How relationships with telcos are helping achieve financial inclusion

African market

“Unless we can understand that — unless we can start from the viewpoint of what the customer needs,” explains Richard Leftley, CEO of MicroEnsure, “then it’s not sufficient to just provide access to these financial services, they actually have to be tailored around the needs of the customers.” (Photo credit: MicroEnsure)

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>>Authored by Richard Leftley, CEO, MicroEnsure

A period of reflection

Read MicroEnsure’s Commitment letter
Read their announcement blog post

When considering our commitments for the Microcredit Summit Campaign last year, I wanted to address the very real key issues faced by middle-to-low income families across Africa when bad things happen to them. I wanted to work towards providing some kind of safety-net to help ensure they don’t fall into poverty when these events occur.

With that in mind, we committed to reaching 10 million customers with insurance services and expanding our reach into 15 countries over the course of the year. This, I felt, would be a suitably significant commitment to make, one that would show just how serious we as a company take this issue and reflect the level of work we are putting in.

Twelve months on and I’m reflecting on some astonishing numbers. MicroEnsure is now serving over 15 million customers and has a presence in 17 countries globally; this is no mean feat by any stretch of the imagination, especially when you consider that we are growing at a rate of 1 million new customers every month.

Needs, not assumptions

At MicroEnsure we’ve been really lucky to work with some large organisations — some really large partners — organisations like Airtel. We found that partnership is the best way to provide access to the working poor because it enables us to significantly reduce the costs of selling and administering these policies on behalf of the poor.

I think a lot of us have assumed that people just need access to financial services and that if as “an industry” we come along and provide access, then that that’s sufficient — it’s enough just to provide access.

Actually, if you think about the way it’s presented, “the financial inclusion landscape” is about including people and that, somehow, that will meet the needs that they have.

In reality, I think that we have to go one step further than that; we need to understand what it is that consumers need, what are the risks that they face in their everyday lives, and how do they want to deal with those risks?

Unless we can understand that — unless we can start from the viewpoint of what the customer needs — then it’s not sufficient to just provide access to these financial services, they actually have to be tailored around the needs of the customers.

Reflecting on these numbers, it prompted me to think about how all this has been possible in what really is such a short period of time.

Creating access

What’s certain is that access to the products we offer is a need and not a wish. When we visited the countries and the communities we were trying to help, we started to understand what low-income customers can afford, and started to get the costs in line with that price point.

Mobile phone menuWe immediately thought of distribution via mobile networks, eliminating the high cost of insurance sales reps and making our offering more obtainable. Mobile telecom is ubiquitous in Africa and Asia, and telecommunications companies (or “telcos”) have “mobile wallet” apps like M-Pesa, Easypaisa, and Airtel Money that allow users to transfer money to one another via mobile phones. We figured that if we put our product in the mobile wallet — and made it even more affordable by offering payments in small installments– low-income families would enrol. Not so. One potential customer even told us, “It’s easier to sign up and pay in small installments, but I don’t trust insurance!”

Furthermore, it was hard to figure out which mobile wallet to appear in, as most mobile users had multiple SIM cards for multiple networks and spread their airtime minute purchases, or “top ups,” across them all.

Another access issue cropped up early: the need for product adaptation. We had to make sure that there were no complicated instructions or processes, but intuitive ones that fit with the way low-income people proceed about their lives. And, the benefits have to be readily apparent if someone is risking scarce resources on them.

In our case, we noticed that even when we did get insurance into the hands of a low-income family, they weren’t taking full advantage of it. We had to strip down the typical insurance process — filling out detailed forms, providing personal information — and create a simpler, easy-to-follow process for enrolling, which meant registering via text rather than a paper form. For claims, we decided to accept an imam’s word as proof of a death, or a claim written on a napkin, and we had to turn them around fast. We paid health insurance claims, via mobile transfers, in as short as one hour. Once initial customers saw the product working — quickly receiving benefits when they filed claims — word travelled.

Airtel claim 3

Photo credit: MicroEnsure

Rewarding relationships

Whilst we know that no one really wakes up in the morning thinking about — or wanting to buy — insurance, they do wake up worrying about the risks and problems they face should something happen to them. We also know that mobile phone companies have a problem in terms of customer loyalty in these markets, with many consumers often switching between different mobile phone networks.

