In my wallet, I have three bank cards. When I opened the accounts, I remembered reading a vague reference to insurance, but until today, I had no idea what the insurance actually covered, how to use it, or what I’m paying for the privilege.

I have now learned I have 26 kinds of insurance coverage on those three cards. However, in spite of several dozen clicks, 90 minutes of reading, and two aborted phone calls, I still don’t understand many of the basics of when and how I can use the coverage. None of the card companies could tell me the fees I’m paying them. Some of the click paths online were circular. And every long list of claim requirements included an escape clause, allowing the insurer nearly unlimited power to deny the inexplicable benefits for which I’m unknowingly paying.

In the religion of the Internet, user experience is gospel; if there were an inquisition into my experience today, insurance would be excommunicated.
<p style="text-align: center">*****</p>
Nearly nine years ago, I joined <a href="https://microensure.com/">MicroEnsure</a>, a pioneer in the field of inclusive insurance. Low-income customers in emerging markets experience risk as a fundamental fact of life. Opportunity – the focus of many a financial "inclusioneer" – is about something that doesn’t yet exist; meanwhile, risk is a present reality every day. If you’re a low-income mother in sub-Saharan Africa, risk is your breakfast, lunch, and dinner; you wake up in the morning worried if the bus driver will be drunk again, and you go to sleep hoping your rural uncle’s illness doesn’t get any worse.

The problem MicroEnsure wanted to tackle was how to protect these “emerging customers” – people in emerging markets who earn $2 to $20 per day – with sustainable solutions, since traditional insurance companies had no model to serve them. Traditional insurers have depended for decades on mandatory distribution channels: car owners must insure their vehicles, businesses their properties, and so forth. I like to call this, “making money in the dark,” where the product (like my credit card insurance) is largely hidden from view. In such an approach, customer preferences became less important to insurers. If a customer ever did really want insurance, that individual was likely to be either high-risk or a fraudster. Over time, this led to customers knowing little about their coverage, and being pushed away if they did try to access benefits. In the end, insurance became an industry that sees customers as the enemy. If you disagree, just consider that the industry calls claims “losses.” Let that sink in: when customers receive the service they paid for, insurers see a failure, not a success.

MicroEnsure, then, was clearly facing an uphill battle: we had no mandatory channels to leverage, and we had customers who faced significant risk. How could we protect customers who faced more risk than the average insured person, with less money to pay premiums, and no easy way to reach them?

The resolution we found, paradoxically, was to use these two problems to solve each other. If emerging customers faced more risk, then they would be more likely to buy products that help them, which meant that it should be easier to create channels to reach them.

The key to making the formula work was to upend the traditional insurance model. Instead of making money in the dark, we needed to make our value as clear as possible: to offer products that were easy to understand, valuable for the price, and straightforward to claim. We needed to respond to customer needs and requests quickly. We needed to be dissatisfied with low usage rates and nervous about unsustainably high profit margins. And we needed to think about our customers not only from a financial perspective, but also from social and emotional ones as well. In short, we needed to act like a company in any other industry, where customers are seen as an asset rather than a liability.
<blockquote>Instead of making money in the dark, we needed to make our value as clear as possible: to offer products that were easy to understand, valuable for the price, and straightforward to claim.</blockquote>
To be sure, there were tradeoffs to be made. Instead of paying the full cost of a customer’s loss, in most cases we paid a fixed part of it. Instead of covering many different customer needs, we limited our service to a few major ones. But by making our product and back office simpler, we also enabled scale much more quickly than traditional insurance. As a result, MicroEnsure reached more than 50 million low-income customers with their first insurance policies in less than a decade.
<p style="text-align: center">*****</p>
I recently had the privilege to speak at the <a href="http://financialinclusionweek.org/cfi10/">CFI 10th Anniversary Symposium</a>, which marked an important career transition for me. Having helped MicroEnsure to build its model, I attended the Symposium on my first day as part of AXA, the world’s 2nd-largest insurance group. AXA sees that the old insurance model is limited: there are only so many mandatory insurance policies that can be sold in existing markets. And while it looks to emerging customers for growth, at the same time it recognizes that the business model for emerging customers holds some of the keys for renewing the insurance industry overall.

Which brings me to my credit card experiment.

Emerging customers who now have insurance – <a href="http://www.impactinsurance.org/about/facts-on-microinsurance">more than 500 million of them</a>, at last count – don’t often feel the way that I did today as an insurance customer. They don’t have to slog through endless jargon when the <a href="https://www.theguardian.com/global-development/2013/may/02/ghana-mobile-free-insurance">policy wording is contained in 3 SMS messages</a>. They don’t have to struggle for six weeks to get a small travel insurance claim paid, as I did last year, but can <a href="https://www.youtube.com/watch?v=vX6TySibSU8">receive a claim payment in West Africa in two hours</a>. They are provided with clear, simple products, not sold with traditional ads that – almost unbelievably – show <a href="https://www.google.com/imgres?imgurl=http%3A%2F%2Ffile.vintageadbrowser.com%2Fl-gwjbeo488h2lj7.jpg&amp;imgrefurl=http%3A%2F%2Fwww.vintageadbrowser.com%2Fmoney-ads-1990s&amp;docid=Xh9R6D9rEBQhiM&amp;tbnid=1Si3I3mwhFCe6M%3A&amp;vet=1&amp;w=660&amp;h=903&amp;source=sh%2Fx%2Fim">activities that aren’t covered by their policy</a>. Instead of seeing insurance as an annoyance, emerging customers tend to <a href="https://www.youtube.com/watch?v=0FOH9E1pe9o">see it as a blessing</a>.

