Micro Insurance Matters

Transcription

1 Micro Insurance Matters THE QUARTERLY NEWSLETTER OF MICROENSURE APRIL 2010 UGANDA MicroEnsure Secures Brokers License in Uganda Page 2 David Dorey appointed Communications Manager As part of ongoing development in Uganda, MicroEnsure has obtained its brokerage license from the Uganda Insurance Commission, becoming in the process the first broker dedicated to microinsurance in that country. This will enable the use of multiple underwriting companies as MicroEnsure continues to develop and implement an increasingly diverse range of products. MicroEnsure began operating in Uganda in 2006 and provides a range of products including Credit Life and Life Insurance. The company offers training for its partners and clients as well as a sophisticated back office processing system that supports an efficient claims process. Throughout 2010 MicroEnsure will be expanding its product range in Uganda to provide Agricultural Insurance (covering both crop and livestock) and Health Insurance for low-income households. Page 3 Product Focus: Health Page 4 6 M-insurance: The next wave of mobile financial services? INSIGHT MicroInsurance Innovation Facility Receives Record Numbers of Innovation Grant Applications In December the Microinsurance Innovation Facility launched its fourth round of innovation grants and received over 230 applications, its largest number of responses to date. A preliminary insight shows that health was the most popular category with 90 proposals submitted worldwide. The remaining applications were split evenly between requests for capacity building support and for non-health innovation grants including consumer education, life, agriculture and property insurance projects. The majority of applications came from India, which remains the geographic epicenter of microinsurance, but there was increased representation from other countries, including The Philippines, Mongolia, Ethiopia, Pakistan and Francophone Africa. The facility team, with the support of external reviewers, has started to analyse the proposals and will present a shortlist to the Steering Committee members in April. The Committee and the team will then gather in Geneva in May to finalize the selection. Previous grantees have included Calcutta Kids and the CARE Foundation in India who are both key partners with MicroEnsure in providing healthcare and funeral insurance products to the poor. Page 7 GREPALIFE and Malayan Insurance Expands Partnership with MicroEnsure Page 7 Microinsurance regulatory framework launches in the Philippines Page 8 Richard Leftley comments in The President s Column 1

2 APPOINTMENTS New Country Manager in Ghana Peter Gross, Ghana Country Manager Peter brings more than five years' experience in business development, logistics and sales management to the role, having worked previously for a top private firm in the US. He holds a Bachelor s degree in Classics from Davidson College, a Master s degree in Theology from Oxford University, and a Master s degree in Business Administration from Emory University. He has a deep commitment to ministry that is both holistic and incarnational, having lived in an economically-depressed community in Atlanta, GA (USA) for the past six years. Whilst in Atlanta, he began a ministry on his street that offered food, prayer and counselling to neighbors trapped in drug addiction, prostitution and other forms of exploitation. He also served in a neighborhood church, where he was the first elder of an alternative ethnicity in the church s 85-year history. He enjoys music, linguistics, and Trappist ales. Peter is happily married to Jessica, a public health research analyst and licensed nurse practitioner. Peter and Jessica are looking forward to working with MicroEnsure in Ghana and helping to grow the outreach of the organization. Communications Manager Appointed David Dorey has been appointed as the new Communications Manager for MicroEnsure. David s expertise lies in new media, e-marketing and social media and he will be working with colleagues to review the company s current communications procedures. David is currently reading for a degree in Economics and Politics at Oxford Brookes on a part-time basis having previously worked as production manager for Trinity Church in Cheltenham. David spent five weeks last summer producing promotional material for the company in Tanzania, the Philippines and India and is looking forward to using his creative skills to showcase MicroEnsure s work around the globe. OUR BUSINESS MODEL To bring insurance effectively to the poor, we see three tasks that need to be accomplished: The first task is carrying the risk. We believe that existing insurance and reinsurance companies are best placed to do this but in some cases no willing insurance carrier can be found. MicroEnsure is pioneering the use of cell captives which are special underwriting vehicles used to carry health insurance risk in Africa and further afield. The second task is that of the front office the sales platform. We partner with those organisations that have effective outreach to the poor such as MFIs, NGOs, and retailers. And the third task is the back office keeping track of the insured s details, premiums, and claims. For this we have developed a very sophisticated MIS system. This is the key to keeping costs at a minimum. The back office also provides product development for the risk carrier, training for the front office, as well as financial education for the clients. MicroEnsure derives revenue from two sources; the first is commission income when we work as an insurance intermediary in partnership with an insurance company and a front office partner such as a microfinance organisation. The second revenue source is generated by insurance companies outsourcing their existing back office operations to MicroEnsure. Insurance Company Reinsurance Company Cell Captive Front Office Microfinance lender NGOs/Faith-based Retailers Avon model Risk Carrier Back Office Product design/negotiation Training/client education Data capture/reporting Claims servicing 2

