Selling microinsurance to African consumers by mobile – how a marriage made in heaven produced mixed results

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African mobile companies are struggling to get to grips with the products and services that they can sell on their channel to produce the next generation of income. But their understanding of how to work with others is deeply flawed and their business processes to sell new services are not fit for purpose.

This story is written under the cover of anonymity because some things are easier said when everyone does not have to arrange it for public consumption. It’s not a story of success or failure but just an account of how things are by way of thinking about how they have to be different.

Let’s call my interviewee Bill. He works for one of Africa’s most successful insurance companies. He has partnered with a large African mobile operator to sell micro insurance products. He’s the first to admit that blame lies on both sides in the story that follows.

Bill’s company saw mobile as an interesting future frontier and agreed to work with a large mobile operator to launch a micro-insurance product in West Africa:”It was driven by their strategy to drive more income for their (m-money) agents. It was a means to stimulate economic activity for the agents.”

“It’s an exciting space from our side. The future of micro-insurance works well in that space. There’s a high penetration of smartphones in many African markets. The mobile handset is an efficient delivery tool.”

Because once most people signed up to mobile money, the agentsonly got the income from customer spend. If you added a micro-insurance product, they would need to add money to their mobile wallet every month and thus there would be a recurring income.

Initially the pilot went very well as it was sold and well promoted to a test group of customers:”We sold in the mid thousands – 6,000 or so – in a highly concentrated area in the middle of (the capital).” It was also doing pilots with the mobile operator in some other countries.

So why didn’t the product roll-out go to scale? Firstly, there was something that anyone trying to sell through a multi-country, mobile operator will be familiar with:”The company has different models in different countries.” As you can imagine, if this is rather tentative “foot in the water” new business approach, then the amount of time applied goes up accordingly.

Secondly, it took both sides a while to realize that their business aims that seemed so much in synch to start with had become confused:”All the partners have to be on the same page. You can do microinsurance for a number of different strategic reasons: customer acquisition, customer loyalty, increased ARPUs, etc. You can do a mobile wallet approach vs an embedded product. Each has its benefits but there are big differences.” Not understanding insurance products, the mobile operator attempted to straddle several different strategic approaches.

Thirdly, although a micro-insurance product can be sold using even SMS, it’s not like other mobile products and services:”Insurance is a very different product and it’s quite distinct. The product has to be sold, not bought. Penetration of these kinds of products is below 2%”.

“The initial understanding of the product is relatively low. You need customer education to take place to change mindsets. You need to put a great deal of revenues into ads and seminars. The more effective model was actually selling products with sales people and using the mobile as the sign-up process. The vendor has a unique PIN and can track their sales back to get commission”.

“If they’re signing up the customer, they can go through a sign-up process. If the customer has questions about things like waiting periods and exclusions, trained an accredited staff can answer them.”

The last thing that did not work is something that we hear time and time again about partnerships with African mobile operators:”The operator has a particular product bandwidth: only so many products can be launched in a particular period. Insurance is a means of generating revenue but its complexity is far greater than for other VAS products.”

In case that’s not clear, what Bill means is that the operator has a fixed number of product launch windows. You may get one but after that the mobile operator will lose interest and may not continue spending with you. Furthermore because these things are effectively going through what is or was the VAS department, they are incapable of dealing with greater product complexity.

An operator on a panel once told me that the mobile operators were becoming banks and insurance companies. He said it to illustrate precisely the complexity contained in this story but he also believed they could do it.

So what of the future for Bill’s mobile micro-insurance initiative?:”We’re waiting to restart in West Africa and another country is coming along. We are influenced by the mobile operator and there’s a need to be clear and have a specific strategy from both the operator and the insurance company that’s aligned.”

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