The reason emerging customers feel this way isn’t because they are fundamentally different from traditional customers; it’s because the industry changed to reach them in the first place. And if the changes have succeeded in reaching this new market, then – at least for me – the lessons learned are relevant for existing markets as well. Insurers will become consumer-centric, lest Amazon and Google do it for them. They will find ways to make money in the light – where customers who have 26 covers actually know that they are covered in the first place. User experience will eventually drive the insurance industry, just as it does everywhere else.

For me this is why, while the last decade has seen an explosion of micro insurance, the next decade may be when “micro” insurance becomes “macro.” On the one hand, emerging customers will continue becoming insured, as more and more commercial insurers see the <a href="https://microinsurancenetwork.org/groups/microinsurance-risk-protection-4-billion-people">size and potential of the market</a>. On the other hand, though, I’m making a bolder bet: that the emerging customer model will go mainstream.

It should be an exciting few years.

Insurance: from Micro to Macro

Sub-Saharan Africa

Inclusive insurance

Insurance

Blog Post

In celebration of its 10th anniversary, the Center for Financial Inclusion at Accion asked 10 leaders in the financial inclusion community to set out their agenda for Getting Inclusion Right. The resulting essays and webinar series creates a roadmap to take financial inclusion into the next decade.

For the first virtual event in the series, Garance Wattez-Richard, Head of AXA Emerging Customers and Elisabeth Rhyne, Managing Director of CFI discussed the topics of getting insurance right and getting inclusion right from the customer’s perspective.

Webinar: Getting Inclusion Right

CFI Research Fellows Program

Webinar

Peter  Gross

Elisabeth Rhyne

Eric Noggle

Garance Wattez-Richard

Susy Cheston

East Asia and Pacific

Latin America and The Caribbean

South Asia

Crop Insurance

Health Insurance

Life Insurance

Agricultural and Rural Finance

Credit

Financial Technology

Insurance Companies

Insurtech

Report

For the insurance industry, 2008 is more often reminiscent of the bailout of AIG than of new beginnings. However, 2008 also launched an unexpected wave of creative destruction. This essay series not only celebrates the 10-year work of the Center for Financial Inclusion, but also  several pioneers that strive to make insurance inclusive for all: the ILO’s Impact Insurance Facility, the Centre for Financial Regulation and Inclusion and the Microinsurance Network—all of which began a decade  ago.

As a more recent settler on the inclusive insurance planet – although almost three years have flown by – others may keep the flame, but I would like to offer a personal opinion on the past decade of innovation, and my perspectives into what more needs to happen to combine sustainable business and social impact for those who need insurance most.

Back in 2008, microfinance institutions predominantly distributed what was then called microinsurance. MFIs provided insurers with a readily available pool of clients for credit life insurance, which reimburses the outstanding loan amount in case of death or disability of the borrower.

This was the first era of inclusive insurance.

Ten Years Gone, Ten Years to Go: Taking Inclusive Insurance from Adolescence to Adulthood

<em>This post is adapted from the recently-released publication “</em><a href="http://www.centerforfinancialinclusion.org/storage/Inclusive_Insurance_Final_2018.01.06.pdf"><em>Inclusive Insurance: Closing the Protection Gap for Emerging Customers</em></a><em>,” a joint-report from the Center for Financial Inclusion at Accion and the Institute of International Finance, in partnership with MetLife Foundation.</em>

New technologies are dramatically changing the landscape for insurance around the world and enabling insurers to reach new mass market segments. New data sources and analytical tools are changing risk models by enabling new ways to create, capture, and analyze valuable information that can help insurers better calculate and manage the risk associated with customers. Machine learning applied to satellite imagery is changing agricultural and disaster insurance, allowing for more sophisticated claims management, even facilitating pre-loss payments that can help minimize the cost of a disaster before it is full-blown. The expansion of identity solutions and onboarding options is lowering operations costs and enhancing convenience. These innovations are helping the global insurance industry transform from a passive risk-transmission industry into an active risk mitigation and advisory partner for individuals, businesses, and governments.

The use of mobile phones to deliver insurance is no longer a novelty, but there is tremendous scope for growth. Mobile phone penetration in emerging markets is now 80 percent, making mobile devices excellent distribution channels. Mobile phones are convenient for enrollment, transmitting premiums and paying claims. Mobile phones have also been helpful for customer service, policy management, consumer education, and other vital functions.

