e billion policyholders, a third e potential market of 3 billion seven times more than today’s estimated market size” 0 Insight (Nov 2009) loyd’s 360 MICROINSURANCE E - INNOVATION IN CTION FOR THE INSU INSURANCE SECTOR Presentation by Israel M rael Muchena Technical Director – Hollard Hollard Mozambique On behalf of Jeremy Leac Leach Divisional Director & Head: & Head: Microinsurance Presentation to the EF EFInA Innovation Forum: Micro-insurance, Lago agos, 22 Sept. 2011
FOCUS OF PR PRESENTATION • The opportunities for the the insurance sector to develop micro-insurance nce products for the low- income mass market • The key challenges • Microinsurance product ct and channel innovations • The experience of Holla llard in developing and launching microinsurance ance products in Africa.
HOLLARD - BACK CKGROUND INFO The largest privately-held insuran rance group in the region, with a premiums of $2 billion & net profit of $130 million. We operate as a single business with with both Short-term & Life licenses, infrastructure and capabilities We generate > $170 million from th the RSA low-income market . The leading independent bancassu surance ($130 million) and brandassurance company ($400 m million) in South Africa Hollard has a presence in 10 countr ntries We and our partners have the leadin ding share of the SA funeral insuran market with ~17% share (FinScope 2007)
TARGET MA ET MARKET In South Africa 45% of the population tion have some form of insurance: • Funeral cover has grown at more re than 10% per annum since 2003 – whilst formal cover growth has ex s exceeded 20% annually. FinScope • However, “despite … proactive e effort by industry… short-term insurance has not managed to pe penetrate the low-income market beyond 1.5% of LSM 1-5 adults” s” CENFRI, 2010 • And, less than one in ten of small all business owners are insured against the specific risks they face. FinScope ope Small Business Survey 2010 Outside of SA, only 5% of Ghanaians ns have insurance, 6% of Kenyans an Zambians and only 2% of the Nigeria rian and Pakistan population have insurance. FinScope
KEY CHAL ALLENGES • Contentious foundational conc oncepts: • Business of dare or risk (ris riscare ) and hazard ( from Arabic word al zahr which also me means dice • Utmost goodfaith / issues ues of low trust • Alignment of interest? • “Rewarding the bad client” • Low levels of understanding a g and service to lower segments • High dependence on forced c d consumption
attack? attack?
OUR APPR APPROACH Value for money - we always aim aim to lower acquisition costs Genuine need, correctly targeted argeted Low Premium: It is essential that ial that premiums be available in units that are as small as possible. sible. Simple: All policy and sales doc documentation should be in simple language and product benefits its should be designed to be explainable in simple terms.
OUR APPR APPROACH Upgradeable: The insurance needs e needs of the individual change and increase as that person progres progresses. Embedded, where possible: The The relatively low awareness of insurance needs can be overcom ercome by attaching a meaningful insurance products to other produc products that are better understood by the consumer
EMERGING BUSINESS SINESS MODELS Affinity/Re ity/Retai Retail/ Micro-insurance l/Mob obile Mobile Insurer value chain Partne tners outlets Product design and origination Back office Risk management Distribution Well-s suit ed t o deliver value Ill-su suit ed t o deliver value
ailer based ayments / Airtime ell phone inity Group abase / Utility
Affordable Housi using Insurance he low-income market we have an an estimated 9-million households hich includes more than 1-million fam families on the government’s housing waiting list.” CEO of FNB Hous ousing Finance, Marius Marais
Preliminary Mar Market Research Definitely NEEDED “…I will need to get a two plate stove again” ain” “…..”will need to get an extra job….” “…..start all over again” But MISTRUST of insurance Industry “It sounds good if they will keep their promises” ises” Concerned that claims processes will be comp mplicated High content values relative to the household ld structure No need for liability cover Don’t use Mzansi – “demeaning”, “makes me e feel poor” “annoys me”
