One of the more innovative features of Africa’s financial services industry, including Ghana’s insurance sector, is the role that mobile telecommunications companies have played in its development. It is not difficult to see why; with Ghana’s mobile penetration rate reaching 100% in 2013 (inclusive of multipleSIM card holders), these partnerships offer insurers potential access to millions of customers.
ON THE LINE: Mobile-based insurance schemes have the potential to alter the life insurance market in a country where only 10% of working adults have access to formal life or funeral insurance. Indeed, the vast majority of clients – estimated at around 80% – who have signed up for the country’s mobile insurance services have never held a policy previously. The benefits are equally appealing for mobile operators, which face a market rapidly approaching saturation as well as slowing average revenue per user figures, and thus must offer a wider range of new and innovative services to maintain subscriber levels.
Tigo, one of Ghana’s six telecommunications companies, began offering life insurance to subscribers in January 2011. In developing the product, which is based on a free opt-in service, Tigo partnered with MicroEnsure, a UK-based insurance consultancy, and Bima, a Swedish-owned mobile insurance provider. Tigo maintains ownership of the project and retains its direct relationship with the client, while Bima owns the microinsurance platform and the sales force. MicroEnsure is tasked with processing all claims and providing training for the programme.
CONTEXT: Mobile financial services have become something of a headline-grabbing trend in subSaharan Africa. The informal transfer of phone credits between individuals had over the past decade become an increasingly prominent way of settling accounts and lending money, but it was not until Kenya’s Safaricom launched the M-Pesa programme in 2007 that the commercial benefits became clear. Over the past six years, the mobile money transfer programme has attracted approximately 15m users, out of a total population of 43m, who use the service to do everything from pay bills to depositing savings.
The success of the M-Pesa programme has been difficult to replicate elsewhere, even by Safaricom;
14 months after it launched, the service had more than 2.8m subscribers in Kenya, but less than onetenth of that after the same period in Tanzania, although that has not stopped operators and banks across emerging markets from rolling out similar services, such as mobile-based insurance policies.
Meanwhile, mobile microinsurance plans have been unveiled in everywhere from Brazil, where prepaid customers of TIM Brasil can access accident and casualty insurance for less than $1.50 a month; to Kenya, where farmers can work with agents to insure against crop failure using camera-phone bar code scans and the M-Pesa system; to Indonesia, where Telkomsel mobile subscribers can buy accident coverage by purchasing a scratch card with an SMS activation code.
LOYALTY BENEFITS: Users of Tigo’s plan, which are estimated to exceed 900,000 in number, receive coverage indefinitely as long as they use a minimum amount of airtime. Under the structure of this loyalty programme, some customers receive life insurance free of cost as long as they use a certain amount of airtime a month. The benefit scheme ranges from $104 to a top level of $520, with a corresponding affordability scale priced between $2.60 and $20.80 of airtime a month, depending. The policy is valid for both the customer and one of his or her dependents.
By paying an additional $0.68 a month, users can double their insurance coverage to up to $1040 as part of a supplemental product that Tigo calls Xtra-Life.
Prospective customers can sign up for the programme either in person with a service agent or by sending an SMS from their phones. Tigo unveiled its own service after only a year of promotion and advertising.
COMPETITION: However, Tigo is far from being the only provider involved in such services. Two of the country’s largest mobile providers also offer insurance to their customers, including India-based Airtel and South Africa’s MTN, which both offer a suite of mobile financial products. MTN’s scheme, known as “mi-life” and launched in 2011 in conjunction with MicroEnsure and South Africa’s Hollard Insurance, is offered as part of its Mobile Money suite for $0.59 per month, and allows customers not only to purchase a policy but also to submit claims via mobile.
Airtel announced its premium-free product in partnership with Star Microinsurance and UniBank Ghana, launching it in early 2012. Airtel’s life insurance coverage is free for all users of Airtel’s mobile money product, provided that they have a balance of at least GHS5 ($2.57) at the end of the month.
The new schemes offer the notable feature of quick turnaround in terms of payment, which is crucial given the fact that many users are on a low income. A study by the German Society for International Cooperation found that in some of the mobile insurance initiatives, more than three-quarters of the customers had an income of less than $300 a month and roughly one-fifth had an income of less than $100 a month. As such, the services regularly feature quick claims processing of between 10 and 30 days.
This has also helped to build trust in the system. According to a survey cited by GSMA, a mobile industry association, 70% of respondents would rather purchase insurance from a mobile provider as opposed to an insurance company – presumably in part due to the fact that they are less likely to have had any previous interaction with insurers.
Given these factors and the success of these insurance products, other companies in the market are taking note. Allianz, the international insurance firm with the largest presence in Ghana, has already partnered with mobile telecommunications providers to develop similar schemes in India, Madagascar, Cameroon and Côte d’Ivoire, which borders Ghana, although the company has not announced plans to offer such services in the Ghanaian market at present.
BRIGHT FUTURE: Microfinance linked to telecommunications providers is seen as the most successful alternative distribution effort present in the market. Indeed, bundling insurance with telecoms services has been key to raising insurance penetration. However, telecoms firms are also benefitting as they search for new sources of revenues. Mobile insurance products have thus become a common feature of the telecoms sector not just in Ghana, but also in the portfolio of many of Africa’s largest multinational telecoms providers, including Airtel, MTN, Vodafone and Tigo. The shared benefit has helped push both insurers and mobile operators to tap into new revenues streams, even among fragmented competition.
CHANGING CARRIERS EASILY: In spite of the fact that the operating environment for mobile operators has tightened, one of the keys to the success of microinsurance has been mobile number portability (MNP), which was allowed starting in 2011 and which permits subscribers to change providers but keep their phone number, thereby increasing customer churn between operators. MNP has created another incentive for telecommunications insurance products by helping ensure customer loyalty. The National Insurance Commission is also considering new guidelines that would allow banks and other licensed non-bank entities to sell microinsurance without a licence, which could potentially open up further opportunities.
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