This blog post was co-written by Arunjay Katakam and Alex Lazarow from Omidyar Network.
Mobile is poised to disrupt micro insurance access and delivery in emerging markets. While the mobile-delivered micro insurance industry is nascent, it is accelerating rapidly. Today there are 119 mobile-led deployments globally, with eight services having issued over one million policies (up from five last year). Initial results from a survey of deployments suggests global coverage now exceeds 30 million people, a 68% growth rate since last year.
At the recent Mobile Money Global Event in Cape Town, we hosted a panel on lessons learnt with three micro-insurance industry leaders: MicroEnsure, BIMA and Inclusivity Solutions. These innovators have taken different strategies to scale mobile-led micro insurance, highlighted by their approaches to reaching customers, growing the product range and building partnerships. This blog post captures the discussion from that session and these different approaches to delivering mobile-led insurance.
Reaching customers
Traditionally, elective insurance was sold to consumers by leveraging distribution partnerships and sales agents to find customers, educate them on risks, and ultimately to sell policies. The first big innovation in mobile-led insurance was turning this paradigm on its head.
Players such as MicroEnsure and BIMA combined the interests of mobile network operators (MNOs), such as reducing customer churn and increasing ARPU, with those of customers (who often had little experience, understanding or trust of the product), by providing insurance as a reward to its massive customer base in exchange for loyalty. MicroEnsure launched a freemium life insurance product with Telenor and Airtel, where the policy was free given a minimum monthly airtime spend. Through this product, customers learned about insurance, observed its benefit (either directly or indirectly), and became comfortable with the product, eventually paying to upgrade their coverage. Today MicroEnsure reaches over 18 million customers in multiple markets across the globe through these partnerships. BIMA partnered with Tigo to execute a similar strategy in Ghana, Tanzania and Senegal and today, BIMA reaches over 18 million customers in 14 markets.
To drive customer product understanding and user engagement, MicroEnsure relies on above-the-line marketing, using television, billboards, radio and newspapers. In contrast, BIMA has built a direct sales agent network to complement its mobile delivery and to sell to consumers – particularly helpful for more complicated product lines, such as health insurance. For instance, agents help to sell ‘Milvik Health Services’ in Bangladesh, a tele doctor service with additional access to a health directory and insurance.
Inclusivity Solutions, a new entrant to the sector, stresses that finding the right balance between marketing and direct sales is central to distributing a product successfully. Over time, we expect to see just that – a mix of simple, free, mobile-delivered products, complemented by direct sales engagement for a broader product range.
Growing the product range beyond life insurance
Insurance products designed to be purchased via a mobile phone need to be as easy as buying a ringtone. They should be simple to explain, to determine the actuarial rate, and to transact with. Life insurance was a natural first product because of its binary outcome, and because it provides coverage for funeral expenses (an important and well-understood cost for many emerging market families, especially in Sub-Saharan Africa).
Over the past four years, life insurance has dominated this nascent market. Last year, it represented 73% of all mobile-led micro-insurance services. However, we’re starting to see increased innovation in different product categories, and the share of non-life mobile-led products in emerging markets has grown from 27% last year to 45% as of June 2015.
Inclusivity Solutions expects to see greater bundling of both insurance and non-insurance products, such as local information and health insurance, to deliver additional value to specific market segments, improve persistency and provide responsible mobile insurance infrastructure.
Partnerships to scale
Early micro insurance services faced challenges across the value chain around both customer acquisition and underwriting. These are being solved through partnerships with MNOs and insurance companies.
As noted previously, innovators are reaching customers through partnerships with MNOs, and leveraging their massive customer base, unique distribution channels, emerging payment mechanisms (mobile money, airtime deduction) and trusted brands.
A second challenge was how to underwrite policies. BIMA and MicroEnsure have both acted as insurance agents, structuring the product with MNOs, and partnering with insurance companies for underwriting. BIMA’s early policies were underwritten by in-market partners. MicroEnsure has gone one step further, taking strategic investment from AXA and Sanlam, two large insurance players.
Over time, more nuanced partner strategies will evolve. BIMA is already underwriting some of its policies from its own balance sheet, and selling insurance policies directly through its agent network.
Conclusion
The mobile-led micro insurance sector is evolving rapidly. Innovators have solved key challenges through new approaches they developed around distribution, product range, and partnerships. Today, most mobile-led micro insurance is driven by telco strategy to increase ARPU and decrease churn. However, we expect that mobile-led insurance to prove itself as a standalone product in coming years – much like mobile money.