1. New opportunities in
microinsurance
distribution
Presenter:
Peter Gross
Regional Director - Africa
Microensure
Presenter:
Jeremy Leach
Director
Bankable Frontier Associates
Presenter:
Craig Churchill
Team Leader
Microinsurance Innovation Facility
Presenter:
Rajeev Karunakaran
Head of Insurance
FINO Fintech
Moderator:
Jasmin Suministrado
Knowledge Officer
Microinsurance Innovation Facility
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2. Discussion flow
1. Why alternative distribution?
2. Alternative distribution models
2.1 Mobile phones
2.2 Retailers
2.3 Banking correspondents
2.4 Direct agent
2.5 Public-private partnership
3. Issues and challenges
4. Conclusion
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3. 1. Why go alternative?
Traditional distribution channels, agents and
brokers unfamiliar with target market
Scale is a key component of the business model
Entry point is often embedded or bundled with
another transaction (e.g. loan, paying utility bill,
buying cell phone minutes)
Insurers’ brand is often not trusted
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4. 2. Range of alternative distribution
channels
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2.1 Mobile
insurance
2.3 Banking
correspondents
2.2 Retailers
2.4 Direct
agents
2.5 Public-private
partnership
5. 2.1 Mobile insurance
In 2012, 12 initiatives were launched
8 of 9 markets outside South Africa with more than 1 million insured have
reached that mark through mobile insurance
By April 2013, 6 initiatives have launched already (that we are aware of):
Mobile money
Papua New Guinea: Pacific MMI Ins. Ltd & Nationwide MicroBank
Tanzania: Liberty-Mobicash
Airtime deduction
SriLanka: BIMA- Dialog
Kenya: MobiSure
Loyalty
Mauritius: BIMA Emtel
Freemium
Tanzania: MicroEnsure + TIGO - “Get well with Tigo”
And one fall out in 2012 when 1,6m people lost their (loyalty) cover
overnight in Zimbabwe5
6. M-Insurance: MNO driven models offer
huge scale if you get the timing right
Loyalty – Embedded Airtime deduction Mobile Money
MicroEnsure – Tigo Mobile,
Ghana / Tanzania / Rwanda
&
Others
Zong – Adamjee Life,
Pakistan
&
MTN Zambia - African Life
MTN – Hollard
6 For further information, see Leach, COVER August 2010
High cost (for MNO),
high scale
Greater cost effectiveness,
higher cover
High cost (for
consumer), high scale
7. Why African consumers do not have insurance today:
Cost
• Typical insurance premiums can represent 6-8% of a typical
income in mass market
Trust
• Insurers are not seen as trustworthy due to product
complexity and poor claims payment record
Access
• Insurance agents are not sufficient to cover a whole country,
and they do not serve the low-income market
Under-
standing
• Clients lack financial, legal, health education to understand
complex coverage, terms and conditions
Mobile Insurance and DemandMobile insurance and demand
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8. Cost
• Offer “free” or low-cost introductory products
Trust
• …through a trusted (ie telecom) brand
Access
• …that is located everywhere
Under-
standing
• …and begin with simple products
How mobile insurance overcomes demand obstacles:
Mobile Insurance and DemandMobile insurance and demand
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10. Telecom viability:
ARPU Increase of 10-15% leads to $5 new revenue per subscriber in
year one
Churn reduction of 20% address a critical need for telecoms
yuMobile, Kenya – “yuCover is the most successful product we have
ever had for ARPU and churn”
Breakeven on free insurance for telecom after marketing expenses: 8-
10 Months
Insurer viability:
Vanguard Life, Ghana: “Tigo Family Care Insurance the most profitable
product in the portfolio”
Breakeven on free insurance for insurer: 3-5 Months
Loss ratios on MicroEnsure free insurance products: 30-60%
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Commercial viability – the good news
11. Commercial viability – challenges
Telecom viability:
“Free” product loses value after 12-18 months
Cost of agents in Ghana is too high to sustain
Mobile money-only products are currently limited to
Kenya, Tanzania, Uganda, where there are many active
mobile money users
Insurer viability:
Voluntary, paid-for products attract anti selection, risk
rate must be 3-5X that of free products for same cover
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12. Without agents, yuCover is economically sustainable, but
client understanding is low. What will we do about it?