3 HEALTH Product Focus: Health Whilst the poor in the third world do have access to public health facilities in most countries, they often choose to utilise low-cost private facilities whenever possible because doctors and drugs are generally in short supply in the public system. The private providers require that monies be deposited upfront before treatment begins, often leading to a delay and subsequent deterioration in the patient s health as the family struggle to sell assets, borrow money or make risky choices in order to get the funds. MicroEnsure has introduced a unique in-patient cashless health insurance product in conjunction with SHARE Microfin, a leading Indian MFI, United India Insurance Company and Medicare TPA. After a successful pilot distribution the product was expanded to include Calcutta Kids, an NGO working with slum dwellers, and Church Southern India serving fishing communities in Kerala. Throughout 2010 it will be expanded to Africa and Asia. Innovation is central to MicroEnsure s business model. Within India, the TPA system has enabled providers with MicroEnsure to sell and service health insurance that costs US$10 a year for a family of four people and provides a benefit of US$450 per family on a floater basis. This system allows flexible payment options for families of different sizes and those unable to afford to pay the premium in a single lump sum. The product was the first in India to cover maternity and pre-existing illness from the first day of coverage. The use of a slumbased NGO and religious group to sell voluntary health insurance proved that alternative channels other than MFI s exist to reach the poor. MicroEnsure realised that in order to provide similar products to its client base in Africa and Asia it needed to have TPA capability and its own underwriting capacity. The experience of this program led to MicroEnsure purchasing a TPA for use in Africa and Asia and the creation of the world s first virtual Cell Captive where Hollard Insurance Company provided MicroEnsure with access to its underwriting capacity so that MicroEnsure can design, price, sell and pay claims globally for similar health insurance products. A consultation at the hospital in India In the hospital, India 3

4 INDUSTRY OPINION: Jeremy Leach, Hollard Insurance Group M-Insurance: The Next Wave of Mobile Financial Services? Introduction When will we see m-insurance join the commonly used new dictionary of commerce? The quantum leap of mobiles into commercial usage has given birth to various new words such as m-commerce, m-payments and the acronym mfsp, meaning mobile Financial Services Providers. So the question for the insurance industry becomes: Is m-insurance close, inevitable, possible and a good idea? And probably more to the point: How will it work? The growth of the mobile phone market 1 is one of the more remarkable stories in recent times. The numbers are startling! As at 11:31am on the 13 January 2010, the GSMA reported that there were over four billion (4,133,185,526) mobile connections 2, increasing by thousands every few minutes. These mobile phones are increasingly reaching consumers who have had limited or no easy access to services before. Now with an estimated 60% of the unbanked in Southern Africa having mobile phones (cf FinScope surveys) the possibilities are virtually unlimited. The advent of mobile operator-led mobile money has dramatically increased the interaction of the mobile and financial services, with McKinsey estimating that it would generate US$5 billion in direct revenues and US$2.5 billion in indirect revenues per year to mobile operators 3. So where does the future of the insurance industry feature in this modern marketing phenomenon? How 1 Also known as cell phones, particularly in the US and Africa. 2 In fact, this is global GSM and 3GSM Mobile Connections so understates the total market. 3 See s mobile money for the unbanked programme Quarterly Update, March 2009 soon will we be referring to m-insurance with the same familiarity as we talk about m-payments and m-commerce? Drivers of M-Insurance In theory, the role of cell phones in insurance is strong as it should provide the following benefits: Lowering the cost of collections, especially where mobile money has been offered by the telco 4 ; Providing a potentially free form of distribution using the telco platform; Improving persistency of premium payment, through SMS reminders; Empowering the consumers to manage their insurance in a cost effective and accessible manner; Although these drivers seem strong, understanding how to engage with the consumer effectively is vital to success. Customer Touch Points One way of looking at the role of cell phones in financial services is to consider the customer touch points - namely how cell phones interact with consumers. This includes (a) how consumers are acquired / how consumers purchase a service, (b) how one remains in contact with consumers, (c) how consumers transact, and (d) how can one cross-sell other products to consumers (see Figure 1). Through understanding these touch points one can then understand better what is required to take advantage of this new wave to democratize access to financial services and, in this case, insurance. As the focus will be on developing countries, it will of course mean that it 4 Whilst airtime is also a possible form of currency, the challenges are (a) cost in that the telco often takes a large chunk of the airtime, (b) it is also VAT-able and (c) potential regulatory challenges by the bank regulator who may not be so supportive of what is currently considered barter. will be on micro insurance / insurance for the low income market, as most users of mobile phones in developing countries fall into this category. See Figure 1 a.customer acquisition Using mobiles as a means to acquire the consumer is one of the least utilized approaches in m-insurance. This is partly due to the fact that many telcos have seen their role to be as a pipe where companies use their services rather than partnering with other companies, with some exceptions. Three exceptions are: i. South Africa: Take It Eezi 5 / Hollard partnership: In this case, Take It Eezi, a prepaid airtime vending company with 17,000 agents, uses the menu on a cell phone as a means to sell funeral insurance products. Whilst it in its early days, the potential for this sales mechanism is high especially in markets where there is limited formal infrastructure; ii.namibia: Trustco / Leo partnership 6. 5 See 6 See 4

