M-Insurance Goes Live in Ghana
MicroEnsure has launched life insurance products with two leading Ghanaian mobile phone providers. Peter Gross, General Manager of MicroEnsure Ghana, says that by the end of 2011 MicroEnsure’s products are expected to double the number of Ghanaians served by insurance.
Ghanaian demand for life insurance is high, even (and especially) among the poor, as a result of cultural values as well as government-sponsored insurance sensitization. The typical Ghanaian funeral is a lavish affair, costing as much as $10,000, with families typically spending a minimum of six months’ income to bury a loved one. As a percentage of per-capita GDP, Ghana is the most expensive country in the world in which to hold a funeral.
However, because less than 2% of Ghanaians have a life insurance policy, families typically sell assets, use savings, and rely on donations and loans to finance funerals. When a family is not able to cover its expenses, the women and children are often the first to be affected; children are removed from school and the women and children forego proper nutrition and healthcare, leading towards a downward spiral into poverty.
With the rapid growth of mobile financial services, MicroEnsure identified a significant opportunity to meet the demand for insurance among the poor. As a result, the MicroEnsure Ghana team developed two separate approaches for working with mobile phone providers in order to meet this need on an unprecedented scale. Both policies provide coverage with limited conditions and easy-to-understand terms and processes, which greatly simplify delivery of insurance to the customer and increase confidence in the product.
The first model is tied to mobile payment platforms. In this model, the subscriber chooses to buy insurance and pays small premiums each month on an automatic, recurring basis. Because of MicroEnsure’s low-cost administration and commitment to serving the poor at low cost, the premiums cost 50-90% less than comparable products in the market. Small premiums are collected monthly because it is easier for a poor person to pay a small regular amount than to pay for insurance upfront in one lump sum. However, collection of the monthly premium (as low as US$0.33 per person per month) is more efficient due to the mobile platform. With this model MicroEnsure and its partners have achieved a world first: an insurance product whereby enrolment, payment, policy management and claims can be processed entirely on the customer’s phone.
The second model is a frequent-user model, where the subscriber is rewarded with increasing levels of life insurance based on the amount of airtime used over the course of a given month. The mobile network operator is willing to pay the premium, as they profit from increased usage. The innovation in this model centres around a more beneficial policy with easier access for clients and enhanced client education. Each policy covers two lives, the subscriber and one family member of choice, for greater perceived benefit to the subscriber. Part of our motivation for this model is to get millions of people to have a first experience of insurance through a simple, low-cost policy. Once customers have a positive first experience with insurance, they will be more likely to increase their reliance on insurance in general, in order to protect themselves from risk.
“I live in Accra, Ablekuma-Agape, but my family is from Aflao in the Volta region. We are a large family, with five brothers and sisters. My mother, Edo, was a bread seller in Aflao, but my brothers and sisters lived in different areas. Since the family was spread around the country, my mother loved for us to visit her, and I tried to visit whenever I had the chance.
I found out about a new insurance product in January when I visited my phone company’s office at Mallam Junction to fix a fault with my phone. An agent approached me and explained the product to me very well. I sign up for most of the company’s promotions, but when they told me about insurance, at first I wasn’t sure about it. I have never had insurance before, and have never really been interested in it. But because the insurance was free and was from my phone company, I decided to give it a try. The agent told me that, in addition to myself, I could also enrol another family member who was very important to me: so of course, I enrolled my mother for the insurance.
This year has not been easy. I work as a driver, but there hasn’t been much work available. Then, in February, we lost our grandfather. He was living with me in Accra when he had a stroke and died. Because I was the eldest of my brothers and sisters, I was responsible for much of the cost of my grandfather’s funeral, which was difficult for me because of my lack of work.
When we went to bury my grandfather in Aflao, my mother Edo had a stroke that paralyzed half her body. I stayed with her in Aflao for some time, but she just got worse and worse. Then, one night in early March while I was giving her a bath, she died – she actually died in my arms. I couldn’t believe she was gone, just like that.
Because I was in Aflao when she died, I had to wait to return to Accra to see about the insurance policy. When I got to Accra, I read the policy document again and decided to call the number listed on the brochure. I told my story to the MicroEnsure representative, and she asked me to provide two simple documents: it was really easy to make a claim.
Just a few days after MicroEnsure took my claim documents, they gave me a cheque for 1000 Ghana cedis (US$660). Of course, the insurance money can’t bring my mother back, but it is really helping me in so many ways, especially since I have been out of work. I would recommend that everyone signs up for the product – you won’t regret it.”