TECHNOLOGY AND INNOVATION AT THE SERVICE OF LIFE INSURANCE CUSTOMERS African Insurance Organization 2013 Life Seminar Outline of the presentation 2 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 Outline of the presentation 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) Outline of the presentation 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 support Conclusion Development of Life insurance in Africa: Inventory 5 Synoptic view of development indicators of life insurance in Africa (2012) Prim e s vie e n m illions de USD Pé né tration Prim e /Ha e n USD Bé nin 21 0,27% 2,22 Burk ina 28 0,26% 1,61 Cam e roun 80 0,29% 3,91 8 0,06% 2,01 187 0,74% 9,07 Gabon 31 0,18% 19,41 M ali 11 0,10% 0,64 7 0,11% 0,45 43 0,30% 3,26 1 0,01% 0,11 31 0,78% 4,94 449 0,30% 3,25 44 787 11,60% 882 Nam ibie 674 5,50% 337 Ile M aurice 442 4,00% 285 M aroc 930 1,00% 29 Ke nya 436 1,00% 10 Egypte 785 0,30% 9 Nige ria 404 0,20% 3 46 298 2,50% 47 4 764 0,33% 5,01 Pays Congo Côte d'Ivoire Nige r Sé né gal Tchad Togo Total CIM A Afrique du Sud Total Afrique Total Afrique Hors Afrique du Sud Development of Life insurance in Africa: Inventory 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 Development of Life insurance in Africa: Inventory 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) Development of Life insurance in Africa: Inventory 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? Development of Life insurance in Africa: Inventory 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 Development of Life insurance in Africa: Inventory 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 Innovation at the service of Life insurance 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 exclusions unrelated to the situation of the policyholder) (excessive • Avoid complex, undecipherable policy languages which are finally injurious to the good comprehension of contracts by the majority Innovation at the service of Life insurance 12 Distribution channels distribution channel innovation : Characteristics of an emerging • 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 Innovation at the service of Life insurance 13 Distribution channels emerging channels Innovation : • Wireless telephony networks • Cooperatives • Water or power distribution national companies • The Post Office • Food distribution channels • Central purchase purchase bodies…. departments or farming products Technology at the service of life insurance: why? 14 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 ? Technology at the service of life insurance: why? 15 Blow up barriers • Transcend distances • Reduce administrative costs • Improve the effectiveness of back-office services Technology at the service of life insurance: why? 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 Technology at the service of life insurance: why? 17 Transcenr distances • Unefficiency of distribution communication means of insurers structures and • 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 Technology at the service of life insurance: why? 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 Technology at the service of life insurance: why? 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/redeposit) not always effective • This practice includes important operational costs as well as time and staff Technology at the service of life insurance: why? 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. Technology at the service of life insurance: why? 21 • Limitation of breaks in the channel of claims handling • Set up of relevant performance indicators for each collaborator Improve the effectiveness of backoffice services • 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 Technology at the service of life insurance: why? 22 • Quick updating of contracts in case of request from policyholder Improve the effectiveness of backoffice services • 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 Technology at the service of life insurance: why? 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 Technological solutions capable to improve “customers” service therefore to boost growth 24 Internet Mobile telephony Internet at the service of Life insurance 25 Internet : Obtaining estimates or quotations on line Internet : declaration of claims on line • Subscription via brokerage specialised websites or concerned companies • Access to brokerage specialised websites or life insurance companies • Declaration on line • Online payment via bank cards numbers • Comply with a quotation procedure, obtain an estimate as well as the conditions of subscription Internet : Online subscription • Not much devloped in Africa • Reserved to customers skilled • Transmission of claims documents on line • Electronic management claims files of Internet at the service of Life insurance 26 Internet : Communication tools for the Insurer • 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,…) Mobile telephony at the service of life insurance 27 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 overview on MFS(Mobile Financial Services): Africa invents financial services via mobile telephony 28 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 overview on MFS(Mobile Financial Services): Africa invents mobile financial services 29 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 Focus on Mobile Insurance 30 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 Focus on Mobile Insurance 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 Focus on Mobile Insurance 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 companies communication channels of mobile telephony • 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,..) Focus on Mobile Insurance 33 Advantages of Mobile (distribution level) Insurance (MI) : • 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 Focus on Mobile Insurance 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) technological advances in the industry reinforce that credibility and Focus on Mobile Insurance 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 Focus on Mobile Insurance 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) Focus on Mobile Insurance 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 Focus on Mobile Insurance 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 Conclusion 39 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. Thank you 40 Avec vous de A à Z.