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Mobile makes insurance work in Africa

By MARIUS BOTHA, group CEO at microinsurer aYo Holdings

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Before 2007, transferring money in Africa was a nightmare of money orders, long trips to towns and trusting bus passengers to carry money for you. Fast forward to 2021, and there are more than 1 billion registered mobile money accounts, with around $2 billion dollars processed daily by the mobile money industry.

We’re starting to see the same thing happen with insurance on the continent. aYo started operations in 2017. Four years later, we have crossed the 12 million customer mark, without even scratching the surface. The common denominator? Mobile telecommunications networks, which are creating direct distribution channels to billions of people who were largely off the financial services radar a couple of decades ago.

Fact is, mobile networks are the real drivers of financial inclusion on the African continent. As opposed to traditional financial services structures, the services provided via mobile phones are not restricted by region or working hours. This has led to the creation of a mass-market of financial services for previously underbanked and unserved people.

What does this mean for the insurance sector? For one, partnerships with mobile networks are the primary driver for accelerating product and service uptake as well as innovation across the continent.

Mobile networks don’t just provide the reach, though. They play a key role in an insurer’s ability to manage customer data, and provide rich geographic and demographic insights that help insurers tailor their offerings to their potential markets.

For insurance to work in Africa, though, it also has to be affordable. Mobile channels reduce the marginal costs of accessing information and participating in financial activities. For businesses, it’s all about trying to solve for healthy margins; for consumers, it’s a matter of getting a service at a price point they can afford. In essence, this means driving high volumes of transactions at very low costs.

Our challenge right now is that many customers across the continent still want to engage with physical channels from a trust point of view. Insurance is still a brand-new concept for most African people, and they want to be able to see and interact with it. They want to know who to come to if they have a problem, or if they want to claim. Much like the early days of mobile money, there’s a vast education job to be done around the how and why of engaging with insurance digitally before it goes mainstream, and this requires some face-to-face interaction.

There’s also a fine balance in positioning responsible insurance in a way that you still give your customer freedom of choice. It’s one thing embedding insurance in another product, like airtime sales or money transfers. It’s another giving a customer more visibility into a product, getting them to understand the benefits of the product, and to consciously choose it – and be able to de-couple it, if they so choose.

Our goal is a state where the customer fully understands their insurance needs and uses their mobile wallets and airtime top ups to buy cover. That’s real customer empowerment.

And then, once you have the customer, your next challenge is to optimise your engagement with them, per segment and per channel. That brings us back to the strategic role of data in our business. It’s only by being able to access new data sets and drawing insights from them that we can truly understand our customers and markets. If we can understand how, when and why our customers use their mobile devices, then it’s far easier to tailor an insurance journey to them, instead of the other way around.

Ultimately, what partnering with a mobile network does is enable a vision of becoming a platform business for any number of financial services. It’s all about creating a marketplace that didn’t exist before, and giving the customer greater choice. Now that’s true financial inclusion.

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