IVR option on yuMobile customer service menus to provide
voice education on product
Auto-outbound “welcome” calls to registrants after
successful subscription
Post-registration policy terms SMS
Monitoring & Evaluation: SMS “tests”
MicroEnsure Call Centre outbound call audits
3-5 Regional product managers to support telco field staff
and maintain awareness and understanding of product
Addressing client understanding: yuCover
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13. Three very different brands requiring very
different sales approaches
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2.2 Retailers
Take it Eezi
(informal cash retailers)
PEP Stores
(cash retailers)
Jet Stores
(credit retailers)
14. Insights on the retail models
Simplicity is key - the product must also sell itself eg funeral insurance
Need for strong systems to ensure a positive sales experience and to
prevent fraud
Trust is important and a strong retail brand is key
Selection remains a challenge in these cash based models as there is no
screening
Scale comes from a combination of a strong brand, effective collection
system and a product that sells.
Formal retailers effectively subsidise the cost for the client – Edcon (Jet)
and PEP prices are hard to compete with. Take It Eezi is the opposite.
Advice and disclosure is a challenge but the rise of alternative agents
are addressing this
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15. 2.3 Banking correspondent (BC)
BC model aims to promote banks offering financial products,
especially savings accounts, to previously un-reached population
Promoting banking with low capital cost by enabling outsourcing
of rural business to agents on a commission basis
Distance criteria also was laid down with regards to the location
of the agents engaged by the bank branches
Use of Information Technology: Smart cards for opening bank
accounts with biometric identification and mobile banking, etc.
Benefits : Easier access and better fraud control
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16. FINO’s robust technology supports
numerous products and channels
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Branch
FINO Technology supports all channels and front-
end architecture.
Its not about the architecture though!!
Saving
Loan
Credit Scoring
Recurring Dep.
Term Deposit
Govt. Benefits
Cash Credit
Overdraft
Remittance
Insurance
Pre-paid
Purchase
Bill Payment
Public Dist. Sys.
17. Partnering with 24 banks, 3 government schemes, and 5 insurance companies
Increase in penetration of insurance to the uninsured and lower income
segments of the country due to extensive reach of BCs. 15,000 BCs active in
microinsurance, each enrolling 5 new customers per month. Current outreach =
1.2 million (microinsurance launched in 2009)
Conversion rate in the cross-selling of the microinsurance product by the BC is
about 35% – 40 % which in turn results to higher penetration
BC is authorized to offer banking services such as cash transactions, and cross-
sell insurance to customers in places where banks do not find it viable to set up
their own branches
Since BCs are controlled by banks, possibility of “wrong” selling is very minimal.
And with simple products, customers also understand the features immediately.
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FINO success in distributing microinsurance
using BC model
19. 2.4 Direct agents
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Seguros (Brazil) sells funeral assistance and income
replacement policies for ~ZAR 50 pm. SINAF policies are
sold through a sales force of 110 broker representatives.
SINAF covers more than 500,000 lives (100,000 primary
policy holders). Flyers are sent for two weeks prior to the
sales force arriving in the area. Sales force proceeds door to
door and returns in a month.
SouthAfrican retailers are now experimenting with alternative
agents with considerable success.
Return of the direct agents - with a twist?
20. Critique to the direct agent model
What percentage of premiums need to be paid as
commission?
Is the commission structured to incentivise sales or
minimize lapses?
Does the product provide good value to the
policyholders?
