did not see described is that all insurance products are built around supporting insurance, risk corridors, reinsurance and risk adjustment.

Photo of Jim Rosenberg
Team

Thanks Darryl for the great feedback / ideas. I hadn't thought about the tools the insurance industry uses to spread risk (reinsurance etc.). I will add those to the design questions to explore.

Photo of Darryl
Team

Although I can understand the need to launch in the US as proof of concept first, I think you have something that will have great interest in overseas markets like China and the UK.

Photo of Jim Rosenberg
Team

Thanks again! I really hadn't thought about international markets either. I have another note to update for design questions to explore...

Photo of Bettina Fliegel
Team

Jim,
I was reading about families that are using life insurance policies as a means to finance college educations for their children.  How does that factor into your proposal?
http://www.wsj.com/articles/SB10001424052702304788404579521532116151844
Bettina

Photo of Jim Rosenberg
Team

Hi Bettina,

It it doesn't really factor into the proposal. Life insurance plans are just used as a tax-advantaged place for savings that doesn't have the spending restrictions of a 529. That approach is still all about individual families saving enough money to pay for college. It's not insurance that spreads risk and thereby changes the cost for a family (the policies do that only for there intended purpose -- providing survivor benefits for your family in case of death).  So this is just part of the "insurance vs savings" question that is already considered and that includes a number of different savings instruments, some of which have tax advantages. 

Jim

Photo of Bettina Fliegel
Team

Thanks.
Will the  fact that the industry is selling it to  families as an option to be used for college savings have any effect on the industry's willingness to create a new product?  I had never heard of this use before.   Is it an option that can be considered for Gavin's Colllege Saving's Ecosystem?  Seems that it would be.
 https://challenges.openideo.com/challenge/higher-ed/evaluation/cumulative-savings-ecosystem

Photo of Jim Rosenberg
Team

You raise a good question. Using whole life policies as a tax-advantaged savings vehicle has been going on for a long time, but I didn't know that they were being marketed more aggressively as education savings options over the last few years.  My suspicion is that if education insurance is a good product, a financial or insurance company wouldn't turn its back on the business just because the firm runs a whole life business. Financial and insurance companies offer lots of different products to serve different needs across different types of customers, and they compete with each other from different angles.

The whole life policies might be an interesting idea for Gavin Cosgrave 's ecosystem in that families would get tax-advantaged savings without some of the limits that come with 529 plans (e.g. the states in which you can attend college). However, government and other partners might not want to put money into this type of account because there aren't controls on how the money can be used down the road to ensure it is used for education. I also like the stronger message about the importance of education and education savings that comes through from using a dedicated, well-known education savings vehicle.  

Photo of Jim Rosenberg
Team

Shane Zhao Joanna Spoth Is it possible to embed a widget (an iframe) in the post? Thanks.

Photo of Shane Zhao
Team

Hi Jim, you can try embedding the widget by going into the HTML edit mode. Try clicking the Show HTML button on the top right corner of the toolbar in the Full Description section. Then copy the iframe code in. You might want to make sure the widget is working properly before you hit Save. Hope that helps!

Photo of Jim Rosenberg
Team

Thanks Shane. My version doesn't seem to have a "Show HTML" button. No worries though, I've included the link to the tool in the concept description, was just trying to embed it directly in the concept instead.

Photo of Bettina Fliegel
Team

Hi Jim.
Congrats on making it to Refinement!  Your idea is really interesting and the video is great!  
Maybe link the video on top of the Post, or with the Title, so that others can see it immediately and give you feedback?

I wonder if one approach to share this Idea with low income and first generation families might be to reach out to the community service providers or faith based organizations in their communities.  There may be folk in these organizations, community members, or community leaders, that are trusted who might be able to facilitate a discussion and gather feedback on the idea.  

Would it be possible to insure all the children in the family as a group?  Can that offset the concern that parents might have about losing all of their money if a child does not attend college?  (not sure if this makes sense....)
Would insurance of this kind be time limited?  What if a youth is unable to attend college at the age of 18 because she dropped out of high school.  At the age of 22 she decides to enroll in a GED program and at 25 applies to college.  Would this insurance be available in this scenario?

Photo of Jim Rosenberg
Team

Hi Bettina,

Thanks so much for the support. Sorry I took so long to respond. I took your advice and moved the video link to the top of the page so folks can see that more quickly. Your questions are great - re: insuring the family rather than one child, and whether the insurance is time limited. I've been working with the starting assumption that it is for one child and it is time limited, but mostly to simplify the exploration. I think your questions are spot on and I'll add them to my list of things to figure out :-).

