OSEAI - Ezekiel Macharia (Day 2)

Reaching the UninsuredMaking Life Insurance relevant in Africa

Ezekiel MachariaGroup Actuary - Jubilee Holdings Limited

Day 2, Thursday 25th August, 2015

AGENDA• Africa Statistics

• Talking Points–Where is insurance heading? Future of

Insurance– Focus on the uninsured– Role of Life Insurance

• Conclusion

Insert Pictures no OESAI background

Africa Statistics• Population: 1.1b (15% of world population)

• Real GDP per capita: $2.2k

• Premium per capita: $61

• Life Expectancy at Birth: 56 yrs

• Human Development Index: 0.502

Sources: Swiss Re, WorldBank, UNDP Ugandans on International Youth day via Twitter @KagutaMuseveni

Insert Pictures no OESAI background

Doing More• Real GDP per capita: Africa: $2.2k (World: $13k)

• Premium per capita: Africa: $61 (World: $640)

17%

10%

70% growth?

Insert Pictures no OESAI background

Spirit of Insurance• Life Expectancy at Birth: Africa: 56 yrs (World:71 yrs)

• Human Development Index: Africa: 0.502 (World: 0.702)

Cheaper?

Need it more?

Where is insurance heading?

•African Consumer Trends•Market Disruption•Peer-to-Peer Technologies•Traditional & New Competitors

African Consumer Trends?• African consumers are quick to adopt to new technologies – African Insurers will be more susceptible to disruption

• Africans are ready to buy insurance if it is well packaged and adds value

Source: GSMA.COM

Uptake of mobile money highest by Africans (50% of global share). The market is willing to test new things.

Market Disruption

–Bypassing regulation: WhatsApp has captured 50% of the active mobile subscriber base in Kenya without a single local operating license. –20 billions messages per day globaly.

To serve the unisured we must adopt market disruptions in insurance?

Peer-to-Peer Technologies

•ZOPA is offering peer-to-peer banking – cutting out the bank. $1b lent out to date.

Taking this concept to insurance – will this be appealing to the uninsured?

Scaling up capabilities

•Traditional Competitors?–Platform as a Service (PaaS): »Startup insurers/MicroInsurers should be able to reach scale without investing in millions of dollars on technology

Market Entries

•New Competitors?–Your competitor is in another industry:–Apple/Samsung entered Mobile Phone Industry. Nokia moves from 40% global market share (2008) to near-exit

Too Big to Fail?

• Nokia Revenue in 2008 - $70.7b

• Total Africa Insurance revenue (2013) - $69b

Focusing on the uninsured

– Target Market– Coping Mechnisms– Key requirements for insurance– Product requirements

Target Market

The insured African population is less than 5% but Africans earning above $20 per day ($7,300 per year) represent 19% of the population

Income above $20 per day(19% of Africa population ~200m)

$10-$20 (11% of Africa population ~121m)

$4-$10 (10% of Africa population ~110m)

Below $4 per day (60% of Africa population ~600m)

Low Hanging Fruits(potential of 200m uninsured who can afford insurance)

At 3%* of income paid towards insurance - $200 is available annnualy for insurance(ILO Insurance Willingness to Pay Statistic)

Coping Mechanisms

Coping Strategies

(low income market)

Self Insurance(Retain Risk)

Salaries & wagesBorrow from family, friends or money lendersSell or pledge assets

Social Protection (Transfer Risk)

Public health servicesDisability compensation

Informal Groups

(Share Risk)

Welfare associations Burial societies Church group loansFundraisersHiring of guardsMutuals

Risk Management for the uninsured

Key requirements for Micro-insurance

• Flexible Premium & readily available payment solutions – e.g.,Mobile Money with SMS confirmation

• Easy to understand & claim with limited exclusions. Bulk rating for all ages, genders.

• Low ticket business – Catastrophic reinsurance would be appropriate to support this

• Leverage current technologies:-– Mobile phones – using voice recording to read policy

document– Electronic submission of claim documents– Using ICT to curb fraud

Role of Life Insurance• Using Life Products (Funeral Plans) to target the

uninsured market?– Easy to administrate claims

• Death claims are easier to verify than health or property claims

– Can be bundled with other products• Bancassurance – bundling with savings account• Protection for micro-loans (micro-credit)

– Limits can varied easily to differentiate the market• Technology can enable clients to select insurance

limits from a mobile menu

Conclusion• The future is uncertain but disruption in

insurance is almost certain.• There is a huge potential from the uninsured

African population ~ 200m lives.• These groups already have coping

mechanisms –we should provide innovative solutions that will entice this target market.

• Life insurance can be used to test the market before introducing other insurance products – agriculture, health, index-based, etc.

?QUESTIONS

ezekiel.macharia@gmail.com+254 722 540 045