Mobile innovations in insurance Presentation to African Insurance Distribution &

Bancassurance Conference

Cape Town, SA – 12 to 14 May 2013

Outline

Setting the Scene – innovations story in Kenya & lessons

In Banking

In Mobile phones

The Insurance story

UAP experience and lessons

The next frontier

The change in Kenya’s Banking Landscape – the coming of Equity

The Mobile phone revolution in Kenya – and Safaricom’s role

Setting the scene: Learning from others

Late nineties/early 2000’s

• Main banks started mass closure of branches

• Closed many accounts that couldn’t reach minimum balances

Total numbers of Kenyans with bank accounts plummet

• Less than 1m with Bank Accounts by 2001

In the 21st Century

• A Bank Account became a status symbol

Banking: State of the Industry

Starts opening branches where the main banks were closing them

Meanwhile a small struggling building society shows up

• No minimum balances

• No ATMs – welcome to ‘the bank’

• Its name Equity – means equalizing people

It is the largest bank in Kenya

Today; less than 10 years later

• Over 7.5million accounts

• Asset base of ZAR 25 Billion

• Profits ZAR 2.4B

Banking: The Case of Equity Bank

In 2000 Kenya had only one Mobile phone company

• Government owned

• Less than 30,000 subscribers

• Expensive lines – Kes 250,000 (R 25,000)

• That company was called Safaricom

Only one fixed line operator

• Less than 500,000 subscribers – most of them businesses

• And ‘occasionally worked’

A phone line was a status symbol

• And a government tool of control

The Mobile phone experience: Safaricom

Kencel the 1st private network chose to satisfy the ‘corporate market’ first …

To the disappointment of many with ‘pent up demand’

Government brought in a strategic investor into Safaricom

Safaricom chose the Retail market … an instant hit with the masses!

Numbers grew quickly - beyond forecasts and reforecasts

Today has 70% of all lines and over 90% of all billings

And Mpesa – which transfers more money in a day than Western Union in a year – 21 m users

A phone line is now a necessity

Then … Liberalisation … and Safaricom

Innovations: mobile money Mpesa (USD 3b in deposits); Mobile bank

accounts – M-Shwari (1 million accounts in less than 6 months); mobile

apps in almost anything

Over 40% of Kenyans own a bank account

• From less than 10% 10 years ago

• > 70% of adult population

31 million mobile phone lines i.e. 78% penetration

• < 500,000 lines 11 years ago

• Mobile money and related services transformed financial services

The two, Equity and Safaricom

• have had the greatest impact on Kenya’s renaissance in the 21st century

Supported by:

• Political & economic liberalisation

• And infrastructure development

The impact: Equity and Safaricom

Kenya largely an ‘informal’ economy

• Of total work force

• Only 11% in formal employment – 2.5m

• 39% in informal businesses – SME’s

• 39% in agriculture and pastoralism

• The rest – fully unemployed

• Barclays, Stanchart, Standard Bank and yes .. Kencel were targeting only 11%

• Equity, Safaricom chose 89% of the market

• And more focus on 78%

Informal does not mean micro

• Kenya’s market requires a ‘different’ not an ‘informal’ approach

• And the mobile phone is the greatest tool to reach them

Why this success? Understanding Kenya

As the Banking and Mobile revolution was happening …

The insurance industry remained untouched

Total penetration remained around 2.5%

Insured population grew from 5% to 7%

Compared with 40% for banks

Or over 78% for Mobile phones

Insurance not a status symbol

But an ‘unnecessary evil’

During the same time – some companies collapsed

Then the industry started questioning itself

About Insurance

Taking away policyholder money &

confidence

In 2007 industry association did a major customer research – the uninsured market

Key findings

• Customers don’t understand insurance

• Products have no relevance – remember the 11% focus

• Or are not accessible (especially in informal or rural areas)

• And please pay claims!

A battle to respond started

• But there is no Equity or Safaricom …. yet !

• At UAP we are trying and a few others are … but its hard to change old habits quickly enough

Industry efforts

We decided

• To simplify insurance

• Expand our market to the ‘informal’ market

• With relevant products

• Serve the uninsured market

• Easily understood

• Simple to roll out & administer

• And relevant distribution mechanisms

• That reaches customers at their convenience

• Reduces cost of distribution

• While holding onto the ‘formal’ market products

The two flagship

experiments …

• Kilimo Salama

• SalamaSure

The next experiment

• AIfyaImara (Health Insurance Product)

At UAP Insurance:

The Mobile Phone

• Amazing reach

• 16.2 m internet users

• 1m broadband users

• 2m formal sector employees – multiple access

• The rest – on mobile

• Cheaper & cheaper smart phones

• Amazing tech innovations

The social media revolution

• Redefining how we live and connect

• And solve our problems

The Common denominators

Kilimo Salama: Weather Index Insurance for small scale farmers

2012 Winner: Financial Times/IFC Sustainable Finance Awards for Technology in Sustainable Finance

What is weather index based insurance?

Weather station measures conditions

No farm visits = low admin costs

Relation rainfall & crop growth using agronomic models

Covers defined shared weather risks (drought, excess rain, frost, weather related disease)

If weather station shows loss, then all insured farmers are paid, irrespective of on-farm loss

Farmers encouraged to take care of their farm

Quick disbursement of payouts

Example Agronomic model

How does Kilimo Salama work? (continued)

How does Kilimo Salama work? (continued)

19

Claims Settlement Process

Marketing & Communication Communication Channels

Field days

Farmer group trainings

Radio show

Telephone helpline

Focus group discussions

Insured 200 farmers in first pilot in 2009

11000 farmers in 2010; 23,000 in 2011

45,000 farmers in 2012

Projected 80,000 in 2013

Modest premiums on first pilot

Premiums of over Kes 70 million (R 7m) in 2011

Success Highlights: What has Kilimo Salama Achieved

The Products Mix:

• Striking a balance between Indemnity based and Weather Index Products- Not all weather risks can be transferred through index based solutions e.g. Fire and Hail.

