Mobile Insurance:Micro Product,Macro Impact
Agrotosh MookerjeePrincipal Actuary
MicroEnsure
1.WHY BOTHER ABOUT INSURANCE?
2.WHAT ARE WE DOING IN AGRICULTURE?
3. WHAT ARE WE DOING WITH MNO?
4. KEY LEARNINGS FROM MOBILE PRODUCTS
5. WHAT NEXT?
AGENDA
WHO WAKES UP IN THE
MORNING WANTING TO BUY
INSURANCE?!
Value Creation – Accessing Demand for Insurance
Realities of Life in the Mass Market:
- Family death- Illness- Accident- Natural disaster- Lack of income and food
security- Exploitation- Marginalization- Patronization
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Do Low-Income People Want Insurance?
Low-Income Clients:
Move from city back to village
Remove children from school
Change to lower-paid/degrading work
Sell household goods or assets
Take on high-interest debt
Middle/Upper Income Clients:
Use savings
Raise money from community
Work an extra (temporary) job
Use insurance via employer
Take on low-interest debt
• The poor face more risk than any other population; they may not know about insurance, but they live with a variety of risks on a daily basis
• The poor have many insurance “policies” today: assets, informal loans, various savings spots, coping strategies
• The job of micro insurers is to offer more efficient risk mitigation tools, which are simple, accessible, valuable and reliable
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Mobile Insurance is Taking Off
Growth in Africa2010-2012: 200%
Outside SA: 17.2 Mlives covered
Coverage by Country
8 of 9 markets with >1m lives insured have done so with mobile micro insurance
Is low penetration a function of low demand?
Source: www.mfw4a.org/insurance/microinsurance-landscaping.html
Recent Agriculture Projects world-wideCOUNTRY DISTRIBUTION
CHANNELSCROPS INSURED
NUMBER OF FARMERS INSURED (approximate)
ZAMBIA Contract Farming Cotton 7,000
RWANDA Linked to Lending, Farm Inputs, Farmer Cooperatives
Rice, Maize, Irish Potato
21,000
MALAWI Linked to Lending, farmer union, church organisation
Tobacco, Groundnut, Maize
16,000
TANZANIA Linked to lending, contract farming, farm inputs, NGO
Sunflower, Safflower, Beans, Cotton, Maize
2,000
KENYA Farm Inputs Maize 3,000
UGANDA, GHANA
Technical Consultancy support to insurance industry, to develop crop insurance products.
n/a
PHILIPPINES Input supplier Rice 5,000
CARRIBBEAN
Retail Livelihood protection
1,000Approx. 60,000 farmers in 5 countries (Kenya, Malawi, Rwanda, Tanzania, Zambia) in Africa insured in 2013. Approx. 5,000 farmers have received payouts in 2013.
IMPACT OF FARMERSHIELD, ZAMBIA
• Access to insurance (often for the first time) to over 25,000 farmers for life
insurance and approx. 7,000 farmers (in 10 locations) for weather-index
insurance;
• Approx. $380,000 insured, premium of approx. $30,000, premium
prefinanced by NWK and cost shared (upto 75% of cost for some farmers);
• Affordable for farmers- cost is $0.80-$3;
• Many life insurance payouts- approx. 3-4 claims a month;
• Weather Index Insurance payouts of aprox. $45,000 (250,000 ZWK) due to
dry spells and excess rainfall in 5 locations in Zambia;
• Strong demand for scale-up and from market;
• Strong interest to scale-up from insurance companies (despite the claim
payout!);
• Need to evaluate impact on yield and side-selling/ delivery of crop;
8
Introduction to MicroEnsure
MicroEnsure is the world’s first and largest company dedicated to serving the mass market with insurance.