Jim

Photo of Bettina Fliegel
Team

Hi Jim. Your exploration of this idea is great!   
In your scenario above I might include the baby's grandparents as part of the conversation.  I think young couples might include their parents, or other family members, in conversations about college financing as they have more experience in financial matters.  (although these days youth may have big loans and be more educated on financial issues.   What do you think about this?) 

Can it be helpful to translate the video into Spanish at some point to get feedback from immigrant families with children who will be 1st generation students?
 
In low income and immigrant families financial decisions may involve larger family units.  Multiple generations may be connected, pooling resources.  Might sharing the video and survey with family groups be an instructive way to get feedback, determine needs?  

For families with no prior experience buying/having insurance, parents working in the informal economy, or at jobs with no benefits, what is their understanding of the concept?  Marketing it to these families might be different than to others.

Photo of Jim Rosenberg
Team

Thank you again! These are great points and ideas (and more work for me to do :-) I'm adding these ideas to my list.

Photo of Pascale Leroueil
Team

Hi Jim,

I love hearing about new ideas to increase access to education and yours is a new one for me!  I had a couple of questions:

 (1) I think your idea is the most attractive when it negotiates a lower-than-market-place tuition rate for people who buy the insurance.  That said, I wondering what you thought about the likelihood of (a)  a 'college management organization' to be perceived as a legitimate representative of the students that is negotiating on behalf of and (b) for a university/college to commit to a tuition rate more than  the normal 2-3 years out (which I think is required for the system to work).   Thoughts?

(2)  Have you done the calculation for per year of education coverage assuming the parents invested the same $250/month in an index fund?

Photo of Jim Rosenberg
Team

Hi Pascale,

Thanks for your questions, these are great. Here are my thoughts:

I think the organization would be perceived as a legitimate representative of students / families because of the financial contracts those families would have with the organization for insurance. The organization wouldn't just be advocating for or representing the families. It would be a true agent of those families, charged with speaking for them to negotiate tuition rates.

The universities wouldn't need to commit to tuition levels in advance. The insurance would need to be built with tuition inflation in mind, the way long term care insurance prices in expected inflation for medical expenses. So when selling a policy, the price for the policy would be set to cover $y of tuition x years in the future. The target coverage would be selected based on what tuition is most likely to be at that time.

I did compare the return from buying insurance with the return from investing the same amount each month. The insurance seems to be the more attractive option. I didn't think to include this in the financial discussion, so I'll add that -- thanks for bringing that up!

Jim

Photo of Jim Rosenberg
Team

Shane Zhao Joanna Spoth  I created a quick (90 second) video and survey as a prototype to test consumer reactions to the idea of higher education insurance. I'm trying to get it out to as many folks as possible. Could you share it with the OpenIDEO communities (via Twitter, Facebook, etc.) to see if we can get reactions from that larger audience? Here's the link:  http://bit.ly/edinsure  

I'm also exploring how to reach the critical target audience: parents who don't have a college education / first generation college students. I've asked SurveyMonkey if they'd be willing to put it in front of their audience panel. Will also poke around at other options. If you have partnerships / access to a broad audience panel that would be great too!

Thanks.

Jim

Photo of Joanna Spoth
Team

Hi Jim! GREAT work on the video and survey. We'll definitely get the word out through our social channels. I'll also share the link with a few people I know locally who are connected to the education community and our partners at UBS as they're well connected in the space as well. Excited to hear about any results you get!

Photo of Jim Rosenberg
Team

Thanks Joanna. I have my head twisted around some of the financials at the moment. The deeper I dig into the numbers, the more I'm wondering if the financials can be made to work. I think it could still be interesting to test consumer interest while sorting all that out, but what do you think? Does it make more sense to wait until I have a basic financial model to share with the community here and an idea whether the consumer cost can work?

Photo of Jim Rosenberg
Team

Joanna Spoth  and of course now that I've slept on it (and had a conversation with Logan Powell ), I'm back to my original thinking about the prototype: it would be great to understand consumer interest and reactions, and learn more from their comments. If the interest is there, we'll keep getting creative until we figure out a way to make the financials work :-) Logan had great ideas for another bit of research that I want to think about too but I think that complements rather than replaces what I have so far.  So, if you agree, it would be great to get the survey out to the communities you can reach. thanks. 

