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Mutuals utilizing technology to increase financial inclusion

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Presentation made by David Ronoh (Managing Director - CIC Life Assurance Ltd, CIC Insurance Group, Kenya) at the 6th ICMIF Development Network Seminar (1-2 November 2012; Nairobi, Kenya)

Presentation made by David Ronoh (Managing Director - CIC Life Assurance Ltd, CIC Insurance Group, Kenya) at the 6th ICMIF Development Network Seminar (1-2 November 2012; Nairobi, Kenya)

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  • 1. MUTUALS UTILIZING TECHNOLOGY TO INCREASE FINANCIAL INCLUSIONDavid K. Ronoh - Managing Director , CIC Life 5th November 2012 Nairobi Kenya
  • 2. Introduction With almost half of the world’s six billion people living on less than two dollars a day, alleviation of poverty through financial inclusion has become the biggest challenge to the human society. In response, the global campaign against poverty has gained momentum, with various development actors suggesting the use of different instruments to alleviate poverty. There is an emerging consensus among many actors, including the United Nations (UN), the International Labour Organization (ILO), the International Co-operative Alliance (ICA) and the European Union (EU), that the co-operative enterprise is one of the few forms of organization that can meet all dimensions of
  • 3. The Big Challenge• Financial exclusion is the unavailability of financial services to poorpeople. It is believed to be one factor preventing poor people from exitingpoverty, by forcing them to manage their finances on a cash only basis andrestricting their access to equitable sources of credit and insurance.• It is a reality that most poor people in the world still lack access tosustainable financial services, whether it is savings, credit or insurance. Thegreat challenge before us is to address the constraints that exclude peoplefrom full participation in the financial sector.• Co-operatives have the advantages of identifying economic opportunitiesfor the poor; empowering the disadvantaged to defend their interests; andproviding security to the poor by allowing them to convert individual risksinto collective risks. Indeed, co-operatives are well placed to bring aboutequitable development and justice desperately needed as well as socialcontinuity and cohesion for the disadvantaged
  • 4. The Use Mobile in Financial ServicesAccording to recent world bank report on Africa Region PovertyReduction and Economic Management Unit:• The mobile revolution has transformed the lives of Kenyans through: – Communications – Basic financial access• Currently, 93% of Kenyans are mobile phone users and 73 % are mobile money customers.• Additionally, 23% use mobile money at least once a day• New potential for mobile money has come with the rise of interest-earning bank-integrated mobile savings systems, beginning with the launch of the M-KESHO system in March 2010
  • 5. Kenya’s Potential Microinsurance Market Upper • 1.6 Million • Out of a total population of 40m, there are 21m adults of whom Middle • 2.4 Million 12m are unemployed. • 7m Kenyans are employed in the informal sector • 4 Million – MicroinsuranceMiddle Low Market • 24m people living below $2 a day. Low • 8 Million – • In excess of 12 million Kenyans Microinsurance Market earn between $2 and $10 per day and form a strategic and< $2 per day • 16 Million core market segment for Microinsurance. (Source: Cenfri, Kenya Microinsurance Landscape, 2010)<$1 per day • 8 Million
  • 6. Distribution Of Microinsurance• The choice of a particular distribution channel is based on its proximity and the trust relationship to the low income market, in addition to cost efficiency, the main challenge is outreach and growth.• Micro insurers have innovatively worked together with insurance intermediaries ,NGOs, retailers, community- based organizations, governments, employers and churches.• CIC Kenya has been working with MFIs , cooperatives and banks as the preferred distribution channels as they have already established networks and are close to the target market.• The challenge of outreach & growth calls for alternative distrubtion channel – the mobile technology
  • 7. Why Slow Growth In Micro insurance Despite The High Potential • The lack of insurance awareness is also seen as a challenge and translates into a relatively low demand for micro insurance services • The high costs which are up of high acquisition costs as the policy holders are often living in remote areas and are not reachable by the conventional distribution networks • The distribution of micro insurance products is also as a major challenge as infrastructures are often not set up yet • The lack of available data, which is needed for risk assessment and premium calculations, is another significant challenge when entering this market. • Process challenges such as registration, administration, customer service & claims settlement still a major challenge
  • 8. Micro insurance ModelsA number new micro insurance distribution models haveevolved that depend on the utilization of partnership withorganization not traditionally in the insurance space to usetechnology in insurance product distributions namely, • USSD registration • Sales of card starter kit • Premium deduction from airtime WASP & VASP • Mobile money
  • 9. Mobile InsuranceThe new buzz word at CIC is M-Bima (Swahili forMobile Insurance). M-Bima is a first in the Kenyaninsurance landscape to be used to distribute andcollect insurance premiums. The platform wasdeveloped by CIC based on information from ourcilents that they would like to be able to pay theirpremiums in a mode that fits their lifestyle.Most of the low income households in Kenya workin the informal sector and earn a wage theirirregular income on a daily basis. To respond to thislifestyle , CIC has over the last one year developedM-Bima, a payment platform that allows clients tosign up, pay for the premiums and review their A CIC Activation Tent in Donholm, Nairobistatements from their mobile phones. The platform isavailable on mobile phone as well as on the internet on
