The Mobile Insurance

Win-Win-Win

Peter Gross Regional Director – Africa

MicroEnsure

Nairobi, Kenya

The Mobile Insurance Win-Win-Win

Financial Inclusion

Disruptive Innovation

Commercial Viability

Today’s Agenda

Ø  Introduction and Overview: Mobile Insurance in Africa

Ø  MicroEnsure Experience

Ø  Mobile Insurance – Demand and Supply

Ø  Mobile Insurance Case Studies

Ø  Conclusion: Realizing the Potential of Microinsurance

Introduction and Overview: Mobile Insurance in Africa

Micro Insurance: Growth in Africa

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

Mobile Insurance: The “Freemium” Revolution

Mobile Insurance Freemium Model

Earn free life insurance up to

$2,500 when you top up $2

The more you top up, the more you

earn

Pay $1 per month and double the free

cover you earn

Earn up to $5,000 in life insurance

Buy additional cover for a family member

Buy additional types

of cover: health, handset, travel…

Why are Telecoms Offering Free Insurance?

Telecom Value

ARPU Uplift (6-15%)

Churn Reduction (10-25%)

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)

Mobile Insurance Market Presence

Why do Customers Love Mobile Insurance?

Customer Value

Reliable Protection from Risk,

FREE

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

MicroEnsure Experience

MicroEnsure Introduction

§  MicroEnsure is the world’s first and largest company dedicated to serving the mass market with insurance.

§  Fastest-growing insurance organisation in Africa: q  11 million worldwide, 5.3 million in Africa q  85% of our clients were never before insured

§  Track record of innovation:

q Winner of three FT/IFC Sustainable Finance Awards

q “One of Africa’s 20 Most Innovative Companies - 2012” Financial Technology Africa Magazine

q  “One of Five Development Innovations to Watch in 2013” US Council on Foreign Relations

q Named a “GameChanger 500” Business – 2014

§  Shareholders: IFC, Omidyar Network, Telenor, Opportunity Bank, Sanlam, Axa

Connecting Distributors and Underwriters

MicroEnsure Services

Product and Process Design Pricing and Actuarial Assessment In-Demand Product Features Appropriate Benefit Levels, Terms and Conditions Brand-Appropriate Marketing Content Robust Training Content

Insurance Project Management Business Case and Partnership Structure Microinsurance Market Research Value Chain Facilitation: Insurance and Reinsurance Arrangements Insurance Regulatory Liaison Legal, Commercial and Service Level Agreement Content

 

Operational Execution Front-End Client Management Platform Customer Care Claims Management Policy Administration

 

Monitoring and Evaluation Key Performance Indicator (KPI) Management Business Growth and Retention Customer Perception Financial Reporting and Premium Reconciliation Claims Status and Payment Performance Risk Management

Micro insurance requires a holistic product, process and operational integration

MicroEnsure  Footprint

Micro  Health  Insurance  -­‐  Tanzania:  KNCU  Primary  Care  Cover  -­‐  Philippines:  Triple  10  -­‐  Ghana:  Credit  Health  for  MFIs  -­‐  India:  Rural,  Cashless  InpaEent  Cover    

Mobile  Insurance:  Life,  Accident,  Hospital  -­‐  Zambia:  Airtel  -­‐  Burkina  Faso:  Airtel  -­‐  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

MicroEnsure Partners

MOBILE

BANKING

INSURANCE

MicroEnsure Results

Partner Revenue Growth -  Achieve ARPU growth, churn reduction, liabilities and asset growth, lifetime customer value

Best Claims Operation in the World -  Paid more than 50,000 microinsurance claims in last twelve months -  Pay claims in minutes in rural areas submitted on handwritten napkins -  76% claims ratio in company history

Social Impact -  Never exclude HIV, pre-existing conditions, or other common exclusions; we build products to pay out

Speed to Market -  Largest group policy in African history (Zambia) – 8 weeks start to finish

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

Example: Paying Claims at Speed

Loss Incurred

First Claim Report

Claim Documents Received

Claim Paid

MicroEnsure

Typical Claims Experience

1-2 Days 3-5 Days 1-2 Hours

10-15 Days 40-45 Days 72 Hours

Policy terms aren’t clear, report has to be made in person at insurer office

Claimants go through many rounds of document

review with insurer; insurer keeps asking for additional documents

Clock only starts when ALL documents received; claims processed through multiple

departments

Customer knows exactly what cover she has, with no fine print, and claims are reported easily via

phone

A proactive customer service process and clear directions on document/s

required allows for faster claims submission

MicroEnsure performs most claims analysis

before final document receipt, earns payment authority from insurer

50-70 Days from Loss to Payment

4-7 Days from Loss to Payment Community Impact

Claimant Frustration

Mobile Insurance - Demand and Supply

Do Low-Income People Want Insurance?

