A new era for mobile insurance distribution

A major transformation that would redefine insurance marketing and product distribution is underway. While efforts by local firms are becoming visible by the day with a recent flag off of mobile distribution between FBN Life and Airtel, offshore firms are seeing huge potential and possibility and in the Nigerian market.

According to the offshore firms, mobile phones have transformed banking in Africa and now they might do the same for insurance. That’s the hope of BIMA, a micron insurance company providing Low price cover via mobile networks to 4 million customers in Africa and Asia, and adding 400,000 new subscribers a month, according to an FT report.

Founded about two year ago, the Swedish company recently announced $4.25 million of new investment from the Mauritius headquartered LeapFrog Investments, which calls itself the world’s largest investor in insurance for emerging market consumers.

Just as Mpesa, launched by Safaricom in Kenya in 2007, made money transfers and deposits available to the masses, the mobile platform could open up a vast, untapped insurance market. Research by Lloyd’s suggests the potential for 1.53 billion new policies among low income consumers globally, should suitable products be made available.

“There is huge demand from consumers for low cost insurance,” says BIMA chief executive Gustaf Agartsson, “but nobody had figured out how to access them yet, according to an FT Report.

In the countries we capture, there is usually 70 per cent mobile penetration, but insurance penetration is below 5 per cent”. “Major insurers know growth will come from emerging markets, but they have focused on upper income groups and don’t know how to develop a product costing a few dollars.

What is the distribution channel? It’s too hard to build an agent network,” Andrew Kuper, president of LeapFrog, told beyondbrics. The model devised by BIMA is to market insurance products through mobile network operators. Customers can pay as little as 20 cents to $6 a month for cover, which is collected when they top up their airtime.

Products on offer include life insurance, accident insurance and hospitalization insurance, and BIMA hopes to eventually release corporate products aimed at small enterprises. The amount of cover is in the range of a $150 to a few thousand dollars.

The technical system is designed and managed by BIMA, which also provides underwriting and claims administration. Though prices are low, the high volumes enable profitability, BIMA says.

So what do the mobile networks gain? As Kuper explains, “Network operators said their biggest problem is that 99 per cent of their customers are pay and go, and very disloyal. The customer walks around with three SIM cards and the MNO [mobile network operator] has to fight a price war.

“When airtime adds to their insurance, customers turn from price conscious pay and go custom

ers to loyal subscribers. The mobile operator gets something they really need.”

The company currently operates in Ghana, Tanzania, Senegal, Mauritius, Bangladesh and Sri Lanka, and with the customer base growing rapidly they hope to move further afield, with Nigeria potentially the next target, BIMA said.

Staffing has grown rapidly from 150 to 500 in less than two years. BIMA was unwilling to divulge financial information, but the investors are giving it a vote of confidence. Alongside the new funding from LeapFrog, the holding company Kinnevik, which majority owns BIMA, has put in an extra $2.75m, more than doubling its prior investment.