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PROMISING STARTS IN MOBILE MICROINSURANCE: TIGO SENEGAL & TELENOR PAKISTAN MICROINSURANCE IN CONTEXT
Executive summary Microinsurance
T he global microinsurance market is estimated at 4 billion individuals, but the cost of selling and administering low-value policies in context
1
makes microinsurance uneconomical for many traditional providers. Mobile phones have the potential to radically reduce the
costs associated with enrolling and collecting payments from low-income customers who have previously been excluded from
the insurance market. Ancillary benefits to non-traditional providers can also bolster the business case for microinsurance. For example,
mobile network operators (MNOs) can benefit from improved brand perception, higher ARPUs, and churn reduction when they couple “Low-income persons live in risky environments, vulnerable to numerous perils, including illness, accidental death and disability, loss of
microinsurance to their core telecom offering. property due to theft or fire, agricultural losses, and disasters of both the natural and man-made varieties. The poor are more vulnerable
to many of these risks than the rest of the population, and they are the least able to cope when a crisis does occur.” 3
Mobile microinsurance is still a young and experimental industry. Over half of all mobile microinsurance offerings have been launched in International Labour Organisation
2
the past three years and they employ a range of business models However, one model is driving significant customer uptake: an MNO-
led “freemium” model that gives loyal telecom subscribers a certain amount of insurance cover for free, and charges those who want to
upgrade to a premium offering.
Why microinsurance?
The two services profiled in this case study employ a freemium model and, encouragingly, seem to be gaining early traction. Senegal’s
Tigo Kiiray, in partnership with microinsurance specialist Bima, has registered 13% of Tigo’s GSM base and collects paid premiums from In theory, insurance should be a good fit for low-income individuals, who are disproportionately affected by financial shocks and lack a
over a third of registered Kiiray users in a typical month. Telenor Pakistan, in partnership with microinsurance specialist MicroEnsure, of- financial safety net to cope with crises.
fers separate insurance products to drive both core GSM activity and mobile money account enrolment. Telenor Pakistan activated close
to 400,000 insurance policies in the first 2 months of operation. Insurance exists to mitigate the effect of these financial shocks, but traditional providers have struggled to provide insurance to low-
income and unbanked consumers. According to the Microinsurance Innovation Facility, “The cost of underwriting, selling and adminis-
The services offered by these MNOs share a number of features: tering claims does not decrease in proportion to the value of the policy. Insurers find it challenging to provide viable products for the
4
• Radically simple product design with minimal exclusions, rapid claims verification, and a streamlined enrolment process low-income market using traditional channels and processes.” This has left an opening in the market for mobile-based offerings, which
may be able to offer low-value policies to a greater number of individuals due to lower distribution and administrative costs.
• Dedicated sales forces, either at outbound call centres or roving agents, who place a strong emphasis on customer
education and sales quality The untapped potential of microinsurance
• Partnerships with mobile microinsurance specialists that contribute expertise and accelerate go-to-market activities
• Automated and non-punitive deduction of premiums through a mobile airtime account One way to view the untapped potential of insurance is to examine the aggregate premiums paid in a particular country as a percentage
of GDP. In 2012, industrialised nations spent 8.6% of GDP on insurance, while emerging markets spent only 2.7 percent. This gap may be
6
• Leveraging a trusted MNO brand to reach a mass market unfamiliar with or distrustful of insurance due, at least in part, to the difficulty of reaching low income populations in emerging markets with microinsurance products.
With mobile microinsurance still in its infancy, it is unclear whether the loyalty-based freemium model will ultimately be able to achieve
commercial sustainability and scale across geographies. However, early evidence suggests a confluence of customer demand and a work- Recognising the potential of mobile microinsurance, a number of providers have launched services in recent years. The Consultative
able initial business model. Group to Assist the Poor (CGAP) identified 74 operators with live services, with the majority launched in the last three years. These
services encompass a range of different business models and products. The 2013 GSMA Mobile Money Adoption survey revealed that life
7
insurance accounts for about three-quarters of all mobile microinsurance offerings. Roughly half of the surveyed business models rely on
loyalty for the commercial model, while the other half relies on direct premium revenues.