The opportunity therefore presented itself for us to develop relationships with key telco companies in Africa and Asia, relationships that allowed us to try the idea of giving away free insurance in return for customer loyalty; if the customer remains loyal to the network, then they get access to free insurance.

We used behavioural economics to help us understand why someone would change their behaviour; what would be the driving force to make someone decide that actually now is the time to buy insurance, usually for the first time in their life. We needed to understand what the alternatives are, and understanding that actually the alternatives — indeed our greatest competitor…is doing nothing.

So, in many of the markets we work in, we have been able to provide something more compelling to consumers than just doing nothing, and this has really helped us to rethink the way in we’re going to engage with the consumer.

We realised that mobile phone companies actually had an issue with loyalty, so we convinced them that they should give away free insurance alongside airtime purchases so that the more customers spent with their network, the more free insurance they received.

What happened was that customers really enjoyed these products. They do wake up worrying about the risks they face, and if someone was willing to mitigate those risks, for free, then they were willing to change their consumer behaviour.

We found that customers started spending more and more of their airtime reload on those networks that offered free insurance. So when people come along with very simple products that are easy to understand, easy to access through a brand that customers trust — whether that-s their bank or their mobile phone company — and that financial access is made extremely easy, as easy as buying a ringtone, then there is a phenomenal demand and interest in having insurance.

This is especially true if this insurance can be offered free of charge, as a promotion that shows people how it works, that claims will be paid and paid quickly, and that the products do work for them. We’re finding that millions of people are coming forward and saying that, now they see that the product works, then they are willing to pay a small amount to keep that product and even add members of their family to it.

For the mobile phone companies, this not only increases customer volumes, but more importantly, it improves customer retention rates, creating a rewarding relationship for all involved.


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MicroEnsure launched a Campaign Commitment in 2014! We invite you also to…

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Accessible and affordable microinsurance with Afua Donkor

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We are pleased to bring you this #ThursdayThrowback blog post, which was originally published in Resilience: The State of the Microcredit Summit Campaign Report, 2014. Afua Boahemaa Donkor, executive director of Star Microinsurance in Ghana, explains how they have developed microinsurance products that are simple and affordable for the poor.


>>Authored by Ana Hecton, former intern, and Sabina Rogers, Communications and Relationships Manager

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You can read a transcript of her interview here.
Read the full report here.

The 2014 State of the Campaign Report features various actors in the microfinance sector that are taking steps to help their clients lift themselves out of poverty. In this interview Afua Boahemaa Donkor, executive director of Star Microinsurance in Ghana, talks to DSK Rao from the Microcredit Summit Campaign about how microinsurance works and how it can benefit the poorest. Ms. Donkor also discusses the challenges in providing coverage for the poorest.

Star Microinsurance in Ghana started in 2008 as a specialized microinsurance subsidiary of the Star Insurance Group. Star Microinsurance works to design microinsurance products, looks for distribution channels, and provides the back office administration of the products.

“Microinsurance is supposed to be suave. When I say that, it means that it has to be simple, accessible, understandable, fundable, and efficient.”

— Afua Boahemaa Donkor

Star Microinsurance aims to make their insurance accessible to all people, those living in the city and those living in remote areas. The microinsurance products that are offered by Star Microinsurance are “made very simple, the premiums are set to be very cheap, affordable, so that the informal person, in the rural sector, can afford to have insurance products.”

Star Microinsurance collaborates with rural banks, MFIs, and post offices where the product is located. The rural banks and post offices are spread all throughout Ghana, therefore being highly accessible to all people no matter their location.

The challenges that face microinsurance

When talking about microinsurance and selling it to those living in poverty, Ms. Donkor says that it is hard for people to grasp the concept that they are paying for a possibility that may or may not occur. For those living in extreme poverty, possibilities of the future or what could happen is not a high priority. The demand is for what they need right here, right now. Thus, trying to sell microinsurance to people whose concern is focused solely on getting through that day is very difficult. In fact, “insurance in general is a very difficult thing to sell whether to an educated person or an uneducated person because it is an intangible good we are selling.”

What we know of the impact of microinsurance

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A systematic review of the impact of microinsurance (2013) produced by the ILO’s Microinsurance Innovation Facility. Source: http://www.impactinsurance.org/emerging-insights/ei76

Providing a Safety Net to Ten Million People

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Richard Leftley, CEO of MicroEnsure, writes about the experiences that helped lead to the development of a safety net for the most vulnerable and how far they have come in fulfilling their Commitment to the Campaign.