t Home Protect tribution : l center, store, gazine etc llections : re account ims : low cost ners – king for ustry support
Mobile Money “Financ Financially connecting the world through mobile” ough mobile” GSMA e MM yments nned yments 011)
ch Points: ch Points: embedded “f d “free benefits” here to here to Challenges ges : Disclosure, Examples : Take It Eez Eezi / Hollard, Tigo / Trustco ocus? ocus? loyalty model, Fundamo o/MTN Mobile Money, ABC MNO- Holla llard (Pakistan) CUSTOMER CONTACT CROSS – SELLING Objectives : Product Objective : Balances, statements, payment upgrades/downgrades, new products reminders Challenges : Disclosure, Challenges : Cost of SMS (although coming NTU rates Examples : “Please call down), Examples : PEP me”, SMS advertisements New opportunities : mobi New opportunities : sites Zingback, Viral TRANS SACTIONS Objective : (a) Collect premiums (e-ca cash or real cash, airtime), (b) pay claims Challenges : regulatory (vs e-ca cash), frictional costs from Telcos Examples les : Cover2Go. New Opportunities : MTN Mobile Mon oney, airtime (Cover2Go), M-Pesa model
M-Insuranc nsurance: MNO driven driven models Loyalty – Mobile Mo e Money Airtime deduc Embedded nsure – Tigo Mobile, MTN – Hollar lard Ghana & Zong – Adamlee L hana / Tanzania Group roll out ut in process Pakistan & rustco Namibia
Conclus onclusion The low-income market is no l o longer a donor-driven backwater – it is now a key po political, business and social priority. Whilst there are challenges, th , there are also considerable opportunities to grow the exist isting insurance market New models and new thinking ng will be required – pockets and consumers will be hurt Rules will be needed to ensure ure insurers act in the interest of the consumer, whilst allowing g Insurers to find creative solutions.
Referenc erences Agusto & Co. 2009. Insurance nce Industry Report , Lagos: Agusto & Co Ltd January 2009 09. Akanbi, F. and Kolapo, Y. 200 007. ‘Between growing Banks and shrinking real sector’ in The The Punch on September 3, 2007, Vol. 17, no. 19, p. 22 Bernstein, P. L. 1996. Against nst the gods: the remarkable story of risk , New York: John hn Wiley. Burt, C. and Gordon, F. 2008. 8. ‘Plain language marches into SA’s statute books’ in Cover , A , April 2008, Vol. 20, no. 11, Cover Publications: Randburg rg, pp. 33 – 34.
References erences (conti.) • Cameron. B., 2010. ‘Your our risk policy’s small print could easily trip you up’ in ’ in the Personal Finance section of the Saturday S Star, April 10, 2010, p. 2 • Cerfontaine, M. 2008. ‘Th ‘The role of trust in organisations today’ in Th The Journal for no. 1, 1 st Quarter 2006, Convergence , Vol. 7, no Axius Publishing: Johann nnesburg, pp. 116-119. • Chiejina E.O. (Ed.) Issue ues in mergers and acquisition for the insu surance industry . Nigerian Insurers’ Association
References erences (conti.) Das, U.S., Davies, N., and Podp dpiera, R. (2003). Insurance and Issues in Financial Soundness ss: IMF Working Paper , WP/03/138, IMF: Washington. Dorfman, M. and Tippins, S. 200 008. ‘An examination of alternative approaches to risk management nt and insurance research’ in Lagos Organisation Review , M , Management Review Ltd, Lagos. Vol. 6, no. 11, April – June 2008 08, pp. 147-156. Ergerue, P. M. 2003. Insurance nce: an examination of emergent issues in Nigeria . Mbeyi & Asso ssociates, Lagos FinScope, Eighty20 Funeral Ac Access Frontier, CENFRI Irukwu – several works
References erences (conti.) • Ladipo-Ajayi, O. (2009). ‘ ). ‘Operator identifies factors limiting growth of of insurance in Africa’ in Risk Shield , Lagos: Risk isk Shield Ltd, Vol. 10, no. 100, July 2009, p. 20. • Leech, J. – several article icles • SAARF, Living Standard ards Measure (LSM) http://www.saarf.co.za/LS /LSM/lsms.htm • Tobias, A., 1982. The inv invisible bankers , The Linden Press/ Simon & S Schuster: New York
Jeremy y Leach Divisional Director & Head: Head: Micro-Insurance, Hollard Insuranc urance Group jeremyl@hollard. hollard.co.za Thabo Gum habo Gumbi Assistant Principal: ipal: Micro-Insurance Hollard Insuranc urance Group thabog@hollard. hollard.co.za Israel Muc Muchena Technical Director – Hollard Mozambique Senior Adviser – Hollard Hollard International israelm@hollard. hollard.co.mz
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