Fastest-growing insurance organisation in Africa: 10 MILLION PEOPLE INSURED GLOBALLY. ABOUT 7 MILLION IN AFRICA 85% of our clients were never before insured
Track record of innovation: Winner of 2009, 2011 FT/IFC Sustainable Finance Award
“One of Africa’s 20 Most Innovative Companies - 2012” Financial Technology Africa Magazine
“One of Five Innovations to Watch in 2013” US Council Foreign Relations
GameChangers 500 member - 2014
Investors: IFC, Omidyar Foundation, Telenor, Opportunity International, MicroEnsure management team
Adding new investors: 2 of the largest global insurers
MicroEnsure Global Footprint
Micro Health Insurance- Tanzania: KNCU Primary Care Cover- Philippines: Triple 10- Ghana: Credit Health for MFIs- India: Rural, Cashless Inpatient Cover
Mobile Insurance- Zambia - Airtel- Tanzania: Tigo- Ghana: Airtel, Tigo, MTN- Kenya: yuMobile, Airtel- Senegal: Tigo- Malawi: TNM- Bangladesh: Grameenphone- Malaysia: Digi- Pakistan : TelenorAgricultural Insurance for Smallholders- Malawi, Rwanda, Zambia, Ghana, Uganda, Kenya,
Tanzania: Rainfall Index Cover- Caribbean: Hurricane Index Cover- Philippines: Typhoon Index Cover
AMERICAS Caribbean
AFRICA Zambia Malawi Rwanda Nigeria Ghana UgandaTanzania Kenya MozambiqueSenegal
ASIA BangladeshPakistanIndia Philippines Malaysia
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Our Innovations in the Past 6 Months: #1
Largest benefits on a mobile insurance product in the world
Telefonica Ghana Three for Free, launched January 2014
First mobile insurance product to cover life, accident and hospital cash
Up to 0.4% subscriber penetration per day
World Bank CGAP video on Tigo product:
http://www.cgap.org/photos-videos/tigo-ghana-insuring-ghanaians-mobile-phones
MicroEnsure Partnership Sample
MOBILE
BANKING
INSURANCE
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Why is MicroEnsure the Global Leader?
Speed to Market- Largest group policy in African history (Zambia) – 8 weeks start to finish
Best Claims Operation in the World- Pay claims in minutes in rural areas submitted on handwritten napkins- 76% claims ratio in company history; currently paying 70,000 claims in Philippines
Social Impact- Never exclude HIV, pre-existing conditions, etc
Partner Value Creation- Achieve ARPU growth, churn reduction, liabilities and asset growth
Systems Capability- 1.2 m new policies/hour, web-based, fully customizable for all classes of risk
Product Innovation- Weather Index (2004) Enhanced Credit (2008)
Credit Health (2011)- EduSave (2012) Decongestion (2013)
Mobile Three for Free (2014)
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Why do Customers Love Mobile Insurance?
CustomerValue
Reliable Protection from Risk
Simple Processes
built for Mass Market
Products address real
needs
Easy access to services
from a trusted brand
Lower cost risk
protection than
anywhere else
Growing suite of products
Policy management convenience
Why are MNOs Doing Insurance?
MNOValue
ARPU Uplift (6-15%)
Churn Reduction (25-
60%)
Direct Revenue (US$0.05-0.20/
sub/month)
Competitive Difference (new product class)
New Customer Additions
Brand and Social Impact
(1,000s of claims paid)
Lifetime Customer Value
(Stickiness)
Our Innovations in the Past 6 Months: #2
Largest Group Insurance Policy in African History
Launched 11 February 2014, project started 9 Dec 2013; 8 weeks from pitch to launch
2.2 million insured on 1 March 2014
Fastest-Growing Opt-In Insurance Product in History
30,000 sign-ups on some days (already 14,000 today)
No Exclusions, No Age Requirements
Compare:
…67 years of insurance in Pakistan = 7 million policies
…3 Months of our product = 700,000 policies
Our Innovations in the Past 6 Months: #3
Value Creation – Accessing Demand for Insurance
Barriers to insurance uptake:
Cost
•Typical insurance premiums can represent 8-10% of a typical income in mass market population
Trust
•Insurers are not seen as trustworthy due to product complexity and poor claims payment
Access
•Insurance agents are not sufficient to cover a whole country, and they do not target the poor
Under
-standing
•Clients lack financial, legal, health education to understand coverage, terms and conditions
Cost
•Offer superior value for money – even “free” or low-cost
Trust
•through Telefonica’s trusted brand
Access
•…via mobile through Universal Access (USSD, IVR, Apps)
Under
-standing
•…and begin with simple products
Our Value Proposition:
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Value Capturing – Insurer Perspectives Must Change
•Illiteracy, indigenous languages
•High rates of morbidity, mortality, natural risks
•Poor document access, distrust of written forms
•Inconsistent cash flow, majority of assets unbanked
•Poor history with all formal financial institutions
•Distrust of all types of insurance companies
•Expected intimidation, inconvenience, bribes
•Low health, legal, financial education
•Pervasive superstitions and traditional beliefs
All Mass Market
Insurance
Products Must
Account For:
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Typical In-surance Micro Insurance
Profit
Brokerage
OpEx
Losses
Core Problem:
How do you offer insurance to people that face more risk andcan’t afford to pay the same premium?
