This article on the development of microinsurance for emerging consumers is by Richard Leftley, the founder & CEO of MicroEnsure, and one of The Digital Insurer’s Digital Innovators for Africa at our Global LiveFest 2018.
When I started working on providing emerging consumers with access to insurance in 2002 most countries in Asia and Africa had less than 2% of their population with access to insurance even though traditional insurance companies had been working in these countries for decades. The blockage was that insurers relied upon agents to distribute their products which in turn dictated a floor price that was too high for the majority. In order to get insurance to the masses we needed to fix distribution and our breakthrough came when we worked out how to partner with mobile networks.
Of course it wasn’t all plain sailing and our initial attempts ended in failure when we tried to embed insurance into mobile wallets assuming that if we just made it easy to sign up and pay in small instalments that people who suddenly wake up wanting to buy insurance which of course they did not! The breakthrough came when we realised that our target market did wake up worrying about the risks they face and that the telcos had an issue with customer loyalty; by combining these two facts we created a winning business model. These pre-paid telco users had multiple SIM cards and the idea was that by rewarding them with free insurance for topping up more with one network that everyone would win; and it worked especially when we were given access to an individual’s historical top up data so that we could set a target for how much each consumer had to top up in order to earn free insurance.
Central to our model at MicroEnsure was that we planned to transition customers from free to freemium insurance after a few months because the free insurance is always run as a promotion rather than as a long term offering. This transition has also had its challenges; the free product has certainly been successful in on boarding customers to insurance for the first time and showing them how the product works. Our best product in India for example saw over 20 million people voluntarily opt in over 140 days after launch. We were surprised at how easy it was to convince people to start paying for the insurance too with more than 25% of people agreeing after a three minute call. The challenge has been to secure payment of the monthly premiums which we often try and collect from their airtime balance but these consumers typically only top up their phones with around $3 per month and they have been oversold VAS services such as ring tones, horoscopes and news stories all of which also deduct from their airtime balance.
I am increasingly convinced that the model of free to paid is correct but interestingly I am also increasingly convinced that having the telco at the centre is not optimal and we are starting to experiment with new partnership structures that combine our learnings on product and customer journeys in new ways and with new partners. I look forward to sharing some of these new ideas during my session at the conference.