Africa Pushes Micro-insurance

ACCRA: Insurance providers looking to target the mass market in Africa need to think outside the box, according to the founder of MicroEnsure, which has developed an innovative approach to selling insurance products on the continent.

The standard approach of sending out agents to sell insurance to people has limited traction in Africa, because the product needs to be expensive in order to cover the agent’s commission – only 3% of the continent has life insurance, for example.

So, rather than sell $1m in life cover to 1,000 people, MicroEnsure has come to the market from the other end, Thinking about how to sell $1,000 cover to 1m people, offering them a safety net previously beyond their reach.

“We needed a partner that had three things,” explained Richard Leftley, founder of MicroEnsure. “They had to be trusted by the low-income market, they had to be accessible to that market, and they had to be able to process payments.”

The obvious fit was a mobile telco, but even here the initial attempt to sell life insurance via mobile foundered. “No one wakes up in the morning wanting to buy insurance,” Leftley observed. “Just because you put it on a phone doesn’t make the dullest product in the world sexy.”

The breakthrough came when he and his team in Ghana better understood the behaviour of their target market: low-income mobile phone users tend to be pre-paid customers who often buy small amounts of airtime across multiple networks through various SIM cards.

“They are typically spending about US$5-7 a month topping up their phone, but they are doing that with $2 with Tigo, $2 with Airtel, etc,” said Leftley.

His idea was that a network – he approached Tigo first – would give subscribers free insurance every time they topped up. “Users are still spending the same amount of money topping up their phone but now getting a reward from Tigo to top up more,” he said.

“So Tigo wins because they get more top-ups” which more than offsets the cost of insurance. “The client wins because they get free insurance and address the risk that they are worrying about”, without spending any more money.

Around one million more people are now covered by insurance in Ghana and Tanzania, as a result, and MicroEnsure is extending the idea into other African and Asian markets and into other insurance categories.