5 Figure 1: Customer Touch Points - Adapted from Leach, 2006 CUSTOMER ACQUISITION Objective: New sales, capture client information, embedded free benefits Challenges: Disclosure, trust Examples: Take it Eezi/Holland (South Africa), Leo/Trustco (Namibia), Zong/Hollard (Pakistan) CROSS-SELLING Objectives: Product upgrades/downgrades, new products Challenges: Disclosure, NTU rates Examples: Please call me, SMS advertisements CUSTOMER CONTACT Objective: Balances, statements, payment reminders Challenges: Cost of SMS (although coming down) Examples: Many but includes PEP & Hollard Direct Solutions (Southern Africa) TRANSACTIONS Objective: (a) Collect premiums (e-cash or real cash, airtime), (b) pay claims Challenges: Regulatory (vs e-cash), frictional costs from Telcos Examples: Cover2Go (SA), Mobile money (M-PESA, MTN Mobile Money, ZAIN s ZAP) Trustco developed an embedded funeral product that provides a certain amount of funeral cover for each rand of airtime spent. This is certainly a good product for an insurer which has a group policy with a telco to cover all clients the challenge remains making the client base fully aware of the benefits. It should also provide a useful base of clients which can be cross-sold clients to. iii. Hollard Direct Solutions Please call me adverts: in this case, an advert for an insurance product has been placed on the ubiquitous Please call me text messages. This allows the client to either SMS a Hollard number or send a please call me message so that a call centre agent can call them. Whilst this is pretty low tech, it is effective and relatively cheap. b. Customer contact Many industries have found that cell phones provide an excellent means to remain in contact with their clients 7 7 Just one of many is co.za/ and SMSs have been readily used from marketers, to credit providers and insurers reminding clients about their next instalment, to health insurers reminding clients about taking medication (health insurers have found this particularly beneficial in ensuring clients adhere to taking the required doses and thus prevent further ailments). Hollard PEP Stores: In the last 2 years, Hollard has sold 500,000 policies to South Africa cash-based retailer, PEP stores. However, one of the key components of making this a success this has been using SMSs as a reminder that the premium must be paid. This has had a dramatic impact on persistency levels where the majority of customers must come in person to settle their premium. 8 c. Transactions So far, transactions in the m world, has mainly been around clients of mobile money who use their cell phones to initiate money transfers 8 An option to use a debit order is also available. (both domestic, and more recently, international). I understand that in Kenya, this has increasingly been used to pay for third party utilities, including insurers and airlines, to pay for goods. M-Pesa & MTN Mobile Money: The telco s Mobile Money deployments are increasingly focusing on bill payments. With access to bank accounts low in developing countries (eg at 23% 9 in Kenya where M-Pesa was launched), the growth of mobile money will be a key component of ensuring cost effective premium collection. d. Cross-selling The opportunity around using cell phones to cross-sell insurance products to your existing base is a strong one. Access to a client s cell phone is a powerful way to stay in touch and as smart and web-enabled phones filter into the broader market, there will be opportunity to use this interface to allow clients to manage their products whether buying up / buying down (i.e. amending one s insurance cover), and 9 FinAccess

