TECHNOLOGY AND INNOVATION AT THE SERVICE OF LIFE INSURANCE CUSTOMERS

TECHNOLOGY AND INNOVATION AT THE

SERVICE OF LIFEINSURANCE CUSTOMERS

African Insurance Organization2013 Life Seminar

2

Outline of the presentation

Development of life Insurance in Africa

• Inventory• Synoptic view of the development indicators of the sector• The density of Life Insurance• Average premium per inhabitant

• Obstacles to development• What to do to attract populations?

• Innovation• Technology

Innovation at the service of Life insurance

• Products innovation• Distribution channels innovation:

• Characteristics of an emerging distribution channel• Some emerging channels with high potential

3


Technology at the service of Life insurance

• Why technology?

• The rise of technology in Africa• Break down barriers and transcend remoteness• Bring added value to the customer

• Technological solutions to improve the "Customer" service and therefore boost growth

• Internet• Wireless telephony (Mobile Insurance)

4


Focus on Mobile Insurance: a growth with high potential• Overview on Mobile Insurance

• The advantages and potential of Mobile Insurances atouts et potentialités du Mobile Insurance

• Possible implementation schemes of Mobile Insurance

• Vulnerableness and weaknesses of the system

• Role of supervisory authorities: government supportConclusion

5

Development of Life insurance in Africa: Inventory

Synoptic view of development indicators of life insurance in Africa (2012)

Pays Primes vie en millions de USD

Pénétration Prime/Ha en USD

Bénin 21 0,27% 2,22

Burkina 28 0,26% 1,61

Cameroun 80 0,29% 3,91

Congo 8 0,06% 2,01

Côte d'Ivoire 187 0,74% 9,07

Gabon 31 0,18% 19,41

Mali 11 0,10% 0,64

Niger 7 0,11% 0,45

Sénégal 43 0,30% 3,26

Tchad 1 0,01% 0,11

Togo 31 0,78% 4,94

Total CIMA 449 0,30% 3,25

Afrique du Sud 44 787 11,60% 882

Namibie 674 5,50% 337

Ile Maurice 442 4,00% 285

Maroc 930 1,00% 29

Kenya 436 1,00% 10

Egypte 785 0,30% 9

Nigeria 404 0,20% 3

Total Afrique 46 298 2,50% 47

Total Afrique Hors Afrique du Sud 4 764 0,33% 5,01

6


Life insurance density very low figures for almost all countries

• The insurance density measures the average premium per capita in a given population or in a specific geographical area

• Generally according to the table shown in the previous slide, the density of life insurance in Africa (excluding South Africa) is very low :

• only 5 USD / ha on average (excluding South Africa)• world average of 373 USD per capita

• Unbalanced situation relative to each country• less than half a dollar per capita for selected countries in the

CIMA• Asia average : 230 USD/ha• Latin America average: 120 USD/ha

7


Penetration of life insurance

• The penetration of life insurance is the share of life insurance premiums in GDP for each country.

• Like life insurance density, we note that the penetration of life insurance in Africa (excluding South Africa) is very low amounting to 0.33% against the world average of 6 60%

• This incorporated rate of penetration hides considerable heterogeneity among African countries.

• Indeed, five African countries have a penetration rate which is greater than or equal to 1%.

• Almost all countries of the CIMA have a penetration rate below the average in Africa (excluding South Africa).

• Egypt although being the third largest on the continent after South Africa still has a penetration rate below the average in Africa (excluding South Africa)

8


What are the lessons learned from these statistics?

• Important challenges to facilitate access of African populations to a minimum level of social protection

• Our strategy, generally based on the population having a bank account, is ineffective

• Much of the population have no life insurance contract or distrust it

• However, the potential growth of life insurance in Africa is enormous.

• So what are the obstacles to the development of the sector?

