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Across Sub-Saharan Africa, tech-enabled micro-insurance is the next big thing

Source: Global System for Mobile Communications

Evidence shows tech-enabled micro-insurance works

This development comes at the time there is a growing number of insurance firms already tapping or planning to tap into markets in developing countries through micro-insurance projects, which provide low-cost insurance to individuals generally not covered by traditional insurance or government programs.

This is because micro-insurance products tend to be much less costly than traditional products and thus extend protection to a much wider market, according to the US-based Insurance Information Institute.  

The Institute adds that the products tend to vary in type and structure but are generally distinguished by high volumes, low cost and efficient administration.

For instance, the Metropolitan Insurance in Uganda, which started its operation in 2017 in partnership with a tech-insurance broker, Ayo, has since attracted more than a million customers. The majority of the firm’s subscribes are hooked onto the South African telecom firm, MTN, who pay a small fee of their airtime as premiums every time they load on their mobile phones or send cash via MTN Mobile Money.  The insurance firm had at the end of last year recorded Shs10bn in underwritten premiums.

Similarly, the Grand Micro Insurance, which was licensed in 2018 recorded Shs24million in total premiums at the end of the year, signalling the potential to tap into the low income earners with micro-insurance products.

Grand Micro Insurance offers life, medical, funeral and saving products for as low as Shs15, 000 annually, with the option to pay via mobile phones or through commercial banks. The insurance policies last for two to five years.

In Kenya, Micro Ensure, which was founded in 2005 in the United Kingdom as a global nonprofit microfinance network, has more than 3.5million low income customers across eight countries including Kenya, Tanzania, Ghana, Mozambique and Malawi.

Micro Ensure employs the services of M-Pesa, a mobile money digital wallet, and Frontline SMS – an open source software program that specializes in mobile financial services, to make micro insurance accessible and affordable to the poorer communities.

The business model entails M-Pesa collecting premium payments (policyholders pay premiums via the app) and Frontline SMS: Credit monitoring individual policies in real time.

Recently, Jubilee holdings, which also has a presence in Uganda and Tanzania, unveiled a micro-insurance product targeting low-income earners in partnership with Bluewave Microfinance.

The product dubbed Imarisha Jamii is accessed via the mobile phone providing life, personal accident and disability insurance as well as medical insurance to the low-income earners.

With premiums as low as Kshs20 per week (approximately Shs740)  policyholders have  access to hospital cash, funeral benefits and disability cover of up to Kshs100, 000 (Shs3.7million) and also get cover of up to Kshs10, 000 (Shs370,000)  hospital cash when admitted for three nights or more.

Jubilee Holdings CEO, Julius Kipng’etich, says with affordable premiums and ease of access using the mobile phone, the insurer  is not only disrupting the traditional model of providing insurance services but also revolutionizing the way insurance business is conducted, by developing more products that are responding to customer’s needs.

Imarisha Jamii also has a Group, Family and Chama option that allows those in groups and with families to get cover for their dependants.

“Most low income earners earn their wages daily and when they are too sick to work, their families are often unable to meet their daily needs. Imarisha Jamii has been designed to mitigate against that as it provides hospital cash – for those who have been hospitalized for three nights or more and cover for death and disability,” says Nicholas Mruttu, the head of retail at Jubilee Holdings.  The product has no exclusions and covers everyone from ages 18-75.

Imarisha Jamii can be accessed by dialing *643# on a mobile phone and following the prompts to sign up, make payments, access policy details and make claims.

In 2014, Britam Kenya unveiled a microfinance product with Safaricom targeting the underserved low end of the market.

The product dubbed Linda Jamii, had micro-health cover with an entry price of Kshs12, 000 per year (Shs420, 000) offering holders for in and out patient, maternity, dental, optical, a hospitalisation and income replacement benefit services worth Kshs250, 000 (Shs8.7milion). However, a year later, the underwriter stopped offering the cover to individual customers.

Statistics from the Kenya Medical Association shows that less than a quarter of more than 45million Kenyans have some form of health cover.

Ten more insurance companies have also applied for permits to start offering micro-insurance policies, according to Godfrey Kiptum, the acting Chief Executive Officer at Kenya’s Insurance Regulatory Authority.

However, Kiptum said the ten undisclosed firms are yet to be cleared, and were awaiting approval of the Micro-insurance Regulations 2018 by the National Assembly.

The regulations provide for provision of policies to individuals or property such as homes, livestock and crops at daily premiums not exceeding Ksh40 (Shs1, 400) with the insured sum capped at Kshs500, 000 (Shs17.4million).

Meanwhile, in Tanzania, Jamii, a local start-up, offers micro-health insurance services with plans to expand into East and Central Africa.

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