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Trend: Mobile Microinsurance in Africa
By admin June 12, 2014

Mobile phone services are a big business in Africa. CNN reports that there will be a billion mobile phones in 2015. But rather than be locked into contracts, users there opt to pay as they go, and top off with minutes as they need them. This has created stiff competition among providers. Some carriers are now providing a free service to differentiate in a tough market – microinsurance. Microinsurance is an insurance product accessible by price or delivery channel to people earning less than approximately $2 a day, according to the International Labour Organization (ILO). For microinsurance companies, it is an opportunity to access a hard to reach and underserved market, the very poor without access to financial services and those most in need of a safety net. Without a safety net, a family can quickly lose all the assets it has managed to earn. The idea is therefore win-win-win – a great chance for the mobile carrier, the microinsurance company, and the newly insured customers.

Photo Credit: http://www.bimamobile.com

Photo Credit: http://www.bimamobile.com

For extremely low-income families, insurance payouts for a health crisis or to cover costs associated with a death can make the difference of stabilizing or moving into a poverty trap. The coverage is usually just a few hundred dollars or less, but for very poor customers, such amounts can have a big impact.

“There is huge demand from consumers for low-cost insurance,” says the chief executive Gustaf Agartsson of BIMA, a Swedish microinsurer, “but nobody had figured out how to access them yet. In the countries we capture, there is usually 70 percent mobile penetration, but insurance penetration is below 5 percent.”

Another large player, MicroEnsure sells its products in 13 countries in Africa and Asia. They pay health claims within an hour and life insurance payouts within a day. The payouts are received in a few different ways. Customers can sometimes directly receive money to their mobile accounts, or they might receive a text that is redeemable at a local kiosk. Or the provider might provide additional minutes, which can be used as a functional currency with shopkeepers.

One major risk for financial services in emerging markets is the danger of miss-selling. Peter Gross, Africa regional director at MicroEnsure, acknowledges that miss-selling is a significant risk, particularly among illiterate customers and those new to the concept of insurance. MicroEnsure tries to explain its products in three text messages, he said. The market is certainly there for microinsurance and mobile phones have changed the landscape.

 

For more information

–       http://www.cgap.org/blog/global-landscape-mobile-microinsurance

–       http://www.theatlantic.com/business/archive/2014/06/the-cell-phone-minutes-that-come-with-insurance/372034/

–       http://edition.cnn.com/2014/01/24/business/davos-africa-mobile-explosion/

–       http://www.theguardian.com/global-development/2013/may/02/ghana-mobile-free-insurance

–       http://blogs.ft.com/beyond-brics/2013/02/21/after-mobile-banking-mobile-insurance/

–       http://opinionator.blogs.nytimes.com/2012/06/06/the-microinsurance-revolution


Thanks for sharing !


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