9


So what are the obstacles to the development of the sector?• unsuitable products• Inadequate distribution channels compared to the large target• Campaigns poorly targeted and expensive• Premiums too expensive• Rigid premiums collection system or inadequate• Lack of interactive contacts with policyholders• Possibility to extend erformances settlement deadlines, creating

snags in the accounts of the Insurer• Malfunctioning after sales services• Religious and cultural barriers

10


What should be done to attract people? Two main ideas to use in the context of this presentation

• Innovate

• Integrating innovation with the strategic vision (Where are we going? Towards what target?)

• Integrating innovation operational strategy• Leveraging technological advances

• Internet• Wireless Telephony

11


Innovation in Products

• Flexibility and simplicity• Customer need-oriented products with high added value for the

customer • Affordable premiums adjusted to income volatility of major part of

the population• Simple compensation processes and devoid of dilatory

requirements • Exclusion clauses without administrative nuisance (excessive

exclusions unrelated to the situation of the policyholder)• Avoid complex, undecipherable policy languages which are finally

injurious to the good comprehension of contracts by the majority

12


Distribution channels innovation : Characteristics of an emerging distribution channel

• He is in touch with a great number of customers, especially poor

• He has a kind of interaction with his customers in the framework of his real activity

• A pre-existing financial or contractual relation makes easier the processing of data

• He has a trust relation with his customers (fame and quality of the service in his traditional business field

• Life insurance contributes to the growth of his main business and to keep his clientele

• He can show profits by giving out life insurance

• He has back-office services capable to inform and even to follow up claims to the Insurer

13


Distribution channels Innovation : emerging channels

• Wireless telephony networks

• Cooperatives

• Water or power distribution national companies

• The Post Office

• Food distribution channels

• Central purchase departments or farming products purchase bodies….

14

Technology at the service of life insurance: why?

Rise of technology in Africa

• In all African countries, access to information technologies rises at a very high speed.

• Subscriptions to wireless telephony in Africa have risen in an impressive way.

• The fall of internet connections prices and the rising availability of 3G networks or more, should considerably improve access to the internet in the years to come.

• Considered as such, technology is more and more considered as an effective means to push away the obstacles to the development of life insurance and prompt the growth of this sector

• How can technology contribute to this development ?

15


Blow up barriers

• Transcend distances

• Reduce administrative costs

• Improve the effectiveness of back-office services

16


Transcend distances

• Characteristics of potential customers capable to assure the emergence of the sector

• Customers spread all over the territory

• Difficult to reach due to the insufficiency of physical communication means

• No valid geographical addresses

• Postal addresses not operational

• Generally, 90% of them don’t have a bank account• They live in non-urban areas or• Work in informal sector

17


Transcenr distances

• Unefficiency of distribution structures and communication means of insurers

• Current distribution structures oriented towards customers having a bank account

• Structures with limited logistic and operational effectiveness

• Insufficient territorial meshing

• Communication Actions not reaching the targeted population

18


transcend distances

• Technological solutions transcend distances :

• Brings the insurer closer to his clientele thanks to the modern communication means (mobile telephony, internet, …)

• Shortens deadlines of statements and compensation for damages thanks to the use of adapted technological supports (call centres, sms, e-mails, electronic wallet, USSD Code…)

• Possibility to create targeted and regular communication actions with the electronic contact with customers

19


Reduce administrative costs

• The traditional management of an insurance portfolio includes :•Long and expensive process of verification of compensation requests, •A management of complex data including the comparison of several files from miscellaneous sources (manual, intermediary, bank…)•And a system of management of subscriptions (payment/re-deposit) not always effective

• This practice includes important operational costs as well as time and staff

20


Reduce administrative costs

• When this classical model of insurance is reproduced at a micro level, keep a good relation Operating expenses/received premiums becomes difficult because of the reduction ration of tasks.

• when 40% up to 50% of the premium of a micro insured is swallowed up in the administrative and aquisition charges, the capacity of the Insurer to pay quickly for damages reduces significantly.

• The added value of such a contract for the customer declines inevitably.

• Technological solutions and the automation of the subsequent tasks allow :

• The reduction of administrative tasks,

• To shorten the deadlines of reaction of the Insurer

• Contribute to the mastery of operating costs.