Insurance Infrastructure:

• Insufficient weather data, number of automatic weather stations, Quality historical weather data

Basis risk: Defined as when a famers suffers loss and the index does not show that there

is a payout.

Marketing and Distribution:

• Due to many farmers involved scaling up is only viable if registration and payouts are paperless.

• Distribution through Agro-vet shops; Insurance is not their core product – Insurance registration process must be fast and convenient

• Regulatory approvals for alternative distribution channels

• Greatest success has come from use of aggregators.

Key Challenges

UAP Salamasure

What is

Salamasure?

Salamasure is a mobile phone driven Personal Accident Insurance Cover

Provided by UAP Insurance

Winner: 2012 African Distribution Innovator of the Year Award

Scope of Salamasure Cover

Accidental death

Permanent disability as per the continental

scale

Medical expenses

arising from the accident

Last Expense

Cost of Artificial Limb

No Age limit

Salamasure Cover Benefits

Standard

• Loss of Life & Permanent Disability Kshs100,000; Funeral & Appliances Kshs10,000, Medical Kshs50,000

(Kshs. 200)

Silver

• Loss of Life & Permanent Disability Kshs200,000; Funeral & Appliances Kshs10,000, Medical Kshs50,000

(Kshs. 250)

Gold

• Loss of Life & Permanent Disability Kshs500,000; Funeral & Appliances Kshs10,000, Medical Kshs50,000

(Kshs. 400)

Unique features of Salamasure It’s a mobile

phone driven PA Product

There are no forms to fill when

applying

Clients are identified by their

ID,PP,BC number, Cell

phone number and a unique Policy number

Flexible monthly premium payment

period

Convenient premium payment mode through the

mobile phone

Claims notification and

settlement through the

mobile phone

Flexible choice of benefits

Salamasure – USSD code version Accessing Cover

Dial *827# from your Safaricom line

• View Cover Options

• Register & Purchase Policy

• Report a Claim

• View Account

Cover Details

Confirmation of cover is via a text message

Upon cover purchase the insured is requested to register a beneficiary

Insured can change his/her cover options / beneficiaries via the phone

Salamasure Renewing Cover

A renewal notice is sent to the

insured via a text message

The insured will either make a

direct payment or change their

cover option and make the new

payment

A text message with the cover

extension confirmation will be sent to the

insured

Dial *827#

1. Select the option ‘Report a claim’

2. Enter ID Number & Date of Accident

3. Claim is validated, Claim number is generated & sent to the insured

4. A UAP representative will contact the insured

Salamasure Reporting a Claim

Salamasure User Experience

Over 233,000 visitors hit the portal in 4 months.

Enrolled customers over 23,000

Over 3,000 paid up

1,100 active month on month customers

… And this is only a pilot!

Salamasure

UAP Pays the 1st claimant (In hat)

Salamasure

1st Claimant and his wife

SALAMASURE

Activation Pictorials

Salamasure Market Activations

Salamasure Market activations

Salamasure Mall Activations

Salamasure Street Activations

UAP Credit Services Flexible payment options

Lessons from Salamasure

USSD technology cumbersome

• Time limit

• Separate steps cost money

• Limited information space

• Response: Development of UAP Android Application

• Response: Enable group registrations through the internet under one sim card

Extra mobile money payments step leads to dropped sales

• Response: Integration of the Application with a payment gateway (with M-Banking interface) to eliminate extra payment steps

• Response: Include Auto renewal payment on Mpesa platform

Customer hesitation

• Response: Aggressive consumer Education program

• Response: Develop Loyalty program for customer retention

Only one product on channel

• Response: Inclusion of additional products that are even more relevant to the consumer e.g. AfyaImara (health insurance product). Other products in the pipeline

The next frontier Inclusion of our Medical insurance products: AfyaImara

AfyaImara AfyaImara

Junior

AfyaImara County

AfyaImara Seniors

AfyaImara mobile app/online How it works

• Customers select their

cover plan of choice

either on the Android

mobile app or on the

UAP website

• They enter their details

(Name, Age,

Dependents, etc)

• Premium is calculated

• Payment is made

Member

is on

cover!!!

UAP App: More than a Distribution Channel

Building the volumes

Social media activations

Retail outlet distribution - Partnership with Uchumi Supermarkets & National Oil

Call / information centre support

Marketing – combine digital & normal

Consumer education

About UAP

Currently in 5 countries:

Geographic distribution continues to

grow in line with vision to be a

Pan-African financial services provider

ABOUT UAP Over 80 years in the Kenyan market

Financial strength

• Top three in volumes

• Biggest balance sheet

• Consistently top in profitability

Credit Rating AA- highest in EA

Insurer of the Year Kenya 2012

African Distribution Innovator of the Year 2012

Winner IFC/FT Technology in Sustainable Finance 2012

FiRe Award winner 10 Consecutive Years

About UAP Insurance Over 80 years in the Kenyan market

UAP Philosophy

Our Vision

• Africa’s Revolutionary financial services company

Our Mission

• Enhance quality of life by

• delivering peace of mind and financial freedom

• through an exceptionally motivated team

• that delivers what customers want – when and where they want it!

Our Values

• We build lifelong relationships

• We do what we say, and say what we do

• We are a pleasure to deal with

• We are passionate about our work, and it shows!

Thank You…

UAP, Bishops Garden Towers, Bishops Road,

PO Box 43013-00100, Nairobi, Kenya. Tel 285000, Fax 2719030, E-mail uapinsurance@uapkenya.com

www.uapkenya.com