Mobile Insurance: Micro Product, Macro Impact
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Mobile Insurance: Micro Product, Macro Impact

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Presentation by Agrotosh Mookerjee (MicroEnsure) at the Fin4Ag conference - Nairobi, July 2014.

Presentation by Agrotosh Mookerjee (MicroEnsure) at the Fin4Ag conference - Nairobi, July 2014.

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Mobile Insurance: Micro Product, Macro Impact Presentation Transcript

  • 1. Mobile Insurance: Micro Product, Macro Impact Agrotosh Mookerjee Principal Actuary MicroEnsure
  • 2. 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
  • 3. WHO WAKES UP IN THE MORNING WANTING TO BUY INSURANCE?!
  • 4. 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 CONFIDENTIAL – FOR RECIPIENT ONLY © 2014 MICROENSURE HOLDINGS LTD
  • 5. 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 CONFIDENTIAL – FOR RECIPIENT ONLY © 2014 MICROENSURE HOLDINGS LTD
  • 6. Mobile Insurance is Taking Off Growth in Africa 2010-2012: 200% Outside SA: 17.2 M lives 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
  • 7. Recent Agriculture Projects world-wide COUNTRY DISTRIBUTION CHANNELS CROPS 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 1,000 Approx. 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.
  • 8. 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
  • 9. 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
  • 10. 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 : Telenor Agricultural Insurance for Smallholders - Malawi, Rwanda, Zambia, Ghana, Uganda, Kenya, Tanzania: Rainfall Index Cover - Caribbean: Hurricane Index Cover - Philippines: Typhoon Index Cover Caribbean AFRICA Zambia Malawi Rwanda Nigeria Ghana Uganda Tanzania Kenya Mozambique Senegal ASIA Bangladesh Pakistan India Philippines Malaysia CONFIDENTIAL – FOR RECIPIENT ONLY © 2014 MICROENSURE HOLDINGS LTD
  • 11. 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
  • 12. MicroEnsure Partnership Sample MOBILE BANKING INSURANCE CONFIDENTIAL – FOR RECIPIENT ONLY © 2014 MICROENSURE HOLDINGS LTD
  • 13. 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) CONFIDENTIAL – FOR RECIPIENT ONLY © 2014 MICROENSURE HOLDINGS LTD
  • 14. Why do Customers Love Mobile Insurance? Customer Value 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
  • 15. Why are MNOs Doing Insurance? MNO Value 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)
  • 16. 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
  • 17. 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
  • 18. 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: CONFIDENTIAL – FOR RECIPIENT ONLY © 2014 MICROENSURE HOLDINGS LTD
  • 19. 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: CONFIDENTIAL – FOR RECIPIENT ONLY © 2014 MICROENSURE HOLDINGS LTD
  • 20. Typical Insurance Micro Insurance Profit Brokerage OpEx Losses Core Problem: How do you offer insurance to people that face more risk and can’t afford to pay the same premium? Solution: Price in the Risk Reduce Expenses Reach Scale Quickly The cost of delivery and operations puts many micro insurance products outside the reach of the mass market. CONFIDENTIAL – FOR RECIPIENT ONLY © 2014 MICROENSURE HOLDINGS LTD Value Capturing – Insurer Perspectives Must Change
  • 21. MicroEnsure’s service model lowers costs dramatically… Typical Insurance 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” CONFIDENTIAL – FOR RECIPIENT ONLY © 2014 MICROENSURE HOLDINGS LTD Value Capturing – Insurer Perspectives Must Change
  • 22.  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
  • 23.  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 CONFIDENTIAL – FOR RECIPIENT ONLY © 2014 MICROENSURE HOLDINGS LTD Value Capturing – Insurer Perspectives Must Change
  • 24. 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 CONFIDENTIAL – FOR RECIPIENT ONLY © 2014 MICROENSURE HOLDINGS LTD
  • 25. 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
  • 26.  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
  • 27.  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