21


• Limitation of breaks in the channel of claims handling

• Set up of relevant performance indicators for each collaborator

• Give objectives to the collaborators on a quantifiable and measurable level of service

• Contribute to « customers »satisfaction

• Increase the rate of maintaining of a regular clientele post repurchase or post preformance

Improve the effectiveness of

back-office services

22


• Quick updating of contracts in case of request from policyholder

• Relation almost premanent with the person insured or the policyholder

• Easy implementation of programs for developing consumer loyalty allowing to fight against the loss of consumers

Improve the effectiveness of

back-office services

23


Bring an added value to the consumer

• Permanent contact with Insurer allowing to reassure some customers about the availability of their savings or about the reality of the underwriting

• Access to insurance services for poor populations having no social protection

• Decrease of premiums or management loading created by economies of scale of the insurer in the framework of acquisition and management of contracts

• Gain of time for the payment of premiums in the framwork of certain solutions of mobile money

• Instant confirmation of transactions

• Quick payment of claims

24

Technological solutions capable to improve “customers” service therefore to boost growth

Internet

Mobile telephony

25

Internet at the service of Life insurance

Internet : Online subscription

• Subscription via brokerage specialised websites or concerned companies

• Online payment via bank cards numbers

• Not much devloped in Africa

• Reserved to skilled customers

Internet : Obtaining

estimates or quotations on

line • Access to brokerage specialised websites or life insurance companies

• Comply with a quotation procedure, obtain an estimate as well as the conditions of subscription

Internet : declaration of claims on line

• Declaration on line

• Transmission of claims documents on line

• Electronic management of claims files

26

• Communicate about the competitive advantages of products on “mass audience”websites (information website, tourism website, search engine,…)

• Exchange with the potential policyholder on great exchange and share websites (Facebook, Youtube,…)

Internet : Communication tools

for the Insurer

Internet at the service of Life insurance

27

Mobile telephony at the service of life insurance

Focus on insurance through mobile telephony or Mobile Insurance (MI)

• Overview on MFS (Mobile Financial Services)

• Advantages of Mobile Insurance

• Possible schemes of Mobile Insurance implementation

• Vulnérability and weaknesses of Mobile Insurance

• Role of regulation authorities to frame Mobile Insurance

28

overview on MFS(Mobile Financial Services): Africa invents financial services via mobile telephony

Mobile networks in Africa: Explosion

• 2nd world market after ASIA with almost 700 million users

• 1st world market in annual growth (+20% per annum)

• Relating to the forecasts handled by the operators, the rate of equipment might reach almost 100% by 2020

• Africa is from now on considered as the emerging continent in the sector of telephony

• Any digital strategy in Africa oriented to the general public shall grant a great importance to mobile telephony

• Benefiting from these successes, the operators of mobile telephony set up several services operating on mobiles phones

29

overview on MFS(Mobile Financial Services): Africa invents mobile financial services

Mobile Banking : starting point• In 2007, in Kenya, the national mobile telephony operator SAFARICOM launched

M-PESA (« M » stands for mobile and “PESA” means money in swahili)

• This revolutionary service allows to the most outmoded of mobile phones to send money through sms to another mobile phone

• Total Success• End 2008, 5 million users of M-PESA• End 2010: more than 10 million users of M-PESA

• Several services are henceforth sold in Africa via mobile phones and Mobile Banking :

• Money transfer

• Airtime or telephone credit purchase

• Payment of bills

• Subscription and payment of insurance premiums : Mobile Insurance

30

Focus on Mobile Insurance

Advantages of Mobile Insurance (MI) : Potential Level

•Tool exploitable not only for the population having a bank account but also for the population having no bank account

•Opportunities to reach the unbanked sector• Informal Sector• Farming Sector• Sector of craftsmen• Sector of transporters and related activities

•Democratize the access to microinsurance products

31

Advantages of Mobile Insurance (MI) : management level Improve the efficiency of operational processes

• Premiums dividable even into weekly or daily periods

• Payment and collection of premiums 24h/24h, 7days/7days

• Instant confirmation of the payment of the premium, hence more trust

• No physical moving

• Efficient management of micro payments

• Automation of data typing

• Reduction of papers

• Declaration and payment of repurchase or capital fallen due at a distance henceforth, gain of time


32

Advantages of Mobile Insurance (MI) : Communication level

• Mobile networks operators control a number of channels of communication which can help in promoting, selling, and facilitating the subscription to insurance or microinsurance products.

