Blue keyboard with buttons, shapes and numbers: Mobile technology and the growth of microinsurance

Microinsurance refers to a sector of the industry that focuses on a previously ignored customer base: low-income families and individuals in developing countries throughout Africa, Asia and South America. Customers may pay less than $1 per month for life, health, crop and other types of insurance, and for many families, this may be the difference that keeps them from sliding into poverty as a result of a single illness or bad farming year.

Microinsurance is growing quickly. By 2012, 33 of the world’s 50 largest commercial insurance companies were offering microinsurance compared to seven in 2005. Between 2007 and 2012, six times as many people began carrying microinsurance.

Significant expansion

In regions where insurance is a new concept however, companies face a number of challenges. These range from convincing customers that the industry is trustworthy, to persuading people who have very little money that a small portion of it would be wisely spent on insurance, through to figuring out innovative methods of delivery and payment.

The growing use of mobile technology has been part of the solution to all of these problems. Known as mobile microinsurance products or MMIs, these products are responsible for significant expansion of the larger microinsurance market and will continue to play an important role in the sector’s future development.

According to a study performed by the Consultative Group to Assist the Poor, between 2006 and 2013, MMI product offerings increased from two to 15. In the past four years, this growth has been particularly significant.

Customer retention

One way that MMIs aid in overcoming resistance to insurance products, is by bundling them with other products such as mobile phone contracts. However, the most significant role for mobile technology is in increasing customer retention and providing ways for customers to easily access payment and other systems and services.

More than 70% of microinsurance products use mobile devices to process some aspect of registration. Mobile devices can also be used to send payment reminders as well as collecting payments via card that are initiated by mobile, mobile money or airtime deductions.

Some companies do not yet have the mechanisms in place for customers to pay directly from their mobile devices, but instead use local representatives who collect payments into an e-wallet and transfer them to the company.

Multi-purpose, mobile technology

Mobile technology has a number of other roles to play in the microinsurance industry as well. Basic policy information and changes in policy can be communicated through SMS, and customers can also use mobile channels for questions about policies.

At present, most products cannot be changed or cancelled using mobile devices. In addition, fewer than half of all products currently appear to allow for customers to register a claim, while less than a quarter have a claims process that can be completed entirely on a mobile device.

However, mobile technology is rapidly evolving which will allow functions such as these to be administered and activated at the touch of a button, so it is not a matter of if, but more a matter of when this will be available to the customer.

Greater economic stability

Microinsurance is expected to continue its rapid growth and to penetrate new markets. MMIs will be significant in harnessing these new products by introducing the concept to customers by way of free add-ons to mobile contracts and as incentives to keep customers loyal to a mobile contract. B2B microinsurance is also expected to show significant growth, with more service providers specialising in this area.

Growth throughout the industry will lead to a more solid infrastructure for mobile microinsurance products and microinsurance in general. This in turn will result in more markets. Most companies have found that government involvement is essential in ensuring that pools of customers are large enough to bear risk. For these Governments, the benefit of microinsurance is a growing middle class and thus allows greater economic stability at all levels.

For more information about Open GI London:

Helen Andrews
Group Head of Marketing & PR

Notes to Editors:

Open GI London is the provider of web-based solutions to the global insurance industry. Open GI London is part of the Open International Group. Priding itself on its speed to market with tailored projects, Open GI London’s market-leading Trader suite is the platform of choice for an impressive list of partners.