The growth of mobile services is a key part of extending the benefits of communications in emerging markets. It is also essential for mobile operators looking for new services to differentiate their offering and generate new income. Mobile banking has been one of the big success stories in the last few years. Now attention is turning to other areas in the financial area. One of these areas is mobile insurance.
MiLife is new insurance project which is being developed by the insurance group Hollard Insurance and the mobile financial services enabler MFS Africa. The service was launched in Ghana on March 23rd. Developing Telecoms was fortunate enough to catch up with Jeremy Leach, Head of Micro-Insurance for the Hollard Insurance Group, and Dare Okoudjou, Chief Executive of MFS Africa, and asked them to explain where the idea for mobile insurance comes from, what the potential for it is and how it will be delivered.
DT: Tell us about the miLife pilot.
DO: The pilot has been running for six weeks in Ghana. The service is not currently offered as part of MFS Africa’s mobile money portfolio; it is available through a separate USSD (Unstructured Supplementary Service Data) portal. We could theoretically deploy an app version on any platform, but at the moment in a market like Ghana apps are not really relevant – value-added services are predominantly available through USSD.
Clients initially purchase a short code, which is then used to redeem the insurance product. The same interface used to purchase the insurance can then be used to change its attributes, tailoring the cover to suit the consumer’s needs, as well as check its status (whether it is still active, who the beneficiaries are, etc.).
DT: Mobile life insurance is something of a new concept - how is life insurance typically purchased in Africa?
JL: South Africa probably has the most sophisticated range of distribution models, but it’s somewhat unique in the continent; insurance can be purchased from major retail stores as well as banks. Outside of South Africa – including Ghana - the focus is more on banks and brokers. A more traditional model is that of individual agents, but coverage through such mechanisms is fairly limited - only around 22% of Ghanaians have insurance.
More recently insurers have moved towards requiring that clients have a bank account, as they are no longer comfortable collecting cash. However, this is an issue too as only 34% of Ghanaians have a bank account. Working with MTN on an acquisition model using mobile phone technology allows us to change our distribution platform and target a much larger percentage of the population.
DT: Africa’s agent networks seem to be trusted more as a means of providing financial services than as a means of purchasing insurance. Are people more likely to purchase insurance via their mobile phones?
JL: A recent survey showed that 70% of respondents would prefer to purchase insurance from MTN than from an insurer – this is because insurers have a low presence in the African market and serve only a small percentage of the population. Brand recognition is extremely important; we aim to make insurance more relevant by associating it with a trusted brand.
DO: People can purchase the product entirely via their phone, but we still want to use the existing mobile money infrastructure – the agent network – to reinforce trust. There’s also an educational aspect: we want customers to understand exactly what they are buying, and there is no better platform for spreading this information than the agent network – mobile money customers are already familiar with it, while agents understand the importance of registering customers correctly and clarifying details.
DT: In addition to the purchase of insurance, what else does miLife provide?
DO: At this stage miLife itself is only a life insurance policy, but we are exploring new options; for example we’re working on a policy that will cover school fees for children. There is also demand for property insurance, i.e. cars, houses and even cell phones.
JL: What’s unique about this product is that it’s the first time we’ve been able to integrate the sales of the insurance with the collection mechanism – whether via a merchant, a service centre or their cell phone, customers can address collection directly and amend the level of cover, which allows an element of democratising insurance. Even in upper income markets, it’s difficult to amend your cover directly.
DT: So users have the choice of using existing MFS infrastructure or their mobile phone to access these services?
JL: Options are very important; the client needs the greatest number of opportunities possible to access the service. This will be the same when we start rolling out other products as well.
Customers can sign up for insurance at the same time – and in the same place – as they sign up for mobile money services. Alternatively they can set up a recurring debit order on their account via their cell phone.
DT: You mentioned that only 22% of Ghanaians currently have insurance – how much would you expect this figure to rise following the launch miLife?
JL: While a significant portion of the banked population have insurance, not all of them do. Realistically, even if a country’s population is 100% banked, it will never be 100% insured.
DO: Over 50% of Ghana’s population has a cell phone – around 10 to 12 million people. MTN have close to 9 million subscribers, and that’s around 50% of the market. A key factor that makes the product appealing to the millions of mobile users in Ghana is the way that a lot of the processes are seamlessly embedded into the pre-existing mobile money process. Being able to administer a premium as low as 1 Ghanaian cedi (around 70 – 80 US cents) is of great importance to consumers – cost is possibly the single biggest factor in their choice of insurance.
We need to look at mobile in general and mobile money in particular as a way of making existing markets more efficient – these services really have the potential to transform lives. With miLife, we’re confident that we can increase the size of the insurance industry not just in Ghana, but other countries too. We are taking a similar approach with other products, such as credit, which will leverage the mobile money infrastructure.
JL: In much of Africa, the insurance industry is frankly set up as a hangover from the colonial days – it’s geared towards the wealthy and the corporate. We aim to make markets more relevant for the population.