This is a guest post written by Jeremy Leach and Tyler Tappendorf from Inclusivity Solutions, a company that specialises in creating inclusive digital insurance markets. This post is part of a guest series looking at lessons learnt from mobile insurance. Read the second and the third guest posts. 

In recent years, mobile microinsurance has experienced tremendous growth with insurers, mobile operators, and technical service providers (TSPs) launching new products around the globe. At the end of 2014, the GSMA reported that there were 100 live mobile insurance services globally, and as of June 2014, the industry had issued 17 million policies and was growing fast.

While mobile insurance products hold the promise of scale, lower distribution costs, adjacent benefits for insurers and mobile operators, and act as first-level enablers of financial inclusion, thus far many initiatives have struggled to realise their full potential. They face challenges such as limited consumer experience with and understanding of insurance, complex and expensive products, lack of enabling regulation, complicated partnerships, and reliance on mobile money in places where it remains relatively underdeveloped.

Nevertheless, a number of mobile insurance initiatives have overcome these barriers, reaching millions of low-income consumers on a financially sustainable basis. This experience is captured in a new paper, and the following seven points illustrate some of the keys to the success of these offerings:

1. A captive, large market and strong brand: Models where a mobile operator lends its brand and strategic support to the initiative have been more successful, as mobile operators typically have a large customer base and a strong brand. In Sub-Saharan Africa alone, mobile penetration is estimated to be greater than 60%. Furthermore, research during an initiative we led in Ghana showed that 70% of those surveyed would prefer to buy insurance from a mobile operator as opposed to an insurer.

2. Simplified product design and processes: With simplified processes for registration, administration and claims processing, customers can easily engage with the products. In many cases, customers can enroll via SMS—without having to travel to an insurance agent. Or, in other cases, customers can be auto-enrolled based on existing mobile operator data, without having to send any additional information.

3. Focus on both quality and quantity: In as much as scale is important, providing quality insurance products ensures growth, especially in markets that are still building an insurance culture. Quality speaks to offerings that appropriately address the needs of consumers, charge affordable premiums, provide easy access to products, simplify product experience, provide consumer education, and build a culture of paying claims quickly, easily and publicly.

4. Offer multiple types of insurance cover to customers: Product variety attracts a wider array of customers, as has been witnessed by Tigo and Bima, a mobile insurance provider, who have expanded their insurance offerings in Ghana and Tanzania from simple life products to include additional hospital cash insurance.

5. Build with loyalty models, then upsell with suitable payment mechanisms: Loyalty models can reach immediate scale and act as a market maker by auto-enrolling segments of customers who achieve certain mobile (airtime or mobile money) thresholds, as seen by offerings in Zimbabwe, and Zambia, as well as a number of other markets.  When shifting from free to paid insurance models, the payment mechanism should align with the market. Mobile money and debit orders often only reach a small proportion of the market, and exclusive use of these mechanisms can limit uptake and lead to higher lapse rates. Airtime is pervasive across most markets, and leveraging it to collect premium payments can help address some issues, although costs associated with airtime can often be significantly higher than mobile money. The trade-offs must be considered when designing products.

6. Mix digital sales with high-touch sales: Utilisation of multiple channels (e.g. SMS, USSD, agents, call centres) suited to target segments provides greater access and drives sales of insurance products. Mobile channels can help drive uptake, but this often needs to be combined with high-touch (human) models as well.

7. Enabling regulatory environment: Despite the best efforts by insurers and mobile operators, regulation in a market can often make or break a mobile insurance initiative. Regulators must ensure they provide space for innovation while also protecting the market.

By taking into account these lessons, mobile operators, insurers, regulators, and other industry players can more successfully address the hurdles these products face—and extend this valuable insurance to unserved and underserved customers.

Access the full report ‘Can the digitalization of microinsurance make all the difference?’

Photo: Courtesy of Tyler Tappendorf