Taking insurance to the poor

Africa is home to three of the world’s fastest growing economies; yet, it has the unwelcome distinction of being the continent that has one of the highest levels of poverty. How does one go about balancing the scales? How does the insurance industry go about addressing the challenge of addressing the poverty issue and what role do brokers play in this? At the end of the day, insurers are about financial protection and assistance in times when certain clients may be left destitute without it.

This challenge was discussed at the recently held 46^th African Insurance Organization (AIO) Annual Conference. 

A major influencer

The industry has heard a lot about technology and how it is influencing the industry. However, there are some who still question what this influence really means for them. 

Alastair Douglas, Global COO of BIMA, pointed out that technology has played a vital role in the growth of insurance across the continent. 

“Mobile penetration in Africa is massive. According to recent reports, the penetration of smart phones across the continent is above 70%; yet, insurance penetration across the continent is less than three percent. Surely there is a way to use the growth of technology to bridge the insurance gap?” asked Douglas. 

An effective strategy

BIMA was started by Gustaf Agartson who worked for major mobile companies for many years. Without any background in insurance, he realized that bringing a product to an emerging market over a platform that they know and understand is an effective way to market it and increase demand. 

The first step that needs to be taken is that insurers need to enter into key partnerships with mobile operators and other consumer technology companies to reach scale and be at the forefront of innovation in emerging markets. 

Once this is done, brokers start to play a role as the industry’s most valuable player (MVP). “A product or service is only as good as the sales force that is marketing the product and creating demand. If an insurer wants to take their product/service to rural areas, it needs to be done with a sales force that knows the population, knows the culture and is able to market a product. After the product is sold, the broker is then responsible for education and stressing the need for insurance,” said Douglas. 

The third secret to success is to establish a platform that enables simple and user friendly registration and access. Finally, the insurer needs to make sure that their products are always affordable, easy to use and are built around the unique needs of the market that they are serving. 

Digital marketing

The demand for a product/service is only as good as the marketing and interest that is created around it.

In the past, insurance was marketed in a very specific way across platforms that consumers were familiar with. This consumer base is getting younger and access information in a completely different way. They have a very different set of needs than their predecessors. 

“As consumers get more educated about the products that insurers are selling them, brokers are able to have longer conversations with them about managing risk. They can make the message more engaging, relevant and personalized to the audience that they are serving. When BIMA first launched in Africa, the company found that SMS technology was becoming a hassle and that clients were receiving close to 100 SMS messages a day. This becomes intrusive and insurers need to find a way to tailor a message that cuts through this noise,” said Douglas. 

Payment channels

Addressing the elephant in the room, Douglas pointed out that a major problem in Africa is that the majority of the continent, particularly in rural areas, is unbanked. How then can insurers sell insurance? 

“The banking problem is not insurmountable. There are a lot of mobile payment platforms that are growing in prominence in Africa. Insurers can go into the continent and sell insurance to clients and take the money for premiums off their mobile airtime balance in small daily deductions. This also allows insurers to become innovative when it comes to coverage. If a client only has enough funds to pay for half a month’s premiums, they will receive half a month’s coverage. If they can afford to pay a quarter of the premiums, they will receive coverage for a quarter of the month. Surely this is better than no coverage at all if affordability is the real crux of the matter?” asked Douglas. 

Communication and motivation

One of the critical challenges that the insurance industry faces is that South Africa is so diverse that English is not the first language in many households. Yet, the majority of communication in the industry is done in English. This is a problem that was highlighted at both the AIO conference and the 2019 Batseta Conference. 

“This was a major challenge that faced BIMA when we came into Africa. To circumvent it, we employed local people and upskilled them. When it was necessary to bring in skills from an international market, we made sure that there was effective succession planning in place so that the job would eventually be taken over by a local after a specific period of time. This increases trust and an insurer’s relevance in the market that they are expanding into,” said Douglas.

There is still the issue of the role that insurance plays in alleviating poverty. For most of us, experiencing a financial loss is stressful. Insurance plays an important role in the lives of many policyholders because they simply cannot suffer a financial loss event without insurance. 

But how do insurers get this message across to clients who are battling to survive every month, let alone purchase insurance. “Claims testimonials are a major motivator. If we are able to show clients that there are people just like them who find value in insurance and can afford cover, it is 90% of the battle won,” said Douglas. 

Editor’s Thoughts:
The role of insurance in alleviating poverty is plain for many to see. However, it is hard to implement in practice. It will be interesting to see how this grows in the future. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za