Solution:
Price in the RiskReduce ExpensesReach Scale Quickly
The cost of delivery and operations puts many micro insurance products outside the reach of the mass market.
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Value Capturing – Insurer Perspectives Must Change
MicroEnsure’s service model lowers costs dramatically…
Typical In-surance Micro Insurance
Profit
Brokerage
OpEx
Losses
Reducing OpEx:
- Product Design- Product- Training- Marketing- Policy Administration- Loss Adjustment- Underwriting- Reinsurance- Policy Reporting- Claims Processing- No Excess “Costs”
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Value Capturing – Insurer Perspectives Must Change
Waiting Period of 3-6 months before cover commences Medical Examination required for underwriting Family Medical History shows genetic linkage to disease Exclusions for HIV/AIDS, death by heart/lung disease or other pre-existing medical conditions, mountain climbing, paragliding, mental illness, asthma, diabetes, hypertension Cover, surrender value lapses if premium paid late Cover terminates when subscriber reaches a certain age Complex documents and forms required for claims Claims Processors paid by claims denial rate
Typical Life Insurance Terms & Conditions
CONFIDENTIAL – FOR RECIPIENT ONLY © 2014 MICROENSURE HOLDINGS LTD
Value Capturing – Insurer Perspectives Must Change
Waiting Period of 3-6 months before cover commences Medical Examination required for underwriting Family Medical History shows genetic linkage to disease Exclusions for HIV/AIDS, death by heart/lung disease or other pre-existing medical conditions, mountain climbing, paragliding, mental illness, asthma, diabetes, hypertension Cover, surrender value lapses if premium paid late Cover terminates when subscriber reaches a certain age Complex documents and forms required for claims Claims Processors paid by claims denial rate
Typical Life Insurance Terms & Conditions
Scale requires simplicity...which is justified by scale
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Value Capturing – Insurer Perspectives Must Change
Typical Barriers
Insurers need to change their processes and assumptions, and be willing to accept thinner profit margins.
Insurance regulators must accept different processes: no wet signatures, no policy documents
Telecoms must be willing to offer a free product to change market perceptions about insurance; paid-for products will only penetrate the subscriber base up to 1% within one year, but freemium products will penetrate 15-20% of the base, of which 40% will purchase paid-for upsell products, leading to higher revenue for Telefonica indirectly in the short term and direct revenue in medium term
The telecom and insurer must be agreed that the telecom’s brand is primary
Project plans and charters have to be established and followed in an orderly fashion; otherwise mistakes will be made and gaps will be missed
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Why Offer the Promo (Freemium) Product?
Creates a Market – Traditional products have only reached 0.5% penetration in any market in their first year, whereas promo products reach 8-12% Accesses Consumer Demand – mass market consumers face persistent risks btu have never had insurance before: promo products give them experience
Product Pays for Itself via ARPU Uplift and Churn Reduction Created Market will Convert to Paid-for Products
12 operators worldwide are currently running with this model…it has driven ARPU and loyalty everywhere
Consolidate the policy wording, terms & conditions onto 1-2 pages Eliminate any important word that a 12-year-old doesn’t understand Consider alternatives to “wet” signatures: may involve regulators
Claims:
Accept documents that are accessible & meaningful in rural contexts Audit the second claim (that looks out of sorts) and do trend analysis Be proactive, accessible, and helpful in claims processing: incentivize
claims officers on how fast claims are paid from event to payment Start the internal clock when the event occurs, not at document receipt Measure the customer’s full experience from event to receipt of cash Accept digital documents for speed (but protect right to hard copy) Expect loss ratios of 50-60% for clients to see value
Process Notes for Mobile Insurance
How Mobile Makes Insurance Better
Understand customers and address their most important needs! Strong trusted distribution partners with good brand recognition;
Strong business case for distribution partners and insurer;
Claims- PAY them! Efficient claims process; Social Impact;
Insurer should rethink strategy; have a long term approach;
Products should be simple, innovative, cheap/ even free!
Robust systems needed and ground presence required
Best Practice project planning and long term strategy
Introduce Value-add-services e.g. Crop advisories, weather forecasts
SUMMARY OF KEY LESSONS LEARNT
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