Parallel session 2 Distribution

By Kay Tuschen This session demonstrated that distribution remains one of the most pressing challenges to achieving viability for inclusive insurance solutions. It cited two cases where the combination of existing structures and innovative approaches had helped overcome the last mile hurdle in a cost-efficient way. It also foresaw tremendous growth to be gained from using mega platforms like Facebook and WhatsApp. How do we get our insurance product into customers’ hands? This question is still one of the most pressing and least solved in the inclusive insurance market. Distribution is often the last thing on the table when it comes to developing insurance products. A properly developed distribution strategy has the power to overcome many of the multiple challenges that insurers are facing in Africa. These include:

• Microinsurance companies are relatively small • Regulation is still pushing agent sales instead of enabling digital channels • Incomes are low, usage of mobile wallets is only high enough in Kenya • Airtime deduction models are often not allowed.

Over the last decade, distribution models have shifted from the traditional individual agent to digital and business-to-business (see Box 6). Digital+traditional: the BAT approach Kenya is known for having the most advanced mobile payment system in Africa. The introduction of M-PESA has been one of the biggest disruptions in the financial services market for decades. The Equity Insurance Agency took advantage of this development. In a threefold approach, it developed an omni-channel distribution strategy called the BAT approach (see Figure 18) for its Rizki scheme – combining the benefits of bank branches, agency networks and technology.

Rizki scheme –

Equity Insurance Kenya

Number of people insured: 192,560

Insured risks:

Hospitalisation

Premium range:

US$ 17 to US$ 75 per annum Equity’s branch business had become expensive and unpopular amongst customers because they were used to buying bank products online but were forced to walk to their branch to buy insurance. So the focus for branches was shifted to MSMEs – by building a reward system to incentivise sales in the sector.

The agency network turned out to be the key to reaching the masses. By offering affordable financial services in the more than 35,000 shops, even very remote customers can be reached. It is a benefit that the agents are typically shops already serving local communities and well-established in the villages. The network is on-boarding 100 customers every day.

Box 6 Inclusive insurance distribution models

Individual agents In this traditional way to sell insurance policies, the agent visits villages to promote and sell insurance products. For microinsurance products that are generally small and generate low profit margins, this model fails to reach the required scale.

Digital Using a digital distribution platform is a low-cost solution to offer products to customers. It also allows the insurance provider to gain regional scale and to reach consumers in remote areas. One issue is that platforms often fail to attract the interest of potential customers.

B2B In this model, existing networks of banks and mobile network operators are used to distribute the products. Payments are collected through the channel of the partner. One downside is that paying the partner for network provision can decrease profits significantly. B2B2C In this twist to B2B, the partner is used for providing a sales channel but sales themselves are typically driven by a call centre. It has the potential of higher sales but the additional cost can diminish profit margins.

40 — Left to right: Balachandran M K, Vice President, HDFC ERGO GIC LTD, India; Jonathan D. Batangan, First Vice-President and Group Head, Cebuana Lhuillier Insurance Solutions, Philippines; Indira Gopalakrishna, Digitisation and Innovation Lead, Equity Insurance Agency, Kenya 41 — Richard Leftley, CEO, MicroEnsure, United Kingdom

The technology pillar of the strategy is set to attract technology-aware customers who buy self-service products. The cost-to-income ratio is only 10 % for this service, compared to 35 % for branch sales. Seamless integration of the mobile platform into the core sales system allows agent shops to concentrate on selling products and increasing sales. By combining the benefits of the three pillars – branches, agents and technology – Equity Insurance has created a competitive ecosystem. Beyond mobile – online selling through kiosks The challenge of the last mile is also tackled by two innovative approaches in India. In line with a digitisation campaign of the government, HDFC Ergo set up a public-private partnership to create a unique distribution model. The public campaign undertook a broad supply of eGovernment services through “Common Service Centres” (CSCs). More than 200,000 of these technically equipped kiosks are established across the country. HDFC Ergo has integrated an insurance distribution channel in this system and thus almost eradicated operational costs.

The future of distribution is as yet unclear, but it is promising. The integration of existing structures and innovative approaches can be highly successful. The role of mobile networks and super platforms like Facebook Marketplace and WhatsApp Payment is about to grow in importance over the coming years and these players might be kick-starting the next wave of growth for the industry.

Figure 18 The BAT approach by Equity Lessons learnt

• Since sales agents have proven to be too costly for microinsurance, developing new distribution channels has become a critical issue.

• The main challenge is to overcome the last mile to the customer.

• Partnership models either in a PPP or with existing distribution networks have proven to be viable. • A distribution strategy should be developed and accounted for in an early stage of product development and not depend on hopedfor availability of any left-over revenues.

Bank branch Agency network Technology

• Corporate & MSME products • Customised products • Referrals from agency • Simple products • Product leads and referrals

• Micro and mass market products • Self service for tech savvy customers • Enable our agents to sell more effectively • Micro and mass market products

Use technology as a direct channel and as an enabler for physical channels