• Leverage these communication channels of mobile telephony companies

• Profit from the expertise of mobile telephony companies in communication

• SMS tools to communicate with customers

• USSD Session to allow customers to access the platform of data on their contract, interactive menus

• Profit from communication campaigns of mobile telephony companies during events having a national range (Miss election, foot,..)


33

Advantages of Mobile Insurance (MI) : (distribution level)

• Enjoy the great territorial network of distribution networks with mobile companies:

• Agencies specific to mobile companies

• Independent dealers spread out on the country

• Mini shops

• Retailers having cars or walking


34

Advantages of Mobile Insurance (MI) : Fame level

• Enjoy the fame of the mobile operator :

• Good brand image of most phone operators to their customers,

• which increases vis-à-vis the target audience the credibility of insurance offer

• Many customers gifts (tombola , other high reward) and technological advances in the industry reinforce that credibility


35

Possible implementation schemes of Mobile Insurance• Contract underwriting in an agency via a POS chip and payment of

premiums via the mobile phone of the customer from his email account (Mobile Money)

• Subscription by USSD code from the Mobile phone of the customer and payment of premiums through the same mobile phone from his email account

• Subscription by USSD code and payment of premiums by "Airtime"

• In the framework of the loyalty program, automatic subscription by mobile operator on behalf of the owner of the phone chip in case of consumption of phone credit reaching a certain limit

• This practice increases the likelihood that the customer makes the purchase of the insurance product by himself especially when faced with a claim or set where performance requires a minimum of premiums paid


36

Vulnerability and weaknesses of Mobile Insurance

• Requirement of a written contract in most of our settlements :

• Obstacle to a total development of Mobile Insurance

• Mobile money account of the Insurer not ciphered according to the code of insurances

• Multitude of arbitration clauses to insert in the contracts making the pre loading of the entirety of general conditions impossible in the interfaces of Mobile Phone

• Limited number of the letters of message texts or SMSs• limited duration of an USSD session (about 2 or 3 minutes)


37

Vulnerability and weaknesses of Mobile Insurance

• Great number of intermediaries involved in the distribution of mobile telephony services

• All these intermediraires don’t comple necessarly with the requirements of the CIMA Code

• Customers not sufficiently protected or informed in some situations when there is the need to have a co-speaker in the branch of mobile telephony during a contract

• Limited legal range of contracts totally soft


38

Role of supervising authorities : support the development of Mobile Insurance while organizing it

• Make simple the laws about contracts in the framework of Mobile Insurance

• Allow for the specificity of operators of mobile telephony in the laws about intermediaries

• Recognize virtual accounts mobile money accounts in the balance sheets of insurance companies


39

Conclusion

Come back to the fundamentals of our job: the law of great numbers and consequences

•Reorganize life insurance starting from the basis of the incomes pyramid• Because in africa, it is at the basis of the incomes pyramid that we can

find a high number of people and therefore the poorest people• With an adapted pricing, we life insurers may make fortune thanks to

a statisctics law we all know : the law of great numbers•Taking advantage of the basis of the pyramid, so millions of Africans obviously means:

• Innovative products• Emerging distribution channels• Operational processes including the internet and mobile

technology as a key factor of the satisfaction of the customer therefore of growth.

40

Thank you

Avec vous de A àZ.

Documents

TECHNOLOGY AND INNOVATION AT THE SERVICE OF LIFE INSURANCE CUSTOMERS