Photo of Shane Zhao
Team

Love the new updates, concept video and user testing that's in the works Jim! It's also great to hear that you've touched base with Logan to brainstorm on the prototype. We've shared the survey with our followers via OpenIDEO's Twitter channel here: http://bit.ly/1VxSmbu 

In addition to getting feedback from potential consumers, it'd also be helpful to chat with some institutional experts to see what they think. E.g. university financial aid admins, provosts, local banking institutions. We're particularly curious about how this idea can be a viable and feasible business solution for key partners involved. I.e. how might this be a sustainable business for service providers? Which local partners might you activate during the first steps? Perhaps that might help as you work on the basic financial model. Excited to hear more!

Photo of Joanna Spoth
Team

Hi Jim! Love @Shane Zhao's input and that you touched base with @Logan Powell. Sounds like you're definitely on the right track and we can't wait to hear more updates!

Photo of Jim Rosenberg
Team

Thanks Shane, Joanna. This is a great help. I have some business model work put together too, just need to write it up and get that added to the site. Hopefully will get that posted in the next day or two.

Photo of Jim Rosenberg
Team

Shane, I've added a financial prototype to the concept. Hopefully this starts to answer the question, how might this be a sustainable business for service providers. I have some more work I want to do on the product / packages themselves, but I think this fills in an important part of the picture.

Photo of Shane Zhao
Team

Thanks Jim! We'll make a note for our financial experts to take a look at this:)

Photo of Leslie Brody
Team

Hi Jim,



What I like best about your idea is that it provides a way to prepare for college that is new, but also familiar. In your proposal you mentioned how confusing it is to figure out how to save for a child’s future education. I suspect that the overwhelming difficulty of figuring out the most effective way to save could cause people to give up altogether. Providing families with a method to save that is an extension of what they are already doing – paying for health insurance, car insurance, etc. – would be one way to reduce stress on families, and perhaps raise their hopes for being able to afford to send children to college.

Here are a couple of questions that I have for you about the content of your proposal:

First: Is it necessary to charge some families more than others for the insurance? There is something in me that balks at the idea of paying different amounts for the same educational opportunities. I understand the economic reasoning behind it; but I worry that it would create feelings of competition and hostility between families. For instance, individuals might find themselves hoping that other neighborhood children do not go to college, as it will keep their own rates down. How would this plan affect the relationships between families, and college students, in similar cohorts? In different cohorts? Could it potentially affect people’s choices about where they live? Who their neighbors are? Could this, in turn, have an effect on a neighborhood’s economy? I am curious of the broader, social impact of the system.


Second: Could you elaborate more on the consequences to families of losing the money that they invested if their children choose not to attend college, or are, for some reason, unable to do so? This is a huge gamble – especially in families where it is a struggle to make payments in the first place. Given how many factors affect whether or not students graduate from college, and that there are other options where they retain their investment should their child not go to college, I’m not sure whether it’s fair to encourage families to take this gamble. What transparency-related issues do you foresee for education insurance? How would companies ensure that families fully understand the huge risk they would be taking?



Looking forward to hearing your answers!



Leslie

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Leslie,

Thanks for the support and the really great (and challenging) questions. I'll share a few thoughts now, but I don't feel like I have the full answers right now. I'll need to keep working on these as we move forward. 

1) My sense is that a market based solution left to itself would end up with different prices for different market segments, much like we see in other insurance. It seems we could create a version of the insurance where everyone pays the same amount for a particular tier of coverage e.g. two years versus four years of school. A layer of regulation could be added to control prices, like we see in the affordable care act to change the way preexisting health conditions are treated. One risk is that if we smooth out the pricing so that the "high risk" families (those with college-educated parents where 82% of kids go on to college) are mixed with the "low risk" families (those with parents who did not go to college where 36% to 54%  of kids go on to college) (data from the National Center for Education Statistics, "The Condition of Education 2001"), we may end up increasing prices for the people we are most interested in helping. Those are just first thoughts, definitely a question here to keep knocking around.

