Microinsurance is Insurance for emerging customers and it’s a huge market opportunity

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Having worked in and around Asia for the past few years, Microinsurance was a constant topic and product line that I came across.  

I always found the concept of Microinsurance (and Microfinance) very interesting. However, I didn’t fully understand it.  

Fortunately, Peter Gross from MicroEnsure helped to give me more insights into this fascinating and extremely important concept.  

The following article is based on my conversation with Peter.  

Who is Peter Gross?

Peter is currently the Director of Strategy with MicroEnsure.  Peter started with MicroEnsure in 2010 as the General Manager of Ghana.  Prior to joining MicroEnsure, Peter had a variety of management roles in McMaster-Carr.  

When I asked Peter about why he moved from a company like McMaster-Carr to MicroEnsure, his answer was simple, ‘I wanted to work in a social enterprise and use my business skills in a developing context.’  

Peter’s wife is also in public health, working for the Center for Disease Control (CDC).  

Having an alignment of interests and values is important for any partnership, personal ones included.  Hence, moving to Ghana to help with both the protection and providing of care was an easy decision for the couple.  

What is Microinsurance?

One of the comments that stuck with me most during my conversation with Peter is on the definition of Microinsurance.  He explained to me that he is trying to get away from that term and refer to it more as ‘Insurance for emerging customers’.  The main reason for this is a desire to get away from the perception of ‘micro-price vs. micro-value’.

These types of products are specifically designed for an underserved population that typically can’t get access.  That is the core of Microinsurance.  

For people in these markets, Peter said, ‘good quality Insurance is very important because they face more day to day risks than you and I…they get really excited about Insurance and the role it plays to protect them’.

The uniqueness of Microinsurance is that the countries in which it is primarily bought, are some of the fastest growing areas of the world.

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Looking at the picture above, of the expected fasted growing economies in 2018, 6 come from Africa and 4 come from Asia.  

This unique blend of under-penetration plus fast growth, shows a lot of opportunity for Microinsurance in these areas, one which MicroEnsure is very aware of.

What is MicroEnsure?

MicroEnsure is a specialist provider of Insurance for customers in emerging markets and has registered over 55 million customers in 10 different countries in Asia and Africa.  

MicroEnsure designs, builds and operates their business by having products that are simple to understand and with distribution partners that can help to reach the masses.  They don’t carry the risk themselves, and partner with over 70 different insurers.  Their biggest shareholder is AXA, alongside Omidyar Network, IFC and South Africa’s Sanlam.  

Since the majority of the consumers in these markets do not have any Insurance, Peter indicated to me that the marketing strategies that they deploy help them to introduce an Insurance solution and meet an untapped need.

An example of this was when Peter first moved to Ghana.  They partnered with Tigo Telecom to offer free life Insurance to its customers.  The process worked like this:

  1. Customer dials *123 to sign up
  2. The more they spend on telecom services, the more they Insurance they get (up to a maximum of $500 USD)

Simple, right?

Peter told me that they started seeing customer behavior changing, especially when customers started seeing claims paid out.  This caused these consumers to not only want to spend more on airtime with the telecom to get more life Insurance, but also a desire to get coverage for other risks that they face in their lives.  

This helps to show what has made MicroEnsure so successful:

  • Identify a need
  • Introduce a solution
  • Make that solution readily available and accessible
  • Introduce more solutions
  • Make those solutions readily available and accessible
  • Repeat

What are some other products that MicroEnsure offers?

As with any market, the range of products available to consumers can vary.   

Product development typically starts with Life, Personal Accident and Hospital cash. Policies to pay for funeral expenses and protection of property and crops are quite popular too.  Other risks, such as political violence can also be marketed, depending on the country.  

As more consumers have mobile phones, mobile device cover is trending upward too.  

If the product fulfills the need to the consumer, is simple to understand and easy to market/get access to, then it will be considered.  

At the same time though, Peter made clear to me that MicroEnsure needs to be extra careful in building its products.  Since the risks their consumers face are higher, the risk exposure for them and their Insurance partners are also higher.  They need to ensure that they build in features that are both easy to understand and tougher to game.  This can be a tough balance to meet, but one that needs to happen in order to ensure that they can continue to provide this valuable solution for their consumers.  

How does technology play into this process?

Good technology is part of the key to MicroEnsure’s success. Peter shared with me that this is both from a distribution and operational perspective.  

For distribution, these products need to be able to be offered and distributed through the masses.  Making an easy to purchase process over mobile or other e-platforms is critical. It has to be not only simple to fill out, but also easy to understand.

From an operational perspective, Peter explained that MicroEnsure needs to assume a lot of mistakes on the data input from the consumer.  As such, they need to build in certain tolerances on imperfect data to make clean.  This is crucial, especially for the payment of claims.  

Peter described that MicroEnsure’s technology is fully API-enabled and can be easily plugged into their distribution partners, whether it be banks, telecoms and others. Further, he shared that their systems are modular, meaning partners can use various components, such as the Policy Administration System, claims system, messaging system, only as needed.  

Who are some other meaningful Insurtechs in the MicroInsurance space

I asked Peter who some of the other Insurtechs in the space are to take a look at.  He gave me three:

  1. BIMA, which just had an investment of $100m from Allianz
  2. Ayo
  3. Acre Africa

Summary

This was a fascinating conversation with Peter and I learned a lot from it.  

I have a ton of admiration for the work Peter and MicroEnsure are doing.  I’ve worked in mature markets as well as emerging ones (though I would say Malaysia is right in the middle of that).  

There are complexities in both types of markets.  

What interested me the most from my conversation is the combination of being able to provide coverage for the un/underinsured, focusing on their specific needs and making them excited to be getting Insurance.

I feel that Insurance is a very important product, for all people.  In places like the US, Insurance can often be looked at by consumers as boring and an unnecessary evil (until they need it of course).  

Insurtech is helping to change that perception in the western world and mature economies.  

For those that are in emerging markets, Insurtech is helping with access and a level of coverage that many have never experienced before in their life.  Now that is something exciting and meaningful.  

Stephen Goldstein is an experienced Insurance executive and Insurtech dealmaker with a core focus on growing revenue, launching go to market initiatives and advising industry leaders.

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4 comments

  1. Nothing particularly new about Insurance, it is about managing risk and setting a premium , the issue is one of premium collection and moving away from large annual and lumpy contracts and using various technologies to ease the pain of parting with money to compensate for future ( unknown) losses. Where these InsureTech start ups can win is making the customer feel they have a pay as you go product and making the Insurance companies feel they have a pay as you risk model.
    In the end it is about a transaction which has a value and a time stamp- cue blockchain Insurance

    Like

    • Thanks @Len Jones for you comments.
      I agree with your point on where the start-ups can win. For consumers that are new to insurance, the process needs to be seamless/easy and they need to feel like they are getting value. At the same time, the insurer needs to ensure their risks are managed accordingly.
      And, fully agree about the opportunities for blockchain to help here too!

      Like

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