3. International Labour Organization, “Protecting the Poor: A Microinsurance Compendium.” Available at http://www.ilo.org/global/publications/lang--en/index.htm
4. Microinsurance Innovation Facility, “Mobile Phones and Microinsurance.” Available at http://www.microinsurancefacility.org/publications/mp26
5. Swiss Re Sigma, “World insurance in 2012.” Available at http://media.swissre.com/documents/sigma3_2013_en.pdf
6. Swiss Re Sigma, “World insurance in 2012.” Available at http://media.swissre.com/documents/sigma3_2013_en.pdf
1. Swiss Re Sigma, “Microinsurance – Risk Protection for 4 Billion People.” Available at http://media.swissre.com/documents/sigma6_2010_en.pdf. 7. See “The Emerging Global Landscape of Mobile Microinsurance” from the Consultative Group to Assist the Poor (CGAP) for more information and review of mobile microinsurance business models
2. CGAP, “The Emerging Global Landscape of Mobile Microinsurance.” Available at http://www.cgap.org/sites/default/files/Brief-The-Emerging-Global-Landscape-of-Mobile-Microinsurance-Jan-2014.pdf
2 3
Executive summary Microinsurance
T he global microinsurance market is estimated at 4 billion individuals, but the cost of selling and administering low-value policies in context
1
makes microinsurance uneconomical for many traditional providers. Mobile phones have the potential to radically reduce the
costs associated with enrolling and collecting payments from low-income customers who have previously been excluded from
the insurance market. Ancillary benefits to non-traditional providers can also bolster the business case for microinsurance. For example,
mobile network operators (MNOs) can benefit from improved brand perception, higher ARPUs, and churn reduction when they couple “Low-income persons live in risky environments, vulnerable to numerous perils, including illness, accidental death and disability, loss of
microinsurance to their core telecom offering. property due to theft or fire, agricultural losses, and disasters of both the natural and man-made varieties. The poor are more vulnerable
to many of these risks than the rest of the population, and they are the least able to cope when a crisis does occur.” 3
Mobile microinsurance is still a young and experimental industry. Over half of all mobile microinsurance offerings have been launched in International Labour Organisation
2
the past three years and they employ a range of business models However, one model is driving significant customer uptake: an MNO-
led “freemium” model that gives loyal telecom subscribers a certain amount of insurance cover for free, and charges those who want to
upgrade to a premium offering.
Why microinsurance?
The two services profiled in this case study employ a freemium model and, encouragingly, seem to be gaining early traction. Senegal’s
Tigo Kiiray, in partnership with microinsurance specialist Bima, has registered 13% of Tigo’s GSM base and collects paid premiums from In theory, insurance should be a good fit for low-income individuals, who are disproportionately affected by financial shocks and lack a
over a third of registered Kiiray users in a typical month. Telenor Pakistan, in partnership with microinsurance specialist MicroEnsure, of- financial safety net to cope with crises.
fers separate insurance products to drive both core GSM activity and mobile money account enrolment. Telenor Pakistan activated close
to 400,000 insurance policies in the first 2 months of operation. Insurance exists to mitigate the effect of these financial shocks, but traditional providers have struggled to provide insurance to low-
income and unbanked consumers. According to the Microinsurance Innovation Facility, “The cost of underwriting, selling and adminis-
The services offered by these MNOs share a number of features: tering claims does not decrease in proportion to the value of the policy. Insurers find it challenging to provide viable products for the
4
• Radically simple product design with minimal exclusions, rapid claims verification, and a streamlined enrolment process low-income market using traditional channels and processes.” This has left an opening in the market for mobile-based offerings, which
may be able to offer low-value policies to a greater number of individuals due to lower distribution and administrative costs.
• Dedicated sales forces, either at outbound call centres or roving agents, who place a strong emphasis on customer
education and sales quality The untapped potential of microinsurance
• Partnerships with mobile microinsurance specialists that contribute expertise and accelerate go-to-market activities
• Automated and non-punitive deduction of premiums through a mobile airtime account One way to view the untapped potential of insurance is to examine the aggregate premiums paid in a particular country as a percentage
of GDP. In 2012, industrialised nations spent 8.6% of GDP on insurance, while emerging markets spent only 2.7 percent. This gap may be
6
• Leveraging a trusted MNO brand to reach a mass market unfamiliar with or distrustful of insurance due, at least in part, to the difficulty of reaching low income populations in emerging markets with microinsurance products.
With mobile microinsurance still in its infancy, it is unclear whether the loyalty-based freemium model will ultimately be able to achieve
commercial sustainability and scale across geographies. However, early evidence suggests a confluence of customer demand and a work- Recognising the potential of mobile microinsurance, a number of providers have launched services in recent years. The Consultative
able initial business model. Group to Assist the Poor (CGAP) identified 74 operators with live services, with the majority launched in the last three years. These
services encompass a range of different business models and products. The 2013 GSMA Mobile Money Adoption survey revealed that life
7
insurance accounts for about three-quarters of all mobile microinsurance offerings. Roughly half of the surveyed business models rely on
loyalty for the commercial model, while the other half relies on direct premium revenues.
3. International Labour Organization, “Protecting the Poor: A Microinsurance Compendium.” Available at http://www.ilo.org/global/publications/lang--en/index.htm
4. Microinsurance Innovation Facility, “Mobile Phones and Microinsurance.” Available at http://www.microinsurancefacility.org/publications/mp26
5. Swiss Re Sigma, “World insurance in 2012.” Available at http://media.swissre.com/documents/sigma3_2013_en.pdf
6. Swiss Re Sigma, “World insurance in 2012.” Available at http://media.swissre.com/documents/sigma3_2013_en.pdf
1. Swiss Re Sigma, “Microinsurance – Risk Protection for 4 Billion People.” Available at http://media.swissre.com/documents/sigma6_2010_en.pdf. 7. See “The Emerging Global Landscape of Mobile Microinsurance” from the Consultative Group to Assist the Poor (CGAP) for more information and review of mobile microinsurance business models
2. CGAP, “The Emerging Global Landscape of Mobile Microinsurance.” Available at http://www.cgap.org/sites/default/files/Brief-The-Emerging-Global-Landscape-of-Mobile-Microinsurance-Jan-2014.pdf
2 3