  • 10. CIC Experience In The Use of Mobile Technology Marketing Distribution Insurance Administration Customer Service & Support
  • 11. Case Study: M-BimaM-Bima Platform:• CIC Insurance has developed the M-Bima Platform• The platform was developed by CIC based on information from clients that they would like to be able to pay their premiums in a mode that fits their lifestyle.• It is a payment platform that allows clients to interact with the insurance company from a touch of a button and at their convenience. The uses include: • Distribution of insurance products (clients can sign up for a policy) • Collect money for savings (Payment of premiums via M-Pesa) • Communication and updates to existing clients • Review of client statements• The platform is available on mobile phone as well as on the internet on www.m-bima.co.ke
  • 12. Jijenge Savings PlanJijenge is the first product that is riding on the M-Bimaplatform. Product Features:• Immediate automatic life cover on joining in the event of Accidental Death or Accidental PTD.• Low premium payments from as low as an equivalent of Ksh.20 daily to accommodate the policyholder’s irregular cash flows• 12 year savings plan with options of Exit Benefits from the end of 3rd year• Optional Family Life cover that pays a shared benefit of Sum Assured per year for death of a member of a nuclear family• Premium payments free of transaction charges to the clients• Weekly premium arrear reminders sent and clients have online access to Policy Account status
  • 13. Marketing• Marketing seeks to facilitate adoption of the M-Bima platform• Building an M-Bima brand with language that resonates with the target market has become important due to increased competition
  • 14. Marketing (Cont’d…)Wall branding is a major marketing tool for CIC’sM-Bima platform as shown below
  • 15. Marketing (Cont’d…Qualitative research is one of the avenues of market analysis being used. Thisincludes having focus group discussions with sample groups of M-BIMA clients attheir convenience, in areas of their operation. This will inform CIC’s futuremarketing plan which includes branding, communication and distribution. An M-Bima Focus Group of existing clientsCIC has taken insurance to the next level by making it not only affordable to theaverage person, but by making it a convenient affair. It is clear that M-Bima’ssuccess will be a breakthrough for microinsurance worldwide.
  • 16. Distribution The main distribution channel is through M-Pesa outlets and existing networks in the informal sector. To stimulate the market, CIC organizes activations whereby the company goes to a neighbourhood, sets up a tent and have sales people talking to clients. They attract attention by playing popular local music and entertainment.A client uses their mobile phone to sign up for M-Bima Jijenge Savings Plan
  • 17. Insurance AdministrationM-Bima leverages on Mobile MoneyTechnology for:  Distribution of the Insurance products  Premium collection  Agents Commission payments  Claims Process (Reporting, tracking & payment)  Customer Service and Policy Administration  Commission processing
  • 18. Customer Service & Support Among areas where mobile technology is being used to provide customer service and support include:  Bulk SMS for premium payment reminders and disbursement of statements  Twitter and other social application to respond to customer queries  USSD for registration, claims reporting & endorsements  Mobile money for premium payment and client benefit payments  Mobile Applications
  • 19. Customer Service & Support (Cont’d…) Insurance companies have partnered up with players in the telecommunications industry to implement the Unstructured Supplementary Service Data (USSD) technology. This technology has opened the door to interactive communication between the client and insurance company without human intervention with the following benefits:  Access to service request via a phone menu  Benefits paid using the phone  Statements and client originated queries  Company originated feedback, promotions & customer education Bulk SMS messaging has also proved a powerful tool for sending standard messages such as:  Payment reminders  Client Statements  Notifications
  • 20. Issues And ChallengesTechnological Challenges• Integration of mobile system with existing underwriting systems• Network and Data outages• In certain rural areas, there are people who do not know how to use internet services on their phones• Number portability issues: Inability to use mobile money services across networksOther Challenges• High initial expenses due to the expensive distribution model• Poor product knowledge and skepticism about the Insurance Market.• Risk of miss-selling by the distributors• The marketing approach can expose a brand to reputational risk• Operational risks as a result of exposure born out of the nature of the operations of the product
  • 21. Conclusion• The mobile technology is no doubt the most creative innovation in the world, providing any-where any-time convenience, just-in-time payments, personal security and the ability to enhance the increasingly time pressured business environment• The opportunity afforded by the mobile phone are revolutionary. The secret lies in crafting the right strategic partnership with the mobile networks• Marketing through technology brings business up to speed with today’s fast-paced, technology-centered consumer market.