2) I agree with you that the toughest aspect of this solution (assuming the financial numbers actually work out) is the risk that you pay for insurance each year and never use it. The pricing would have to account for this risk in order to make it attractive versus just saving your money. There's an economics way to think about it, I think, in terms of expected value: the money you save by paying for insurance must be greater than the expected value of the loss if your child doesn't go to school (which is the probability that your child does not go to school multiplied by the amount you save by paying for insurance). That's all well and good for figuring out pricing but it doesn't deal with the emotional question about risk for people, and it doesn't deal with the social justice question you raise. I'm not sure what to do with those yet.  Certainly regulation is needed, as with all financial products, to make sure buyers understand what they are buying. And I imagine this as one of a set of financial options for families -- savings, loans, insurance -- where different families pick different solutions that work for them. Some folks will feel they can save the money, so why take the risk with insurance, others will see insurance as the best option. Again, these are just some starting thoughts that need to be pushed forward.

Jim

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Welcome to the refinement phase Jim! We love how you drew inspiration from the long term care industry to explore creative solutions for tackling the challenges of affordable higher education. We also appreciated how you developed user scenarios to flesh out this idea in a human-centered way.

In the Refinement phase, we’d love for you to continue developing the viability, desirability and feasibility of this business solution. The following are some feedback and provocations to consider. Education insurers may seek to maximize profits when a greater portion of the college-expense pool is unused. What are the incentives for Education insurers to help more students attend and graduate from college? You began to touch upon the potential for education insurers to negotiate tuition fees with a network of participating universities - we’d love to learn more about this aspect of your idea. In particular, we’re curious to learn what the value propositions are for participating university partners. Your lightweight experiment to build a financial model with experts from the insurance industry is a great idea. We’re looking forward to how the math can demonstrate cost savings for families and also potential profitability for insurers and participating universities.

Here are some key questions and milestones we encourage from all ideas in the Refinement:
1. How might this idea address the unique needs of low-income families and first generation college students?
2. Clearly summarize the value proposition of your idea in 1-2 sentences
3. Identify assumptions that need to be answered in order to validate your value proposition.
4. Collect feedback from potential partners and users to answer the assumptions you’ve identified.
5. Communicate your idea in a visual way with user experience maps http://ideo.pn/UX_Map Or you can use the Mural template provided to you to collaborate visually with your teammates. 

Lastly, here's a useful tip: When you update the content of your post, it'd be helpful to indicate this in your idea title by adding an extension. For example, you can add the extension " - Update: Experience Maps 12/22" to you idea title. This will be a good way to keep people informed about how your idea is progressing!

We’re excited to see this idea progress in the next weeks!

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Thanks for the great questions OpenIDEO . I'll focus on these questions in my work over the next couple of weeks to refine the idea. 

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Hi Jim,



Great job and kudos on making the shortlist! Funny, I'm in Virginia too...

Anyhoo, I've been asked by the OpenIDEO leadership to reach out. This is a great community and I'd like to offer my assistance at helping improve your chances of successful prototyping. I'd like to set up a time to speak with you about your idea, where your current thoughts are and brainstorm how you might postulate a small experiment around your idea.



Might you have some time in the next few days for a brief Google Hangout? If so, send me a message with your email address and I'll send a scheduler to find us a time.



Kind regards,



Logan

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Hi Logan. Would love to talk. I shot you a LinkedIn connect so we can get things organized. (Apologize, I may just be dense but I don't see how to send a message directly to you here rather than post to the public.) 

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Team

You're not dense! In an effort to keep everything transparent for our community, we don't have a direct messaging option. We encourage you and Logan to collaborate however is easiest, just don't forget to keep us in loop with noting updates to your idea. Excited to hear how it goes!

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That makes sense. Thanks Joanna.

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Great to see you two connect already Jim and Logan! We just dropped in a new comment with some expert feedback for Long Term Education Insurance. Check it out when you have chance:T

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Congratulations on making it to the Refinement Phase.  In addition to insurance modeling, I would recommend that you seek input/assistance from economists and marketing professionals to get their input.  For what its worth, my observation is that college tuitions are increasing because student demand exceeds current supply (e.g. application are up considerably) -- and that when colleges and universities compete, they do not compete on price but rather on other intangibles (reputation, quality of faculty, setting, etc.).  Price control seems to work most effectively when competing goods/services are fungible.

There is some good data out there as well that may help you refine the value proposition -- perhaps start with www.census.gov    Good luck.

