How mobile-enabled microinsurance services can boost mobile operator revenue

This guest blog from Nigel Bowman of Inclusivity Solutions explores the positive effects of their mobile micro-insurance solution on customer activity rates and operator revenue.

As discussed in the GSMA’s recent report, ‘Spotlight on mobile-enabled insurance services’, insurance penetration remains as low as 3 per cent (as a percentage of GDP) in many developing countries. With 67 per cent of the global population subscribed to mobile, there is a significant market opportunity for mobile to “leapfrog” traditional insurance models in protecting the under-insured against unexpected emergencies and shocks.

At Inclusivity Solutions, we work with mobile operators, insurance companies and other partners to deliver digital insurance solutions for under-insured customers. Several months ago, we developed a mobile micro-insurance product based on extensive market research, designed to incentivise higher customer expenditure during a one-month period. To qualify for the free insurance cover for a month, customers are required to meet a spend threshold on the network (for airtime, data and other mobile services) during the previous month, or meet a minimum mobile banking transaction value threshold. For customers who met both thresholds during the one-month period, the value of their cover would be doubled. A customer who continues meeting either or both thresholds would receive continuous cover for another one month period.

The change in customer activity between those who registered for insurance cover and those who did not was surprisingly positive. Figure 1 shows the average revenue per user (ARPU) for the four months prior to registration (T-4 to T-1), during the month of registration (T 0) and again for the four months after registration (T+1 to T+4) versus the ARPU for customers who had not registered at all.

Figure 1: Average revenue per user of customers registered for insurance relative to those who have not registered.

It is clear that ARPU increased dramatically around the month in which customers registered for the insurance product. What is less noticeable is that these customers are still spending more four months after registration than they were prior to registration.
So where has the increase in ARPU come from among these customers? The aggregate monthly revenue can be broken down into two components: activity levels and average revenue per paying user. An increase either in the activity level or in the average revenue per paying user will lead to a rise in the aggregate revenue (provided there is not a compensating decrease in the other component). An increase in both the activity levels and the average revenue per paying user will lead to a doubled rise in aggregate revenue.

Figure 2 shows the change in activity level for those customers who registered for insurance, split by registration month, relative to those who did not register. Consistent with Figure 1, there is a substantial spike in activity around the registration month (T-0) – as much as an 80 per cent increase in activity rates. Furthermore, this increase in activity does not wane; each registration cohort settles at an activity level higher than prior to registration.

Figure 2: Change in the proportion of active customers for customers registered for insurance, shown by registration month.

When assessing the impact on average revenue per paying user, shown in Figure 3, we see a similar spike in average revenue per paying user at registration – up to a 20 per cent increase. However, this increase is more sustained than the increase for activity levels. Furthermore, for the average revenue per paying user to have increased, active customers must be spending at least the same average amount as those who have always been active.

Figure 3: Change in average revenue per paying customer for customers registered for insurance, shown by registration month.

Overall, therefore, we have seen an increase in aggregate revenue from those customers who have registered for insurance relative to those who have not. This increase in aggregate revenue is driven by both higher activity levels and higher average revenue per paying user. We also saw similar changes in customers’ mobile banking money transaction behaviour. At least some of the behaviour change lasts beyond the initial months following registration, with the full effects over the long-term continuing to be assessed as our product matures. It is clear from our experience at this point, however, that mobile operators’ investment in adjacent services such as microinsurance can pay off. With increased revenues outpacing insurance premium costs, this service is proving a win-win for operators and customers alike.

For more information on micro-insurance in the mobile money industry, visit the GSMA’s recent report ‘Spotlight on mobile-enabled insurance services’, or email