Agent networks as brokers. Insurance ... Agent Network Manager as Insurance Agent/Broker. Insurance .... SMS/Call centre
Using Mobile/ Agent Channel for Insurance/Pension
Premasis Mukherjee Practice Group Leader, Microinsurance, MicroSave
CONFIDENTIAL AND PROPRIETARY Any use of this material without specific permission of MicroSave is strictly prohibited
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Why Microinsurance Needs BC Channel Microinsurance covers only 9% of target population in India
Micro pension market size: 350-393million
Microinsurance (MI) and Social Microinsurance (SMI)coverage in India (2012) 278
300
6.5
Millions
250
MI
200
50
0
4.25
SMI
150 100
Outreach of Unorganised Sector Pension in India
18
48
16
2
22
1.11
58 5
NPS Lite
Life
Health
0.65
Agriculture
Property
Accident
Abhaya Hastham
Welfare Schemes
Private
Sub-optimal Distribution
Cost of Microinsurance delivery overwhelms revenue Cost
Average claim expense ratio (claim cost/premium) for private
30.47%
20%
Commission to aggregator
48%
- Client acquisition cost, - Underwriting and policy issuance processing cost - Paper and stationary cost, - Travel cost, - Product development cost, - Claim processing cost - Allocation of central office staff cost
Premiu m
30 20 10 0
Anticipated Aggregators Unable to Reach Scale 300,000 200,000 100,000 0
Number of Aggregators Number of Subscribers
Number of Subscribers
10%
Salary cost for relationship managers, with productivity of INR1.4mn premium/year
Number of Aggregators
Detail of Insurers' Costs in Microinsurance
Source: PFRDA and MicroSave
Source: MicroSave Analysis
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Apparent Value in the Eco-system Insurance/Pension Industry •
FI/BC Industry
Insurer are used to deliver product through agency relationship
•
Need of alternative channel to deliver micro products
•
Need conduit to collect premium at high frequency
•
Reduce technology cost of delivery
•
Lower client acquisition cost
•
Opportunity to get >230,000 customer touch points
•
Account opening ceases to impact BC income
•
Viability issues in BC in single product suite
•
Low transaction volume (approx.9) for CSP with 2 years vintage
•
32-47% CSP attrition, a majority of which is for low income
•
potential increase in CSP income (as high as 37%) if insurance is offered
But •
Insurance is not service intensive, but acquisition intensive
•
Insurance and BC activities have misaligned incentive
•
Exclusive agents operate at high incentive environment
•
Insurance is not high transaction business
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Landscape of Mobile Insurance in the World
Insurance Companies
MNOs
Other Players
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Distribution Models: The Value Chains in mInsurance Telecom Regulator Insurance Regulator Insurance Agents
Insurer owned channel
Insurance company
Technology Provider
Customer
Third party channels Customer Service Provider
Third party Agent Manager Possible Options (Regulations Dependent) Insurance Company
MNO Partner(s)
Insurance Company Insurance Company
Bank
Insurance Company
Agent Networks
Insurance Company Insurance Company
Insurer owned channel,;
Exclusive agents
Bank
Bank agents Agents Agent Network
Bank
MNOs direct insurance distributor
Agents MNOs
Insurance through bank agents Agent Network as insurance agent Agent networks as brokers Insurance by MNOs as Bank Agents
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Insurer Owned Channel Example
Insurance Company
Insurance Agents
Technology cost -Cost in training of agents -
Technology Provider
Structured planning on sales and agent management possible -
Low premium products are not attractive for incentive -
-
Hassle free selling
-
Quick Turn around
Clients Poor solicitation -Trust /tangibility -
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Insurance Through Bank Agents PSU Banks, India
Example
Insurance Company
Insurance Company
Bank
BC of Banks Technology Provider
Insurance Company
-Access
to bank clients -No technology cost -Low cost on training and maintenance of agents -Fee
income from 3rd party product -Cross-selling opportunity -Option of own brand --Income
enhancement (3040%)
Clients
--One
stop solution for financial needs -Option of choice
-Non-exclusivity
of brand and product -Quality of sales -Supervision cost -Additional
training cost of staff/agents on insurance -Incentive misalignment -Effort
required in selling is higher than other products
-Confusion
on “product owner”
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Agent Network Manager as Insurance Agent/Broker Example
Insurance Company
Insurance Company
ANM
CSP of ANM
Insurance Company
Indian ANMs, IRDA Recommendation
-Access
