Creating a simplified, low-friction customer experience - whether that means taking premium payments directly from a customer’s mobile wallet or automating claims processing - is often seen as one of the keys to scaling up microinsurance among low-income populations.
“For lower income consumers, scale is reached profitably when you can combine technology with a human touch,” says Mathilda Ström, Deputy CEO of BIMA. “Technology is required for a simple, registration process, affordable and accessible premium payments and a smooth, fast claims process, while human touch is required to get true adoption. Customers need education, explanation, and questions and objections to be handled by a peer in their local language.”
In some emerging markets, however, regulatory barriers ban, or in some cases restrict automated payments in order to protect low-income customers who may not understand how or why recurring premium payments are deducted from their mobile wallets. Such regulations are frequently responses to poor behaviour from the various companies generating these automated payments. The result is unfortunately often a frustrating impasse between insurance companies who need to drive down costs in order to offer affordable products at scale, and regulators who are charged with safeguarding the interests of low-income customers.
Processing premium payments manually is - as Stonestep CEO Brandon Mathews told a MiN Expert Forum - a pain. “Making collections of less than five cents a day, tracking whether they paid the correct premium - you need an army of people to do that. When we started in Brazil in 1999 our claims adjusters were doing about four claims a day each, by the time I left in 2007 it was 120 a day. The best is yet to come, building trust through technology.”
“Push payments are dead,” Jeremy Leach, Founder & CEO of Inclusivity Solutions, told last year’s Digital ICII. “In many markets, mobile money payments systems are predicated on push payments and don’t allow for recurring payments. It’s laudable that people take control of their lives, but it’s a killer for these types of payments. It’s like a gym phoning you up each month saying you haven’t been to the gym, do you still want to pay? Of course you don’t!”
Relying on clients to pay on time every month can be a significant cost barrier for insurers of low-income customers, because people often forget or don't have the money when they need it. Cash payments, especially during a pandemic which may restrict travel or face-to-face contact, are similarly hard for insurers to work with.
Regulation may not be the only barrier to automation - in Nigeria, for example, WellaHealth says most people are hesitant to authorise automated payments, especially for a product and company they don’t know. “This means WellaHealth must invest significant effort in renewal reminders with the hope of eventually building sufficient trust so that users authorise automated pull payments. Without such authorisations, push payments are more likely to lead to lapsed subscriptions,” they note.
In markets which do not allow automated payments, not only are admin costs pushed up but clients may forget to pay premiums and find themselves without cover. As explored by MiN, there are numerous other benefits for both digital consumers and insurers, including reduced claims turnaround times and fast, automatic payouts which help to build trust.
In many countries, the most sought-after method of premium collection is through direct payroll deduction, which minimises admin for the insurer and means there is no danger of the customer forgetting. That's why, in countries where this is permitted, government workers (who often make up a significant portion of salaried workers) are competed over as customers. However, in emerging economies, many people - especially women - work in the informal sector where cash payment is the norm and a regular monthly salary is enjoyed only by the minority of the overall population.
‘Going mobile’ has for some time been seen as the way to reach underserved populations. “A fully mobile value chain goes beyond simple premium collection to provide a full range of insurance services via mobile technology,” noted Accenture in 2015. “This could include fully mobile registration; mobile policy information and coverage views; after-sales services such as renewals, reminders, and queries; claims filing and processing; and claims payment via mobile money.
Mobile technology allows insurers to connect not only with customers, but with the intermediaries that play an essential role in making microinsurance a success.” As far back as 2013, research suggested that of 13 mobile insurance schemes studied, every one used automatic reminders to customers when a payment was due. However, mobile-enabled value chains alone are not enough to scale up microinsurance. And scaling up microinsurance is not just about improving the economics of distribution, payments, and claims.
Achieving scale in emerging markets goes beyond all of this - it’s about building trust and improving customers’ financial literacy. MiN member BIMA, for example, recognises that reaching scale requires a combination of mobile technology and human agents in order to educate consumers about the benefits of insurance. BIMA saw the Covid-19 crisis as an opportunity to expand this model - last September the company announced it had raised US$30 million to ramp up its mobile health insurance and telemedicine services through a combination of digital solutions and human touch.
”We feel automatic payments are crucial to the success of the products and business model – a direct debit model where a customer agrees, upon initial registration, to a subscription product where payment is taken automatically each month,” says Ström who warns however that “if customers are not properly educated about the product, then they may be surprised when money is taken from their wallets.” To address this, BIMA prioritises educating the customer on the payment model, incorporating a multi-step registration process at the point of sale; quality control teams who verify and validate consumer understanding; and providing customers with a clear opt-out option and instructions to exercise it, if they choose.
Describing the “insurer of the future, Tom Whitbrook, Lead Strategist at Kin+Carta Create, says “Advancements in data openness, ‘regtech ’ services behind the scenes, and investment in the user experience make seamless application processes and journeys commonplace. Authentication via services like Facebook or Google enables digital data exchange that makes providing on-boarding information simple. That means higher conversion rates on new customers, and easier routes for those who are ready to extend their relationship with an existing provider.”
The current reality is somewhat different. Lack of innovation and regulatory challenges mean the customer journey is often anything but frictionless. Even in the Covid-19 pandemic era, many microinsurance clients still have to physically travel to a bank or agent branch to take out a policy, pay a premium, make a claim or collect a payment. That costs both time and money - and acts as a significant brake on scaling up.
Fortunately, there are solutions to overcome this, and where these can be found, they have a profound impact on the economies for insurers trying to serve low-income customers as well as on the customers themselves.