For many in the third world, micro-insurance is where their protection purchasing history will start, and maybe this is where many should start in the developed world too? Greg Becker looks to Tanzania.
It currently covers five million people globally, with 850,000 in Tanzania. It provided the training and insurance administration.
- Golden Crescent: A Tanzanian insurance company that has underwritten the initiative.
The insurance is simple and free for those who spend at least 5000 TZS or £2 per month, with the amount of free cover being a function of past airtime purchases, with cover increasing as a person spends more. The sum assured varies between £80 and £400 – or 1m Tanzanian shillings. The phone subscriber must sign up to the programme, with this benefit acting as a loyalty programme.
There is strong evidence that average revenue per user (ARPU) increases, as well as customer loyalty. More than 100 claims have been paid so far, and some may be astounded to note that claims are paid within three working days of the appropriate documentation having been provided.
Informed customers who have had a positive insurance buying experience are perfect for on-sell and up-sell opportunities, and further initiatives are on the cards to provide more insurance products to this newly established customer base.
In Tanzania, the barriers to insurance sales are being overcome. Illiteracy, poverty and limited infrastructure have held back traditional insurance sales but have conversely spurred on innovative alternatives. We do not have the same constraints in the UK, but we still have challenges.
Carol Sergeant’s recent report on simple products noted barriers to widespread uptake of financial products including a lack of awareness, a lack of self-confidence in dealing with financial matters, mistrust of the financial industry, and a feeling among consumers that they are overwhelmed and confused by the offerings available, which is compounded by entrenched distribution models, regulation and the complex processes this has led to. Some see challenges as hurdles, while others see them as opportunities to do something different. Tigo describes its strategy as being “Triple A”, covering “affordability, accessibility and availability”. Is that the way to overcome barriers?
Greg Becker is product development actuary at RGA