- Image courtesy of MicroEnsure

Image courtesy of MicroEnsure

Join us in Mexico for the 17th Microcredit Summit in Mexico this September 3-5.

Richard Leftley will be joined from leaders in the microinsurance sub-sector for a workshop on microinsurance.

http://17microcreditsummit.org/


Over the years many of the microfinance leaders that I have met have told me of that one chance interaction that changed the course of their lives and resulted in them embarking on a journey to help millions of people be transformed and lifted out of poverty.

My moment was in the summer of 2001 in a village in Northern Zambia; one of the ladies I was talking to had become frustrated by my ignorance as to why she had experienced such a seeming boom and bust in her fortunes. From among her few possessions she produced a child’s Chutes & Ladders board and she explained that she was just trying to work her way out of poverty. She had succeeded earlier in her life having lived in an apartment in the capital and driven a car, but here she was back in the village with seemingly nothing to her name.

She explained that the microfinance loans she received helped accelerate her out of poverty like the ladders in the game, but then she looked at me and explained that no one was there when disaster struck causing her to slide back into poverty just as the chutes in the game return you to your starting place. What is today MicroEnsure was founded a few months later in partnership with the team at Opportunity International.

Twelve years later it is a real pleasure to make a Campaign Commitment to join with other microfinance leaders to help lift 100 million people out of extreme poverty; our contribution will be to provide a safety net to 10 million people in 15 countries so that they do not slip back following the death of a breadwinner, sickness of a child or following a natural disaster.

At the beginning of 2014 when we made this Commitment MicroEnsure was serving just 4 million people, but I am pleased to report that by the end of May we had enrolled 8.2 million customers (a growth of over 200%) and we are well on our way to matching or even exceeding our commitment by the end of the first quarter 2015. This rapid growth has come not only from our MFI partners but most significantly from the mobile network operators that we have partnered with in Africa and Asia some of which are signing up in excess of 250,000 new clients each and every week.

The breakthrough in working with telco’s (telecommunications providers) came when we stopped trying to sell insurance through them but instead realised that we could dramatically affect customer loyalty to the telco; let me explain. You see, none of us wake up wanting to buy insurance and if you are poor the idea of a product that you may need at some time months or years from now really makes no sense in the present.

However we know that our clients do wake up worried about what would happen if their husband died, their kids got sick, or a disaster struck. We also knew that telco’s are suffering from low customer loyalty with most subscribers using multiple SIM cards to make prepaid calls. We simply combined answering clients’ fear with the need of the telco’s for increased loyalty and in doing so we convinced the telco to give their loyal subscribers free insurance in return for spending more airtime on their network. The subscribers were happy to do so because their fears were being addressed for free in return for simply making more of their calls on one network. Everyone wins.

Interestingly we have also used this same idea to significantly drive the mobilisation of deposits in MFIs across Africa. Most deposit accounts have tiny balances that are loss-making for the MFI yet we know that the poor save money in a myriad of ways. It just seemed obvious to us that offering interest to depositors was simply not attractive enough to give customers a reason to choose the bank over  informal savings mechanisms. So we tried giving away free insurance if you saved.  As you saved more – $50, $60, $70 – you earned more free insurance coverage. We were delighted to see 200% increases in deposit rates clustered around these targets.

Achieving our goals will not be simple. We continue to rely upon partnership in order to provide our services and we are always on the lookout for MFIs, telco’s and others that provide services to the mass market. We would love to hear from anyone who wants to join with us on this mission. This kind of rapid growth also requires capital and we were delighted to announce last month that AXA and Sanlam Insurance Companies joined Opportunity, IFC, Omidyar Network and Telenor as investors in MicroEnsure bringing together key strategic partnerships with the funds required to continue scaling.

I often dream of returning to that village to find the Chutes & Ladders lady. I have no idea what I would say to her, but I would love the chance to simply say thanks for starting us out on this journey. I wonder if she knows she was the spark that has helped 10 million people like her find a safety net against the chutes they find along their own journeys out of poverty?


