Expert Identifies Key Drivers Of Inclusive Insurance
Anne Kamau, Executive Director at AB Entheos Limited
Demand, Supply and Regulation have been identified as key drivers of inclusive insurance services.
Inclusive Insurance is a form of insurance that gives all persons effective access to insurance from responsible providers.
Micro Insurance is Insurance for low-income persons, provided by different entities and based on generally accepted insurance practices.
Speaking at the just concluded West African Insurance Companies Association (WAICA) Education Conference in Accra Ghana, on the topic “Driving Financial Inclusion Through Inclusive Insurance,” Anne Kamau, Executive Director at AB Entheos Limited, highlighted three key critical drivers of inclusivity of insurance services namely: Demand, Supply and Regulation.
“Demand: insurance education, diversified products, customer centricity and financial literacy
“Supply: technology, dynamic distribution partnerships, E-commerce, incorporation of value-added services, Innovative insurers, Interest from non-insurance sectors, and public-private partnerships
“Regulation: introduction of microinsurance regulations, regulatory sandboxing, market development role of regulators, public investments in insurance awareness and education, mandatory directives, and supply side incentives,” she explained.
Statistically, she said more than 150 million Africans are destitute and live below USD 1.90 per day; more than 429 million Poor/low-income earners, which is 1/3 of Africa’s population, live below USD 2.15 per day; Lower middle income: more than 769 million; Middle Income: 313 million people; Upper middle income: 74.4 million people; and High Income: 135,200 high-net-worth individuals with wealth of at least USD 1 million and 21 billionaires.
She emphasized the need to give the excluded upper and lower middle class and the too-poor access to microfinance or microinsurance to enhance their financial capacity, leading to wealth creation.
She listed six key facts about the excluded market segments: Fact number one – Low income: usually, irregular; regular but low-medium. Fact number two: Usually in informal employment; Formal but low-middle class. The third fact is rural/poor/remote; urban/low-medium. The fourth is negative perception or misconceptions of insurance. Fact five: Vulnerable to abuse and fact six: Little or no experience with insurance, low insurance awareness.
In proferring solution, according to her, is to make insurance Inclusive, Simple, Understandable, Appropriate, Accessible, Valuable and Responsible.
According to her, Inclusive insurance is not only about doing good. If done well, it is also good for the bottom line. Business viability is a delicate balance between client value and the Business case Inclusive insurance is not charity. It is a social enterprise, but it can be profitable, viable and sustainable.
Speaking on customer centricity as key to client value creation through Empathy and Design Thinking, Kamau raised some pertinent questions: How well do insurers understand what the client needs? How well do insurers deliver client-centric insurance solutions?
She noted that “If we engage and talk to the customer, we are likely to find out what their needs are.”
She said, “You cannot create value for a client you do not know.” Stating that to do so you must define the persona with key features using a guided template, identify the key challenges faced by their target market, understand their willingness and ability to pay for insurance, understand potential challenges that can inhibit targeted or prospective consumers to buy insurance, and identify opportunities including possible insurance solutions and distribution channels that can be used to effectively serve the targeted consumers with insurance.
Strategies for achieving client value, she stated include value-added services, Consumer education, Measuring client value, and Complaints and feedback mechanism.
“Value added services: Increase benefits for the same premium if claims ratio is low e.g CIC Kenya; Increased presence at the time of claim e.g Pioneer Philippines; Merchandise and giveaways e.g Hollard SA
“Consumer education: Simple products; Simple documentation; No jargon; Simple processes and quick TaTs; Defined benefit principle and Responsive contact details (customer care centres)
“Measuring client value: Customer experience; Employee experience; Distribution partner experience and Organizations experience
“Complaints/ feedback: Can customers talk to you? How do they talk to you? How and when do you respond? Do you allow them to publicly rate your service,” she explained.
Business viability, according to her, is driven by three success factors, namely: Scale, Containing claims costs and Containing administration costs
To achieve scale, she said “Your product must be appropriate, accessible, affordable, relevant and simple, and you must ensure that you deliver the right products, get the right distribution channels, use mandatory strategies as a building block for voluntary, including the right incentives for the sales force and distribution channels, leverage technology, leverage existing infrastructure and consider public-private partnership (PPP) models for high-risk products.
Containing claims costs, she said, “Simple products are easier to price accurately, mandatory and group products minimize adverse selection risk, avoid products subject to high levels of moral hazard and claims fraud.
“Get to know the market, start where data is relatively more available for pricing, and iterate to find a level of risk cover that the market is willing and able to pay for.
“Work with partners and distribution agents, work towards large pools, ensure adequate waiting periods and apply Technology.”
On Micro Insurance versus Conventional Insurance, she said “Micro Insurance is a simple, easy to understand policy document; Broadly inclusive, with few if any exclusion; Premiums accommodate irregular cash flows, paid in cash or with another Financial transaction; Period of coverage can be as short as four months; Any screening requirements would be limited to a declaration of good health; Only small sum insured; Community or group pricing; Distribution channel may manage the customer relationship, premium collection, claims payment; Market is largely unfamiliar with insurance.
“Conventional Insurance: Complex Policy document; Limited eligibility with standard exclusions; Regular Premium payments as banking transactions; Usually a minimum of 12 months; Screening requirements may include medical examination; Small and large sum insured; Priced based on age/specific risk; Agents and brokers are primarily responsible for sales and Market is largely familiar with insurance,” she further explained.