to new clients -No technology cost -Low cost on training and maintenance of agents -Fee
income from 3rd party product -Cross-selling opportunity
-Non-exclusivity
of brand and product -Quality of sales -Supervision cost -Additional
training cost of staff/agents on insurance -Incentive misalignment
enhancement (3040%)
required in selling is higher than other products
--One
-Confusion
--Income
-Effort
Clients stop solution for financial needs
on “product owner”
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ANM selling insurance as Bank Channel Supervision across elongated value chain Quality & brand -
Insurance Company
Insurance Company
Insurance Company
--Multiple
touch points
-Non-exclusivity
Bank
Bank
ANM
-Fee
income -Less training cost
ANM
-Compliance
cost
-Incentive
distribution -Incentive
-Cross-selling
distributed -Coordination of services
CSP of ANM -Effort --Income
enhancement
required in selling is higher than other products -Low incentive
Clients --Ease
of access -Choice of products
-Poor
solicitation -Trust issue
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MNO as Insurance Distributor Example
Insurance Company
-Access
to MNO clients -No technology cost -Able to collect premium on high frequency -Group policy possible
-Need
to re-design information pathway
MNO -Reduced
Retailers
churn -Higher usage -Fee income
-Management
decision -Product design cost
--hassle
free sales/fee income -(if at all retailers are used)
-Efforts
in processing claim documents
--Ease
-Tangibility
Clients of frequent payment
not ensured
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Value Across Business Models Differ Value chain in Mobile Insurance Stakeholders Regulator
Insurer
Agents
Banks/MNO
Clients
Stakeholders’ concern Client protection, AML/CFT Example
Insurer owned channel
Business potential, portfolio quality, brand sanctity Value for insurer
Value for Bank
Earning potential, extra effort
Value for MNO
Value for agent network
Convenience, trust, needs fulfilment Value for agents
Value for clients
Max Vijay
-Group policy arrangement -Hassle free sales Tigo, Hollard --Product bundling -New customer -Training of agents for PSU banks of Bank owned selling India, Equity -High fee income agent/BC channel -Access to new clients Bank, Kenya -Less focussed -Training of agents Some pilots in -New client base ANM as insurance India with FINO, -Low brand sanctity -agent/broker Eko -Effort misaligned with other products -Training cost Agent network -Supervising cost for -Distributed incentive managers as bank elongated value chain -Low brand sanctity channel -Non-exclusivity MNO as direct distributor
M-PESA linked MNOs as payment sales of gateway insurance
-Cost of managing multiple small policies -New customers -Low ticket product
-Higher float balance
-Low customer churn -Higher usage -Fee income ..
…..
…..
-Loyal clients -Higher number transactions - Higher income
-Easy access -Low cost
- Easy access
--
-Effortincentive misaligned with other products
--
- Incentive distributed -Low incentive - Poor solicitation over long value -High effort sales chain
-Fee income -Higher float balance
......
-High effort sales -Choice of than other products product --Easy access
- Higher transaction
-Ease of frequent payment
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Trend on MNO led mInsurance :Function of Value Value chain in Mobile Insurance Stakeholders Regulator
Insurer
Agents
Banks/MNO
Clients
Stakeholders’ concern Client protection, AML/CFT Example
Insurer owned channel
Max Vijay
MNO as direct distributor
Tigo, Hollard
Business potential, portfolio quality, brand sanctity Value for insurer
Value for bank
Earning potential, extra effort
Value for MNO
Value for agent network
Convenience, trust, needs fulfilment Value for agents
Value for clients
PSU banks of Bank owned India, Equity agent/BC channel Bank, Kenya Some pilots in ANM as insurance India with FINO, agent/broker Eko Agent network managers as bank channel M-PESA linked MNOs as payment sales of gateway insurance
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Questions in the Model and Emerging Options Who Sells? Agent Enrolment : Agents sell insurance to clients Sales Third Party Enrolment: Retailer/agent of associated partner enrol Agent-less Enrolment: SMS /USSD based enrolment
Who pays? Loyalty Products : MNO pays premium Premium Payment
Claim Processing
How is Premium paid? Airtime deduction: paid from airtime, processed by TPA
Freemium products : Loyalty + Top-up option
Wallet based : client pays from mobile wallet balance
Voluntary Products : Clients Paying full Premium
Pre-paid instrument based: premium collected on high frequency and paid to insurer at monthly/semi-annual basis
How is Intimated?
