written by
Renjit Philip

Microinsurance and Mobile Network Operators: A Macro Opportunity

micro insurance mobile network operators 4 min read , July 2, 2021

What is Microinsurance?

It is reasonably well-known that insurance penetration is relatively low in most parts of the Middle East, resulting in people with low incomes more exposed to risks than those with higher incomes. Could microinsurance be a solution? Microinsurance can be used as a risk management tool for people in developing countries, and it can help to cushion the day to day risks that they face. Can it find a way into the Middle East?

Photographer: Amir Hanna | Source: Unsplash

One of the reasons why insurance is underpenetrated in developing markets is because the cost of distributing insurance becomes prohibitively high as a percentage of the low premium value. While all the countries in the Middle East are not exactly classified as developing, the distribution challenges are similar. What’s needed is a high volume, low-cost distribution business operating at scale. This is where Mobile Network Operators (MNOs) come into the picture.

Why MNOs?

Mobile network operators have the geographic reach, usually have an app or SIM-based short messaging mechanism that is already operational with their users. Think of the Etisalat or Du app that most of us have downloaded (UAE). Also, phone and data credit is a proxy for currency, as MPesa and Safaricom from Kenya have shown us. So when you put it all together, it is a matter of making the connection between the customer and the insurance provider using the MNO's technology assets.

Photographer: G-R Mottez | Source: Unsplash

Success story:

BIMA: This is an insurer that has reached 37 million plus customers, many of whom are accessing insurance for the first time. It first entered Ghana in 2010, focusing on affordable life and medical insurance products. BIMA's mobile insurance platform can integrate easily with the infrastructure of any mobile operator. The product proposition is designed so that the insurance coverage increases as the customers use more of the mobile operator's services. MNOs collect the premiums by using a daily deduction of mobile credit. The MNOs break down the monthly payments into daily micro-premiums. The mobile phone penetration in many of the developing markets is in the high 80%s, and that tailwind is used to drive insurance penetration.

"BIMA Health offers a unique 'bundled' insurance and digital health package. We offer unlimited, 24/7 access to qualified doctors over the phone, saving customers the time and expense of visiting a medical center."- says a blurb on their website. That is a way to solve the problem of primary care reaching deep into the developing economies.

New Development:

Chubb: Chubb is a multinational company that has launched its "Roam as you go" travel insurance. This scheme was launched a few weeks back this year. When the customer is detected as "roaming" by the telecom provider, the travel coverage is activated. The customer is intimated by a text message or pop-up notification in the telco's app. Customers are given a few hours from receipt of the message to either decline coverage or add more people to the travel policy if they did not do so before travel.

Coverage ends when the customer is no longer roaming or reaches the maximum trip duration of 31 days. For a cell phone operator, the cost of insurance is added to the customer's next phone bill- as easy as that!

Extending the Value proposition to a location-based model:

There are other ways to develop the value proposition to location-based insurance. Telcos have a phenomenal amount of metadata for each subscriber. Metadata is the when, where, and who the communication is sent by and to whom.

Example: the name of the sender and recipient of an SMS & location when sent.

Insurers can use the metadata to create a geospatial lifestyle map that reveals the interests of the user's habits. Based on that, Insurance companies could offer appropriate on-demand insurance offerings.

Photographer: Brenda Lai | Source: Unsplash

Product offerings:

  • Enjoy golfing? Golf insurance covers people on the geo-fence area of the course.
  • Visiting the mall to shop ? There is shopping protection insurance that covers your purchases when you exit the mall.
  • Into jogging or physical fitness a lot? There is a fitness cover for you that switches on when you go jogging.

Future scaping

The combinations are endless. The offers are machine learning-driven and can be switched on and off by the customer. The privacy issues are taken care of because of no human intervention in the policy issuance process. Payments are made seamlessly because it is linked to your phone bill. There is a possibility of making the claims automated by using on-blockchain smart contracts triggered by news events from reputed sources. Customers could optionally use coded smartphone videos to report claims. No human intervention = low expense claims management.

Is that taking on-demand, embedded insurance to the extreme? Maybe, but the fact remains that given the low penetration of insurance, a more proactive way to cover and transfer risks is needed. Microinsurance maybe the answer!

micro insurance mobile network operators