MicroEnsure announced their Campaign Commitment as:

  • MicroEnsure commits to reach 10 million clients with insurance services by the end of the first quarter of 2015.
  • MicroEnsure commits to expand its current reach into 15 countries by launching work in 5 new countries by the end of the first quarter of 2015

Join MicroEnsure and State your Campaign Commitment

Join MicroEnsure in the global coalition to help 100 million families lift themselves out of poverty – state your Campaign Commitment at mycommitment@microcreditsummit.org

Need additional guidance in formulating your own Campaign Commitment? Refer to our Commitment Development Toolkit.

Be social with us on Facebook and Twitter (@MicroCredSummit) using the hashtags #Commit100M and #100MGoal

MicroEnsure to Expand Services to New Clients and Countries – Latest Campaign Commitment

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MicroEnsure releases a Campaign Commitment! Español Français Continue reading

Paths to Ending Extreme Poverty by 2030: What will it take?

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Designing products and programs with the poorest and most vulnerable first in mind will lead to benefits for everyone. EspañolFrançais Continue reading

Partnering in New Approaches to Old Challenges

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Partnerships against Poverty Summit Banner with logos

Partnerships against Poverty: Why, When, & How to Partner
Date: 
Wednesday, October 9th 

Time: 11:30 – 1:00 PM

Effective partnerships generate synergies between organizations that each supply unique skills, perspectives and resources to devise new ways of approaching old challenges, providing needed products and services on a much wider scale.

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Nicholas Luff, Senior Associate, The Partnering Initiative

The plenary “Partnerships against Poverty: When, Why and How to Partner” centered on the guiding principle for the 2013 Partnerships against Poverty Summit, exploring the manner in which partnerships can be developed, negotiated, leveraged, and managed between actors that come from different sectors while highlighting some of the best practices in the field. This cornerstone session set up the framework for the rest of the Summit agenda to follow.

Nicholas Luff of The Partnering Initiative, serving as the session’s moderator and multi-stakeholder partnership builder, began the session by stressing the characteristics of good partnerships.

He described these strategic relationships as an “engaging two-way dialogue, which moves beyond mere contractual interactions towards transformative missions among value-adding knowledge sharers.” Collaborations founded in this spirit hold great potential for catalyzing the next wave of movement out of extreme poverty.

Rodger Voorhies, director of the Financial Services for the Poor Initiative at the Bill & Melinda Gates Foundation emphasized the dire need for cutting-edge partnerships in the financial inclusion field. He stressed that “2.5 billion people are currently left out of access to financial services.”

In order to combat this trend, Voorhies advised that “we need to substantially increase access and that will require new kinds of partnerships, new kinds of innovation and new kinds of thinking…We are at the forefront—at a cusp—of rattling changes using technology and new ways of delivering services.” Voorhies discussed the potential of digital services coupled with transformative partnerships to form the next great paradigm shift in helping practitioners reach into untapped communities and leverage their impact.

Bringing a concrete example of a successful cross-sector partnership, Richard Leftley, CEO of MicroEnsure, engaged the audience by showcasing his own company’s collaboration with mobile service providers, which facilitated an expansion of MicroEnsure’s client base.

Leftley summarized the process that MicroEnsure underwent in its quest for a fruitful partnership, describing the challenges associated with being a small, young company and providing a product (i.e., microinsurance) that at the time was relatively unknown. He echoed Luff by pointing out that “a shared sense of necessity where each partner brings something to the table” is vital in developing and negotiating successful relationships with other actors.

Watch the full video of this plenary

On the whole, the plenary displayed a clear sense of optimism for the road ahead by highlighting the manner in which partnerships can create opportunities for people living in poverty where no single actor could provide the multitude of services needed by the poor on their own. Each of the speakers acknowledged that opportunities for collaboration are widening and stakeholder engagement is at an all-time high, making it a perfect time to engage in deep dialogue and work together on the collective mission to eradicate extreme poverty in the near future.

Providing a Safety Net for the Poor

Back in 2002, I found myself in rural Zambia sitting with a group of borrowers trying desperately to understand their lives; as it was my first encounter with microcredit, the ladies were getting increasingly frustrated with my ignorance. One of them took pity and shuffled off to her hut coming back with a “Chutes and Ladders” board (also known as “Snakes and Ladders”). She explained to me that she was trying to work her way out of poverty, which she likened to moving up the board. The loans she got were like the ladders, accelerating her progress.

