The COVID-19 crisis has taken its toll on the insurance industry, but how did it particularly impact microinsurance clients, who were forced to choose between paying their premiums or paying for food? Bearing in mind the old adage ‘never let a good crisis go to waste,’ the Microinsurance Network’s (MiN) latest Expert Forum asked whether the pandemic has strengthened or undermined the business case for microinsurance.
For Peter Gross, Senior Advisor at AXA Emerging Customers, COVID-19 has been a wake-up call that has forced insurers into long-overdue changes. He explained how the insurance industry has been dodging digitalisation for the longest time. Yet, many companies, including AXA, have been able to go digital in a matter of weeks. “We have to offer valuable products that people know about, understand, and stick with. COVID-19 has shone a light on that.”
Telemedicine, for instance, has been widely spoken about, but moderator Bert Opdebeeck, the Founder of Microinsurance Master, wondered how much of it is really being used. Not only does telemedicine push behaviour change at scale by offering a value-added service, but it is also safer than visiting hospitals in person. AXA has seen a response rate of about eight percent in the use of telemedicine services, which is an increase on pre-pandemic levels, but is still short of the 12-15 percent they aim for. “We want that to continue after COVID-19 because we think that once people have tried the service, they will see it as more convenient, safer, and affordable,” added Gross. Ghana, said Gideon Ataraire, CEO of Allianz Life Ghana, has also seen an upsurge in telemedicine since “customers call doctors because they are afraid to go to the hospital.”
Ataraire further explained Ghana has seen greater awareness of insurance in general. For example, the government has been providing insurance for healthcare workers since the crisis; and thus, microinsurance has benefitted. Despite an initial hit on premiums, with income dipping by 49 percent between February and April, microinsurance business has bounced back, with a 70 percent rise from May to June. “Most of our customers in the microinsurance segment are daily workers, so when they are not working, they cannot pay for anything. Now, they are working again, and they have disposable income to pay for insurance,” said Ataraire.
As for microfinance institutions (MFIs), they have been hit hard, with knock-on impacts for microinsurers using them for distribution. Vision Fund International has been trying to ensure MFIs remain viable during the economic down-turn- “the priority is trying to keep our MFIs alive,” said Solène Favre, Global Insurance Director. Favre elaborated MFIs whose business is mostly loans have been greatly impacted. Since Vision Fund International is a credit-led organisation, “we are going to have to shift to a financial service organisation, with insurance being a big part of it,” she added.
Despite the challenges, microinsurance remains a priority for both AXA and Allianz. If anything, COVID-19 has highlighted the market potential of billions of low-income customers who do need cover. Eventually, consumer incomes will bounce back, and in turn, the ability to afford small premiums will do as well. “As long as people work, sell, or trade, they will have an income, and there will still be a microinsurance market,” said Ataraire.
For stand-alone microinsurers, however, the business case in a post-COVID-19 future is uncertain. Favre cited the example of Prevoir, which is a microinsurance company that was set up in Cambodia in 2012. Six years later, Prevoir had 300,000 active policies and more than 100 staff, but it was still unprofitable. From his experience with around 20 insurance start-ups in Africa, Gross suggested that if a business does not start to show signs of profitability within 36 months- based on gross written premiums, customer growth, and customer retention- a long-term survival is unlikely. Finding the right low-cost distribution model is key, which partly explains why Allianz in Ghana is gradually trying to move face-to-face contact to digital platforms.
On the plus side, there has been little change in claims’ rates during the COVID-19 crisis, at least in Ghana. In fact, Allianz was able to return a small amount of money to some customers as a thank you for their loyalty. “It was a real ‘wow’ moment,” exclaimed Ataraire. “The customers were like: ‘No way! In all my life, I never got anything back from insurance!’”