Mobile as a Source of Microinsurance Innovation
Insurance Experts' Forum, March 19, 2013
The use of mobile in insurance is usually related to the self-service capabilities insurers can deploy for agents and for upper income groups such as quote, bind, issue, claims and printing, all for which a smartphone is a better device than a simple mobile phone.
One trend we have recognized is that mobile technology is being used in emerging markets to innovate as a means of distribution and collection, especially to low income consumers through microinsurance products, as there is usually 70 percent mobile penetration but insurance penetration is below 5 percent. Mobile operators benefit as well, as they are able to turn ‘pay as you go’ customers into annual subscription contracts.
Microinsurance aims to the base of the pyramid (BoP) population and has the potential to play a very important social and economic role by breaking the vicious circle of poverty and vulnerability that affects the low income segments of the population. It can also help local economies by redirecting funds to be invested into high-return/high-risk assets, that otherwise would be allocated in low return investments or even kept without investing. For many insurers it is also the opportunity to position its brand in a population that eventually will demand more insurance products.
While in 2006, 78 million risks were covered under microinsurance products in Asia, Africa and Latin America, by 2011, this number was over 500 million. Latin America represented 10 percent while Asia had nearly 400 million risks covered.
The potential market for Latin America is estimated at 360 million people, with Mexico and Brazil concentrating around 55 percent of this market.
A usual misconception is that emerging markets are behind most mature markets in terms of internet and mobile usage. You might be surprised to know that Latin America for example:
* Had 231 million internet users in December 2011 (10 percent of the world internet population);
* Had 145 million Facebook users in April 2012 (18 percent of worldwide Facebook users), and
* Had +500 million mobile connections as from March 2010 (86 percent of the Latin American population)
As for smartphones, clearly of more interest for deploying self-service capabilities for agents and upper income consumers:
* Brazil has more smartphone users than France or Germany
* Brazil and Mexico together have more smartphone users than Australia has inhabitants
* Argentina smartphone penetration (24 percent) is better than in Germany
* 26 percent of Mexican smartphone users have made a purchase on their mobile
* 45 percent Brazilian smartphone users have purchased on their computer after researching on their mobile
* 82 percent of Argentinean smartphone users have researched a product/service on their mobile
The microinsurance market matches almost perfectly with the conditions for innovation as it is an under-served, untapped market that presents fragmentation; but serving these markets carries a high cost under the present business model for traditional insurance companies. Mobile is just one of the technologies available that could help insurers serve the low income market with a profitable model.
Microinsurance strategies require an innovative approach in areas such as product, rates, distribution, claims and collection and it is a shared view among industry leaders that such innovative approach could afterwards be used in their incumbent markets.
This blog has been reprinted with permission from Celent.
Juan Mazzini is a senior analyst in Celent's insurance practice, and can be reached at email@example.com.
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The opinions posted in this blog do not necessarily reflect those of Insurance Networking News or SourceMedia.
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