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21. 2.5 Public-private partnership
Some of the largest schemes are organized by governments
and implemented by insurance and reinsurance companies
Insurance can be a critical input to achieve public policy
objectives (e.g. rural development, universal health care,
food security, disaster relief)
Insurers can see governments as customers
Opportunities to link premium payments to G2P transfers
…but not without challenges
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22. FINO serving some of the big
government schemes
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Rashtriya Swasthya
Bima Yojana (RSBY)
provides health
insurance coverage for
below poverty line
families
FINO manages the end
to end process from
enrolment to claim
processing for these
families by providing
them with an
identification and
transaction mechanism
World’s largest
healthcare coverage
The National Rural
Employment
GuaranteeAct
(NREGA) assures rural
residents with hundred
days of assured
livelihood through low-
skilled work
FINO pays the laborer
directly through smart
card – cutting out the
traditional middlemen
and ensuring greater
transparency and
accountability of
government spending
World’s largest
employment act
Social Security
Payments (SSP) are
made by the
government to old,
widowed and disabled
individuals to assist
with living expenses
FINO pays the
recipient directly
through smart card –
ensuring greater
transparency and
accountability of
government spending
World’s largest
social security plan
23. 3. Issues and challenges
1. Managing partnerships
2. Role in the claims process
3. “Agent” training
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25. Issue 1: Managing partnerships
Telecom Type Internal Goals Stage 1 Product Stage 2 Product
Recent Entrant
Establish the brand,
steal customers
Simple Embedded,
Free Product
Free Product
Enhancement
Embattled Competitor
Reduce churn,
change direction
Subscription
Product with In-Life
Benefits
Reward for loyal
customers only
Market Leader
Diversify income,
reduce churn,
innovate
Simple Subscription
Product
Offerings targeted
to customer type
Practical Steps: How to Pitch a Telecom
Brand
& Sales
Under -
writing
Claims Executive
Human
Resources
Know Your Customer: Fitting the Product Set to the Telecom’s Position
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26. Keeping and growing the partnership
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Maintain client value by connecting to
business intelligence or analyst
departments in telecom: conduct
market research, analyze loss ratios,
and make revisions where necessary
Stage 1: Simple Life/Accident
Market Creation
(6-12 Months)
Start with “free” loyalty
product to generate fast
uptake and introduce
customers to insurance
Stage 2: More Complex; Hospi-Cash/Education Fees
Market Development
(9-24 Months)
Respond to demand for
more product offerings as
insurance scales up
Stage 3: Mine the database
Full Service Provision
(18-36 Months)
Target customers with data:
telecom now the customer's
insurance provider of choice
for all risks
27. Issue 2: Role in the claims process
Payment of claims are critical in order :
1. To create a market - penetration levels are very low in emerging markets eg only
2% of the adult population in Nigeria & Mozambique have insurance
2. To build trust that insurance is valuable - claims ratios show low value eg one
model we investigated had 0.05% claims ratio but are often only 20%
3. To meet the risks in time - claims turn around times can be very slow – averaging
3 months in the Philippines
4. To address the promise of the distribution partner – whose brands are often
much more trusted than insurers.
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Grupo Elektra, a retail chain in
Mexico now owns an insurer
and bank
Vodacom South Africa, an MNO, now owns life and
general insurance licenses
If servicing does not improve the distribution partners may take insurance in
house:
Distribution partners are more focused on claims than insurers – which
creates opportunities and threats
29. Issue 3: “Agent” training
Challenges
Coordination on the field and training of 25,000 BCs
Updates : Time taken to communicate and give the update /
changes in the products to the field is comparatively higher
Solutions
Mobile/ SMS-based training module – the BC gets updates
on his mobile through a SMS in a timely manner (cost-
effective, convenient and no lag time)
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30. 4. Concluding thoughts
Success in microinsurance remains a story of
distribution – where one is able to manage scale,
collections and risk management.
What can insurers do to have greater control over
distribution?
To succeed at distribution, insurers need to get into
the minds of the distributors.
Technology can play a key role in reaching low-
income segment; but “trust” serves as foundation
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31. New opportunities in
microinsurance
distribution
Presenter:
Peter Gross
Regional Director - Africa
Microensure
Presenter:
Jeremy Leach
Director
Bankable Frontier Associates
Presenter:
Craig Churchill
Team Leader
Microinsurance Innovation Facility
Presenter:
Rajeev Karunakaran
Head of Insurance
FINO Fintech
Moderator:
Jasmin Suministrado
Knowledge Officer
Microinsurance Innovation Facility
31