Spotlight: Insurers Leverage Africa’s Telecom Networks
Forget Silicon Valley and Tel Aviv; if you are looking for mobile insurance innovation, take a look at Africa.
Playing ‘Leapfrog’ in Africa
Technology organizations call it ‘leapfrogging’ – when a country or region skips an entire generation of technology to become a world-leader. And so it has been with Africa and telecommunications. Landlines are rare – just two percent of African homes have one, yet mobile penetration is among the highest in the world in many markets. In Egypt and South Africa, mobile phone penetration tops 100 percent; Nigeria and Algeria are above 90 percent.
Interestingly, the rapid adoption of mobile has allowed the continent to achieve another ‘leapfrog’ maneuver, this time in banking. The launch of Safaricom’s Mpesa mobile money transfer service in 2007 has utterly transformed the way people buy and sell items in Kenya; around half of the country’s GDP now funnels through the Safaricom network each year. The initiative’s success has catalyzed dozens of similar systems around the world.
Insurers Look to Africa for Growth Networks
With mobile penetration and usage rates rising everywhere, a small but growing number of insurers are now looking to leverage Africa’s mobile leadership to achieve their own ‘leapfrog’ maneuver by partnering with leading mobile organizations and local innovators to create entirely new products and services. Much of the activity has been in three key areas:
How does it work? Similar to bancassurance, mobile network operators leverage their existing network and customer database to promote products, manage claims and handle customer inquiries through voice and SMS, while insurers manufacture products, receive premiums and settle claims through mobile wallets.
Who is doing it? One of the first and most successful programs (Mi-Life) was launched in 2010 through a partnership between Hollard Insurance (one of South Africa’s insurers), MTN Ghana (a mobile operator), MicroEnsure (a rapidly-growing mobile insurance distributor) and MFS Africa (a mobile wallet operator).
How does it work? This variation of the micro-insurance model is intended to protect farmers from drought risk and excess rain. Farmers buy coverage when purchasing agricultural inputs, registering the product electronically via a smartphone scanner. Stockists collect premiums and transmit them via Mpesa, which also disburses claims to farmers.
Who is doing it? Kenyan insurance company UAP Insurance Limited partnered with mobile operator Safaricom and Switzerland-based Syngenta Foundation for Sustainable Agriculture (SFSA) to launch ‘Kilimo Salama’ crop insurance.
Mobile network insurance partnerships:
How does it work? Mobile network operators bear insurance costs on behalf of customers, who are covered provided their monthly airtime consumption exceeds a specified threshold. The included insurance coverage then increases commensurate to airtime consumption.
Who is doing it? A number of programs exist across the continent including in Ghana where Vanguard Life and BIMA, both local insurance providers have partnered with MicroEnsure (the mobile insurance distributor) and Tigo Ghana (a mobile network operator).
What Makes These Partnerships Work?
Besides the ability to share resources, R&D budgets and risks, these innovative partnerships also leverage the core value proposition of each party to create a new idea or concept. For insurers, partnering with a trusted brand is also critical, particularly in markets where the public remains skeptical about the benefits of insurance.
Ultimately, by creating partnerships with non-traditional players, insurers operating in Africa have been able to expand their market reach, improve their reputation, drive growth and inspire world-leading innovation.