HomeuncategorizedIs micro-insurance the next game-changer for telcos?

Is micro-insurance the next game-changer for telcos?

Piggy’s Trading & Investing Tips: By Batanai Matsika

THE 2012 FinScope MSME Survey and the 2014 FinScope Consumer Survey revealed that 23% of Zimbabwe’s adult population was financially excluded.

Furthermore, the World Bank Consumer Protection and Financial Literacy Diagnostic Review of 2014 revealed low financial literacy, despite Zimbabwe’s high rate of general literacy.

To this end, micro insurance is one of the new-born strategies in the Zimbabwean insurance arena that can be used as an instrument to boost financial inclusion.

Micro-insurance is intended for the low income earners and subsequently insurance entities that are utilising this methodology have contemplated making it feasible for low salary workers to transfer their risks.

One discussion topic at the 43rd Organisation of Eastern and Southern Africa Insurers (OESAI) Conference that was held from the August 21 to 25, 2021, in Mombasa, Kenya 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 and micro insurance at the Insurance and Pensions Commission of Zimbabwe (Ipec).

The topic is critical in the context of African economies, such as Zimbabwe that remain largely informal and there is also a need to increase financial inclusion across all socio-economic groups within the populace.

Considering market conditions in Zimbabwe where most of the population is uninsured because of the unaffordability of traditional insurance products, premium collections are thus irregular compared to those of the traditional insurance.

That said, one important trend in Africa is that telecom companies have been on the forefront of a socio-economic revolution while mobile money has allowed unbanked Africans to participate in the financial system.

An interesting case study is the M-Pesa payment system. Safaricom first launched M-Pesa in Kenya in 2007 and other operators in East Africa, such as, Telkom Kenya and Essar Telecoms have also introduced mobile money services such as ZAP and Yu-cash.

In Francophone West Africa, Sonatel has also introduced Orange Money. Zimbabwe’s Econet Wireless has made progress with its EcoCash offering.

In Zambia, mobile wallets such as Airtel Money are also gaining some traction.

These developments are part of a trend by most telcos in sub Saharan Africa (SSA) to focus more on fintech and value-added services (VAS), not only as a strategy of diversifying income streams, but also as a way of ensuring the stickiness of subscribers.

Cellphone tech revolution in SSA

Given that telcos are active in the technology space where innovations and changes are happening at a very fast pace, the big question has always been; what next after mobile money?

Our view is that micro-insurance is a relevant offering in the African mass market given the various risks that households are exposed to such as threat of diseases, accidents and disability.

However, the major task for micro insurers is to offer more efficient risk mitigation tools, which are simple, accessible, valuable and reliable.

Telcos can act primarily as aggregators and distribution channels that are also responsible for the marketing and promotion of insurance offerings.

More recently, Sanlam and MTN announced an exclusive strategic alliance across Africa in a deal whose goal is to change the face of insurance on the continent.

The two companies indicated that they will build a digital insurance and investment business, which will be an integral part of MTN’s fintech offering.

Together, they will develop and distribute a comprehensive range of insurance, investment and savings products to the mobile operator’s customers using digital channels. The collaboration also offers MTN the opportunity to enhance its existing fintech offering and drive financial inclusion in Africa.

The info -graph below illustrates some of the advantages for telcos to offer insurance products.

Why are telcos doing insurance?

In Zimbabwe, Econet and Cassava have been very aggressive in terms of developing relevant products for its market in Zimbabwe, having launched Ecosure, which is a convenient, subscription-based, mobile insurance product with a mass-market appeal. This also includes Ecosure Funeral Cover, which enables all Econet customers to access the most affordable funeral cover in Zimbabwe on their mobile phones.

Econet also intends to roll out more insurance products, both of which are expected to trigger high take-up from our customers as they will provide valuable new services into market.

There is also scope for strategic alliances within the insurance, banking, telecoms and media space in Zimbabwe.

  • Matsika is the head of research at Morgan & Co and founder of piggybankadvisor.com. — batanai@morganzim.com/ batanai@piggybankadvisor.com or +263 783 584 745.

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