How is claim settled?
SMS/Call centre intimation: Client intimate MNO who intimate insurer of claim
Wallet settlement: claim amount credited to mobile wallet
Agent intimation: Submission of document at MNO agent
Bank settlement: claim amount credited to bank, intimated through SMS/call
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Loyalty Products: Performance and Design Considerations Design Logic
Performance
• Value for MNO: • High retention rate, • High Average Revenue Per User • Cost • Premium cost • Marketing cost • Design • Entry criteria • Additional coverage based on usage • Criteria: • Minimum airtime balance • Number of transaction in m-wallet • Minimum wallet balance
• Tigo Family Care, Ghana • 550,000 policies • >1mn lives • Break-even : 8-10 month • YuCover, Kenya • Break even period: 5 month • Outreach: 700,000 • 10-15% increase in ARPU • 20% decrease in churn • US$5 additional revenue/used/yr
20
2,000
15
Max. Airtime Bal 1,500 Max. SA 1,000
10 5
500
0
0
4 3 3 2 2 1 1 0
350 300 250 200 150 100 50 0
Min. Sum Assured (USD)
2,500
Max. Airtime Balance(USD)
25
Max. Sum Assured (USD) Min. Airtime Balance (USD)
Low Entry Point and High SA Multiplier Proved as Key Success Factor min. Airtime balance Min. SA
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Freemium Products : The Next Option Why? • Value for MNO: • Loyalty benefit • Commission income • Value for insurer: • Enhanced pool • Entry of new clients into voluntary insurance • Value for clients • Additional coverage at minimum additional cost • Well tested products/provider
Who? • Faraja Insurance (Vodacom-M-Pesa, Tanzania) • Free funeral insurance of SA USD121 if #transaction >10/month • Additional funeral cover + accident cover for sale • E.g. USD3 gives • Funeral benefit: USD605.8 • Accident cover : USD1,817.41 • Tigo Xtra Life, Tanzania • Double the cover by paying USD0.68 p.m. from airtime/m-wallet • Daily deduction of small amounts • Tigo Hospital Cash Plan, Ghana • Hospital insurance (term 30 days) available for USD0.47 deducted on daily basis • Renewed if airtime usage continued
How? • Design • Entry criteria for loyalty insurance • Additional free coverage based on usage (like loyalty products) • Option to increase coverage by paying from mwallet • Frequency of payment matching to usage pattern • Marketing through client reminders
So What? • Faraja Insurance (Vodacom-M-Pesa, Tanzania) • >50% of free insurance providers opted for top-up options • Tigo Xtra Life, Tanzania • >55% of free insurance clients became paid-for clients • Challenges in • Criteria for new area • Simplicity of communication • Embedding new benefits • Paying process
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Voluntary Insurance Products are Dissimilar in Nature
Efforts Required in Selling
Term Life Agriculture
Fire and Property
Funeral
Pension
Personal Accident Motor Insurance
Endowment Credit-linked products
Health
Complexity of the Product
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Level of Solicitation the Channel is Used To
And So are The Channels that Promote Them
Insurance Agents
BC agents
MNO Agents
Linked Product
Specialisation and Training in Insurance
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Level of Solicitation the Channel is Used To
Efforts Required in Selling
Channel-wise Product Mapping Might help
Insurance Agents
Term Life
Agriculture
BC agents
Fire and Property
Funeral
Pension
Personal Accident
MNO Agents
Motor Insurance
Endowment
Linked Credit-linked products Procuct
Health
Specialisation and Training in Insurance Complexity of the Product
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Questions before an MNO for Insurance Implementation Design Level: Which profile of customers should be targeted and what level of benefit will comprise of a suitable product? •
Customer Level • Entry criteria • Entry levels
•
Benefit Level • Type of benefit • Quantum of benefit
Finance Level : Whether the investment in insurance is justified ? Cost: Premium Marketing
Implementation Level: How should the product/s be implemented in market?
Process Level: What kind of processes should create an efficient process of delivery? • •
• •
Coordination • Amongst agents and MNO • Amongst MNO and insurer Design of processes • Sales and enrolment • Premium payment • Claim settlement Incentive across value chain Marketing and promotion plan
Benefit: Reduced churn Additional balance/ transaction: ARPU
• • • • • • •
Design of product with insurer Third party involvement and rationalisation Design of pilot Assessment of pilots Launch of product Training of stakeholders Marketing of product
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