As we went around the group, the ladies told me of the risks they faced and how disasters, medical bills, and funerals caused them to sell assets or spend hard won savings, returning them back into poverty much as the chutes (or snakes) cause you to slip down the board. They asked me if it was possible to put in place a safety net that would move up underneath them as they worked their way out of poverty so that when disaster strikes, they would not fall all the way back to the bottom.

That meeting changed the course of my life and led to the creation that year of what is now MicroEnsure, a leading provider of insurance to over 4 million low income people.

The first task in 2002 was simply to understand the supply and demand dynamics: which insurable risks did the poor face (and want to cover) and what products would insurers provide. The easiest way to do this was from within a microfinance network, and we were delighted to be housed within Opportunity International. After several years of developing products for Opportunity’s borrowers, it became clear that we were limiting our potential scale and the range of products that we could offer; we needed a way to pay for an organisation that would tackle the challenges of providing a wide range of products to a wide range of clients. The four challenges we set out to tackle were as follows:

  • Simple products with efficient processes.
  • An educated sales force and clients who understood the products.
  • Efficient back office capability and IT to collect, store, and report on key client data.
  • The ability to pay claims quickly as this has the biggest impact on demand.

MicroEnsure was established as an insurance broker because it was the fastest and cheapest regulated structure available and provided a revenue stream via commissions, but we soon realised that the local insurers we represented were not always able to offer the products we wanted or the claims turnaround times our clients demanded. Our response was to establish a reinsurance vehicle so that we could simplify the products and pay claims within days.

As we branched out into health insurance, we realised that many countries lacked the infrastructure to form networks of hospitals or to adjudicate complex health claims, so we created in-house capability called a “Third Party Administrator” (TPA) to do health claims. Finally, we realised that some products such as weather index require significant R&D pre-launch, and the only way to do this sustainably is as a consultant pre-launch and as a broker post-launch. So, today MicroEnsure is a broker, reinsurer, TPA, and consultant serving 4 million and growing in excess of 200,000 new clients every month.

Microinsurance is all about partnership, and perhaps the most important partnership is with the distributor of the products. Like most microinsurance providers, we initially only worked with microfinance lenders, packaging our basic life insurance products alongside the loans, but we soon started to work with a wider range of distributors including VSLAs, SACCOs, church groups, and other retailers. We discovered that in order to be a successful distributor you need a strong brand that is trusted by the poor, accessible points of sale, and the ability to transact cash to cover premiums and claims. So far, the most widespread distributors remain microfinance companies—although it’s great to see a wider range of products be embedded into not only the loan but also increasingly being used as an incentive to get savers to open accounts and increase balances. Mobile phone companies such as Tigo and MTN are also starting to be used to distribute insurance to the mass market.

In our experience, the most successful model is to introduce insurance as a loyalty program. The telephone company (“telco”) is willing to pay the premiums on behalf of its subscribers so long as doing so increases loyalty and the average amount of airtime that the subscribers purchase. It’s a true win-win. The subscriber gets free insurance and the telco increases its revenue. During 2011, more than 1 million people gained access to insurance for the first time through Tigo using this model. Having created a new market, the telco is then able to sell additional products to this market, and the take-up rate from consumers that have experienced the benefits of insurance are much higher than from a “cold sell”.

In 2011, Swiss Re estimated that perhaps as many as 4 billion people had no access to any insurance products. Over the last few months, however, it has started to emerge that, according to the ILO, perhaps as many as 500 million people now have access to insurance. Many of these have access only to basic credit life products—but it’s a great start. Providing the remaining 3.5 billion people with a safety net will be the work for many hands, but I feel confident it will happen in our lifetimes!

Over the last decade, I have often wondered how many emergencies that Zambian lady has had to face and overcome and whether the safety nets that we put in place meet with her approval. One day I hope to return to ask her and to share with her that the challenge she set me has been taken seriously and resulted in millions of people having access to protection from life’s storms.

—Richard Leftley, President and CEO, MicroEnsure, UK, http://www.microensure.com/

Additional resources:
• MicroEnsure blog: http://www.microensure.com/resources-blog.asp
• ILO, Protecting the poor: A microinsurance compendium, Volume II (April 10, 2012)
• “An interview with ILO’s Craig Churchill on the expansion of Microinsurance coverage