6 INDUSTRY OPINION cont. the regulators, as one will also need to simplify the terms to ensure clients understand it as well as meeting the limited space needed on a cell phone. also buying alternative products. Whilst SMS messaging has been used already to market products, it is a matter of time before providers use this model more effectively. Challenges and next steps Whilst there is significant potential for m-insurance to expand beyond its existing stage of development, there are a range of challenges, which include: Activating the client - market acceptance: A significant challenge in using the telco as a base for voluntary client acquisition, will be to activate the client. i.e. to enable the client to demand the product. Whilst telcos are often seen as a trusted brand, it is the reliance on airtime resellers who may not be seen in the same light that may be a problem; Distribution skills: One of the most significant challenges is ensuring that marketing material is suitable and understandable, that there is adequate training for those marketing the products (as likely to be on a non-advice model), and that those who buy the product are adequately informed. One could say that Hollard has learnt the hard way with its various retailers! Customer protection and intrusion: There is growing concern about the intrusion of service providers into the life of the client. With the growing advent of consumer protection rules, this could make it more difficult for service providers to market to the clients. Smart ways of getting client s permission would therefore be needed. Conclusion M-Insurance offers great potential to enable insurers to both enhance their efficiency and also access the microinsurance market in smart ways. Whilst challenges do remain, the roll out of mobile money is likely to be the launch pad that shifts this from a promise into a reality. About the author Jeremy Leach is Principal and Divisional Director: Personal Financial Services of the Hollard Insurance Group. Hollard is a South African based international insurance group and is one of the leading players in retail / brandassurance with over R3bn in revenues from its retail partners in, and generates over R1,1bn in the low income market in South Africa alone. Hollard is pleased to partner with MicroEnsure, a specialist micro-insurance intermediary and underwriter, which will dramatically increase their ability to serve the low income market internationally. Regulation: It is noticeable that countries such as Kenya do not allow e-contracts, in that paper-based proof of sales is required. This significantly increases costs as there will be a need for feet on the ground and minimizes the benefit of the cell phone. Further, the issue of acceptable disclosure will be a challenge for both insurers and 6

7 PARTNERSHIPS GREPALIFE and Malayan Insurance Expands Partnership with MicroEnsure MicroEnsure Philippines, Great Pacific Life Assurance Corporation (GREPALIFE) and Malayan Insurance Company (MICO) joined parties in a Memorandum of Agreement in March in Iloilo City. The MOA outlined the strategic relationship between the parties involved and as well as the launching of two new insurance products. of death due to accident and costs less than US$23 per year. A second initiative being launched by MicroEnsure is the Bahay Asenso Insurance Cover (EZ Fire with Personal Accident) underwritten by MICO. It operates on a first loss basis and is available to home owners and tenants. Approved in January 2010, the Group Life Insurance with Funeral Benefit and Personal Accident is a double indemnity product underwritten by GREPALIFE. It provides cover in cases PHILIPPINES Microinsurance Regulatory Framework Launches in the Philippines The Department of Finance and the Insurance Commission formally launched the Regulatory Framework for Microinsurance on January 29, 2010 at the Philippine International Convention Center in Manila. The framework covers the provision of insurance, insurance-like and other activities (as may be defined by the concerned regulatory bodies) that provide the risk protection needs of the poor supplied by the private sector. It will create public awareness of the importance of providing appropriate risk protection for the poor through microinsurance. The framework identifies and promotes a system by which the rights and privileges of the poor will be protected and promptly acted upon. The framework was drafted by a technical working group formed by the Dept. of Finance and has undergone a series of regional consultation nationwide in MicroEnsure attended two of these consultations, one in Iloilo and one in Cebu. The framework was approved by members of the Steering Committee which consisted of representatives from the Dept. of Finance, Insurance Commission, Bangko Sentral ng PIlipinas, Securities and Exchange Commission, Cooperative Development Authority, National Anti-Poverty Commission and Philippine Health Insurance Corp. in a meeting held on December 11, This event marked the culmination of the observance of the Microinsurance Month. The Presidential Proclamation 1212 declared January to be Microinsurance Month and appointed the Insurance Commission and Dept. of Finance as the lead agencies. In support of the government initiative, Asian Development Bank (ADB) and German Technical Cooperation (GTZ) are providing technical assistance that focuses on the establishment of the appropriate policy and regulatory environment; building capacities of both regulators and providers in regulating and providing microinsurance services; product development and financial literacy for both providers and clients for microinsurance. 7

