ONE important discussion topic during the 43rd Organisation of Eastern and Southern Africa Insurers Conference was titled, “Micro-insurance and financial inclusion: Adoption of Innovation, Technology and Digitisation of Insurance Business Operations beyond Covid”.
The paper was presented by Sibongile Siwela, director for Insurance & Micro Insurance at the Insurance and Pensions Commission of Zimbabwe (Ipec). By definition, microinsurance refers to insurance products that offer coverage to low-income households.
A microinsurance plan provides protection to individuals who have little savings and is tailored specifically for lower valued assets and compensation for illness, injury or death.
It is prevalent in developing countries where the insurance market is non-existent or inefficient. This focus on the low income market gives rise to distinct means of distributions and unique products. From a Sub-Saharan African context, microinsurance is critical given that it offers coverage to low-income households or to individuals who have little savings.
Estimates indicate that approximately 1,7 billion people in the world are unbanked and c350 million of them are in Sub-Saharan Africa (SSA). This demonstrates a massive credit gap in SSA. Microinsurance therefore, offers an important intervention in extending financial inclusion to low-income socio-economic groups and a key enabler in the attainment of Sustainable Development Goals (SDGs)
In Africa, the provision of micro-insurance products is provided by various entities: insurance companies in the formal sector, non-governmental organisations, microfinance institutions, cooperatives, mutual health insurance companies, community programmes, associations and other support groups.
Nevertheless, it should be noted that the insurance penetration rate is less than five percent in this region. Microinsurance is typically delivered through the following ways:
Partner-agent model
A partnership between the micro-insurer and an agent i.e. intermediary, where the insurer designs and develops the product and is responsible for the underwriting, and the agent provides marketing and delivery to clients.
Full-service model
The micro-insurer is responsible for design, development, marketing and delivery of the product.
Provider-driven model
The policyholders can pay premiums directly to the service provider such as a hospital, who takes on the responsibility of design, development and delivery of the service to policyholders.
Community-based/Mutual model
The policyholders are responsible for all aspects of the scheme, effectively being both the insurer and insured.
While the use of mobile network operators (MNOs) gained momentum in the past, the use of MNOs has started to decrease due to the limitations on the range of products an MNO might offer. That said, mobile money has made payments of premiums much easier in non-developed countries.
While customers in these regions may not always have access to banking services, mobile money has helped by allowing people to store money in mobile wallets.
Certain regions also allow for automated deductions from these mobile wallets. In Zimbabwe, there are currently two microinsurance companies registered with Ipec, which are Coverlink Microinsurance and Golden Knot Microinsurance.
Microinsurance is mostly in the form of funeral cover and medical aid, which shows that the range of product offering is limited.
Further, microinsurance players largely targeting political groups, churches and other communities.
According to Ipec, the market leader in terms of gross premium written was Coverlink, which controlled 67,81 percent for the quarter ended March 31, 2021. In countries such as Zimbabwe, where a large segment of the population cannot afford traditional insurance products, insurers who offer microinsurance have a significant market to tap into.
Additionally, if microinsurers are innovative in their approach and use mobile technology to reach their customers and deliver their products, they are set to grab the attention of those customers who traditional insurers cannot reach.
Mobile microinsurance is any type of microinsurance product which leverages the mobile channel, regardless of the existence of a mobile money platform to improve a part of the insurance value chain, which can include product design, pricing, marketing and sales, policy administration and claims payment.
Overall, it is envisaged that technology will remain the game changer in the microinsurance space.
The cell phone technology revolution and increase in mobile subscriptions is also an opportunity for the growth in micro-insurance.
Matsika is head of research at Morgan & Co, and founder of piggybankadvisor.com. He can be reached on +263 78 358 4745 or batanai@morganzim.com/batanai@piggybankadvisor.com