Low-Income Sector:

Sell core household goods or tools

Remove children from school

Change or add jobs, increasing risk

Move from city back to village

Take on high-interest debt

Middle/Upper Income Sector:

Use savings or liquidate investments

Raise money from community

Work an extra (temporary) job

Use employer coverage

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 persistency and variety of risks on a daily basis

•  The poor have many insurance “policies” today: assets, informal loans, various savings spots, community-based coping strategies

•  The job of micro insurers is to offer more efficient risk mitigation tools, which are

simple, accessible, valuable and reliable

Assessing Demand for Insurance

Barriers  to  insurance  uptake  in  Africa:  

Cost  

•  Typical  insurance  premiums  can  represent  8-­‐10%  of  a  typical  income  in  mass  market  popula8on  

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  educa8on  to  understand  coverage,  terms  and  condi8ons  

Cost  • Offer superior value for money

– even “free” or low-cost

Trust  • …through trusted brands

Access  • …via mobile through Universal

Access (USSD, IVR, Apps)

Under-­‐standing  

• …and begin with simple products

Our  Value  Proposition:  

Mobile Insurance Demand: Anecdotes from the Field

•  A chief of a rural village hired a coach to bring his people to sign up for insurance

•  Customer in Ghana: “I was suffering – but maybe God knew, and that’s why God brought us this Tigo insurance”

•  M-Insurance in multiple African countries has more than doubled the insured population in the country within 12 months, compared 40 years of typical insurance via 20 companies

•  Telecom: “Insurance will be core for us, like ringtones.”

•  Microfinance Bank: “Our customers use loans and savings to cope with risk; banking is really just expensive insurance.”

Demand is not the problem…

Supply-Side Considerations

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: Reduce Complexity Reduce Expenses Reach Scale Quickly

The cost of delivery and operations puts many micro insurance products outside mass market reach.

Supply-Side Considerations

Revenue per policy is lower, but microinsurance creates markets for current and future growth opportunities.

Typical Insurance Micro Insurance

Profit

Brokerage

OpEx

Losses

Reducing OpEx: -  Pricing -  Product Design -  Training -  Marketing -  Policy Administration -  Loss Adjustment -  Underwriting -  Reinsurance -  Policy Reporting -  Claims Processing -  No Excess “Costs”

Supply – A Problem of Perspective?

Insurers are used to winning business with relationships; Telecoms are used to sophisticated business cases

Insurers think in hundreds or thousands of customers; Telecoms think in hundreds of thousands of customers

Insurers usually launch 2 or 3 new products per year; Telecoms usually launch 100+ new products per year

Insurers see the low-income market as difficult to serve; Telecoms see the low-income market as ideal to serve

Insurers are worried about fraud and anti-selection; Telecoms are worried about talk radio and competition

Mobile Insurance – Three Case Studies

Example 1 – Tigo Ghana/Tanzania

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

2011 2012 2013

Tigo - Paid

Tigo - Free

Rest of Ghana

Lives Assured – Tigo Free, Paid, and Rest of Ghana

94% of clients can explain the product 42% of Ghanaian public aware of product

60% eventually bought an “upsell” product

Example 2 – Airtel Burkina/Ghana/Nigeria

Free  life,  accident  and  hospital  cash  insurance  if  you  top  up  $2/mo      Top  up  more,  earn  more  insurance    Hospital  cash  covers  inpaEent  care  at  any  hospital  for  any  reason:  no  exclusions    Launched  January  2014,  3  countries  so  far    Dozens  of  claims  paid,  average  70  minutes    Claims  raEos  stable;  fraud  is  kept  low  

Free Product Impact – 2014 Data

Increased ARPU and decreased churn leads to an excellent return for the MNO…

While financial inclusion & insurance penetration skyrocket as claims are paid…

-

100,000

200,000

300,000

400,000

500,000

600,000

0.0% 2.0% 4.0% 6.0% 8.0%

10.0% 12.0% 14.0% 16.0% 18.0%

Jan Feb Mar Apr May Jun

Oct Nov Dec Jan Feb Mar Apr May June

Average Recharge per User (ARPU)

Control All Insured

Insurance Launched

•  1 million subscribers purchased in 9 months

•  Demonstrated demand for insurance

•  But: product features were a problem

•  Complicated purchase process, 12-page brochure

•  Subscribers not aware of cover amount

•  Constant ‘3111’ messages led to critical Facebook group with 8,000 members

•  6-month waiting period led to loss ratio of only 0.9%

•  And partnership value wasn’t shared equally

•  Trustco charged $1.11 per user per month for insurance product – 25% of African telecom revenue

•  Trustco & EcoNet went to court July 2011

•  EcoLife canceled by EcoNet in February 2012

Example 3 – Ecolife Zimbabwe

Conclusion: Realizing the Potential of Mobile

Insurance

How is the Chief Marketing Officer’s annual bonus determined?

Step 1 – What’s in it for the Telecom?

Revenue •  Acquire new

customers •  Sell more widgets •  Achieve higher per

ticket sales • Up-sell products

Footfall •  Increase

transactions per customer

•  Increase store visits per month

•  Cross-sell new products and services

Loyalty •  Reduce churn •  Consolidate

spending •  Build brand •  Enhance trust •  Show social

responsibility

Tip  1:  This  is  not  tradi8onal  affinity  insurance  -­‐  it’s  placing  insurance  at  the  front  of  a  product  as  a  marke8ng  tool.  

Tip  2:  This  is  not  a  mobile  money  product  at  first.    

Test operations for scale, or find scalable partners:

Step 2 – Dive into the Details

Marketing Education Enrolment Premium Collection

Customer Service

Claims Payment

Can we serve 5 million customers in

each of these stages? If we can’t,

who can?

Can technology help us to do any of these

things faster and cheaper?

Step 3 – Plan for Staged Growth

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

MicroEnsure – Bridging the Gap

peter.gross@microensure.com

Regional Director, Africa +254 786499100

@microensure