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Team

Thanks for the ideas. I think it will be very helpful to get input from economists, consumer marketing professionals, and people with experience developing insurance products. The idea here isn't really about price controls, it's about spreading the cost of education across a risk pool to reduce the costs that each student or family must shoulder. I do think that down the road, an education insurer that represents a significant percentage of the tuition revenue for a college will be in a position to influence tuition rates and other fees, but that's a later step. If that collective bargaining advantage never came to pass, the core benefit from an insurance model would still be there.  

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Congrats on making it to the Refinement Phase Jim! In the next few days we'll be sending you additional feedback to help you take this idea forward - so be on the lookout for that. We're looking forward to how this idea will grow!

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Team

This is great. Thanks OpenIDEO. I'm excited  to keep working on the idea with the community here.

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Hi Jim,

I love this idea. It reminds me of a program that Texas did called the Texas Tomorrow Fund.
Essentially when I was a baby, my parents locked in the tuition prices of a public college education for me in my future. Now all of my tuition costs are paid for by this program and provided a lot of financial relief for my parents and I now.
You asked for possible enrollment type data, since I feel this program is kind of similar, I found a 2013 report with a lot of data that is hopefully useful for you.
http://www.tgtp.org/docs/TGTPAnnualReport2013.pdf

Here's the general website with information on the program:
http://www.texastomorrowfunds.org/

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Team

Thanks Madeline. I hadn't thought of the programs like the Texas Tomorrow Fund. I considered a similar option for my daughter here in Virginia. Those are an interesting way of hedging risk too. One exercise, if/when this insurance idea is fleshed out, would be to compare a prepaid program to the insurance option and see why families would prefer one vs. the other -- both offer financial advantages and it would be really interesting to think through this comparative value. And thanks for the data link!

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Love how you're drawing inspiration from the healthcare industry Jim! This is a great way of reimagining how the cost of college can be financed through alternative ways. Which institutional/ corporate partners might you leverage to create this Education Insurance?

It'd be helpful if you might consider helping people better grasp how this idea could play out by describing some of the proposed activities you've outlined. Check out this example: http://www.openideo.com/open/e-waste/concepting/neighbourhood-e-waste-champion/ where a few scenarios were created to explain the idea in a human-centered way.

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Hi Shane. It took me a while to get back, but I dropped in a human-centered story to try to make the concept more real. I went with one longer scenario rather than showing use by a few different types of people. Let me know what you think. 

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Jim, Joanna Spoth and I love how you used human-centered storytelling to bring this idea to life. Thanks for the update!

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Thanks Shane, Joanna. I'll try to make some time to add human-centered stories to some of the other ideas I've posted too.

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Interesting idea Jim, reminds me of an idea I have. Follow something like California's model for paid parental leave. Have workers pay into a fund, and every 5-7 years they can have a 6 month sabbatical which includes classes, ideally aligned with industry mentors and a living stipend. Even if college was free, I'm not convinced this frontloading approach is the best for our evolving economy. Instead we need to make it easier for people of all backgrounds to keep learning and adapting.

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Team

Thanks Chris. I'm with you -- I think the future of education should look much more like lifelong learning than a one-time binge. I threw in an idea about a reboot along those lines in the "surprise us" section of the Research phase, and there was also a good post about Stanford d.school's "open loop university" model.  Your idea is neat too. All that said, I like some of the ideas I've been seeing here for how to address the current education model and its costs. 

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Hello Jim, 

I really like this program, and because I aspire one day later my children going to study in America, I have included my children from childhood to the world famous insurance. Unfortunately my husband ensued affected by layoffs, we were not able to pass on, we lost money without refund.

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Team

He Eldy,

That would definitely be a concern. I think an effective insurance product could be built with protection for financial hardship built in. I sketched that idea in the use story I added to the concept tonight.

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Team

So Educational Insurance can be made when the child is born for 10 or 12 months payment. After 12 months X 100 dollars payment the child is insured until education is finished. In the case of family lose this insurance will be active for child future protection.

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Team

You are close to a solution but not enough, education insurance can be good for a young person who lost their family. So their education future protected by insurance. This should be part of the solution.

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Team

Hi Mustafa. I think the type of insurance your talking about is important too. I think there are some solutions already out there for protecting kids who lose their parents. Many families plan their life insurance needs with education costs in mind for the children that will survive them. The US government also provides survivor benefits for children as part of Social Security and people can dedicate those funds to education savings. It would make sense though in long term education insurance to build in protection in case the parents die or for other reasons can't make premiums at some point -- I hadn't thought about that. Thanks for the comment!

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Congrats on this being today's Featured Contribution!