8 THE PRESIDENT S COLUMN The year so far... It has been an interesting start to Our partnership with Hollard to create a virtual cell captive has provided a platform to increase our impact on the lives of the poor. For the first time MicroEnsure now has the capability to design, price and authorize claims arising from a range of products around the world. The initial focus has been to start channelling much of our original business to this facility because we then know that we have the authority to settle claims and can guarantee a faster claims turn around and more transparent claims decisions for our MFI partners. The second phase will focus on bringing products to market which are currently unavailable. For example, later this year we will use the facility to start selling health insurance in East Africa in partnership with the Anglican Church. The Hollard facility has also opened up new business model for MicroEnsure. We are in the process of starting operations in Rwanda and Mozambique using a franchise model which sees the MFI enter data into our IT system over the web. A local insurer then issues the policy and reinsures the risk back to the facility. MicroEnsure does not need to open an office in Rwanda or Mozambique and we get our commission paid from the facility back to our head office. This franchise model can be used in countries where the size of the microfinance market would not support a micro insurance intermediary. It will also allow MicroEnsure to open operations in a great number of countries in the years ahead without having to establish a local entity, leading to a faster ramp up of operations. In order to fully utilize the opportunities that the Hollard facility provides us, we have been working hard to identify a suitable Third Party Administrator (TPA) so that we can sell cashless health insurance in Africa and Asia later this year - news to follow soon on this. Our IT team is also working to develop a bridge to allow our systems to interface with a range of m-payments systems. We will be starting some pilot tests later in 2010 in partnership with a couple of leading mobile phone companies. Whilst all of this progress is great to see, I am still perplexed about the slow rate of growth we are experiencing and it seems to me that a trend is emerging, not just in MicroEnsure but with other operators as well. If I add up all of the borrowers that our partner MFI s have and assume we can sell insurance to them, then MicroEnsure would exceed its 2012 target by 200%. The issue for us is not forming partnerships with large MFI s then, it is actually ramping up activities across our partners branch networks. I have my own views about why working with MFI s is so slow and I will not share those here, but it is increasingly clear to me that whilst the MFI s are the low hanging fruit, they are unlikely to be the path to scale. If we are to reach our full potential in relation to scale then we will have to start to work with other distribution partners such as religious groups, international NGO s, mobile phone companies, multi-level marketers and other retailers. I think it is time we started rethinking the idea that micro insurance is sold only through micro credit organizations. MICROENSURE WAS PREVIOUSLY THE MICRO INSURANCE AGENCY GLOBAL OPERATIONS OFFICE: MicroEnsure First Floor Parker Court Knapp Lane Cheltenham GL50 3QJ UK EDITORIAL CONTACT: [email protected] FT SUSTAINABLE BANKING AWARDS 2009 WINNER MicroEnsure, UK Achievement in Basic Needs Financing BANGLADESH MicroEnsure Telephone [email protected] GHANA MicroEnsure Telephone [email protected] INDIA Micro Insurance Services Pvt Ltd Telephone [email protected] INDONESIA MicroEnsure Telephone [email protected] Kenya MicroEnsure Telephone [email protected] MALAWI MicroEnsure Telephone [email protected] MOZAMBIQUE MicroEnsure Telephone [email protected] PHILIPPINES MicroEnsure Telephone [email protected] RWANDA MicroEnsure Telephone [email protected] TANZANIA MicroEnsure Telephone [email protected] UGANDA MicroEnsure Telephone [email protected] USA, HEAD OFFICE MicroEnsure Telephone [email protected] 8