While mobile insurance products have already broken important new ground, there is a much broader array of more recent innovations paving the way for growth. The joint CFI-IIF report found providers using technology to solve both front-end and back-end challenges. Here are some of the ways providers are addressing customer and business needs through technology.
<h3>Instant Enrollment</h3>
In many countries, advances in identification systems have made it possible to enroll customers instantly. Garrance Wattez-Richard, Head of Emerging Markets at AXA, notes, “National ID is changing everything in China and in India.” In Colombia, Margarita Henao Cabrera reports that customers can enroll in DaviPlata’s insurance in seconds by entering their national IDs into their mobile phones. Richard Leftley, CEO of MicroEnsure, notes that even basic questions such as the customer’s name, age, and other demographics can create a barrier to enrollment, so enrolling customers based only on phone numbers eliminates those barriers. “We don’t know anything about them until they make a claim, not even their name or age,” says Leftley. Depending on the market, automated enrollment mechanisms include internet-based products in China and point-of-sale devices among retailers in Latin America.
<h3>Technology-Enabled Claims Verification and Payouts</h3>
<a href="https://centerforfinancialinclusionblog.files.wordpress.com/2018/01/daviplata.png"><img class="wp-image-24911 alignright" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2018/01/daviplata.png" alt="" width="465" height="507" /></a>

Since paying claims fast builds trust and adds customer value, Allianz is experimenting with payments that do not require customers to submit a claim—for instance, if the distribution partner reports that a customer has been in an accident. Parametric or index insurance using data from weather satellites enables automatic payments for farmers. Claims payouts and management are even being enhanced by drones. Drones allow access to isolated and dangerous areas after disasters to collect aerial data and assess loss through cutting-edge imagery analytics. Munich Re has been experimenting with the technology and has partnered with U.S.-based drone company PrecisionHawk. The two companies worked together in the aftermath of the April 2016 earthquake in Ecuador.
<h3>Back-Office Systems</h3>
Modernizing back-office IT systems helps bring down administrative costs, making low-premium products cheaper to manage. When AXA acquired MicroEnsure, its first investment was to improve legacy IT infrastructure. LeapFrog Investments also prioritizes IT with its microinsurance investments. To further reduce transaction costs, some experiments use blockchain technology, such as Consuelo, offered by the Mexican-based mobile platform Saldo.mx, in this case to facilitate microinsurance for Mexican migrant workers in the United States. By providing a universal and tamper-proof record of transactions, blockchain technology could reduce human error, fraud, data duplication, processing delays, and opaqueness—ultimately increasing efficiency and lowering operational and administrative costs for the insurance industry. (Though at a very high energy cost.)
<h3>Using New Data to Reappraise Risks</h3>
Historically, there has not been enough data to feed actuarial analysis that can inform a relevant product at a fair and attractive price for newer and lower income market segments. However, data has now become available on people who have a national ID or mobile phone number. Data analytics can then be effective at identifying prospective customers and their behavior patterns. Salmaan Jaffery of DIFC Authority looks forward to using artificial intelligence and machine learning in product development and risk assessment. With new data tools, the sector will look at risk differently. As Jaffery explains, “It may become apparent, through the analysis of behavioral and social data, that lower-income people may not be any greater risk than those with higher income profiles.”

<em>For more on the uses of technology in inclusive insurance, including how it’s enabling integrated services for health insurance, read “</em><a href="http://www.centerforfinancialinclusion.org/storage/Inclusive_Insurance_Final_2018.01.06.pdf"><em>Inclusive Insurance: Closing the Protection Gap for Emerging Customers</em></a><em>.”</em>

<em>Image credit: Accion</em>

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2018/01/08/inclusive-insurance-closing-the-protection-gap-for-emerging-customers/">Inclusive Insurance: Closing the Protection Gap for Emerging Customers</a>

<a href="https://cfi-blog.org/2017/04/13/making-microinsurance-work-in-bangladesh-three-takeaways/">Making Microinsurance Work in Bangladesh: Three Takeaways</a>

<a href="https://cfi-blog.org/2014/10/06/bundling-mhealth-info-and-microinsurance-to-improve-health-outcomes-in-kenya/">Bundling mHealth Info and Microinsurance to Improve Health Outcomes in Kenya</a>

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How Technology Is Propelling Inclusive Insurance

We use the term “inclusive  insurance” to encompass many different approaches to reaching the unserved,  underserved, vulnerable, or low-income populations in emerging markets with appropriate and affordable insurance products. These range from microinsurance for people with very little disposable income to new  products and  services for an emerging middle class around the globe who have not been served by traditional  insurance. Based on insights from written submissions and in-depth interviews with 30 people across 22 institutions, this report invites us to re-think the concept of insurance and its fundamental role in society.
<h2>Major Findings</h2>
In  the  broadest  terms,  the  challenges  of  providing  insurance  to  lower-income  population segments are similar to those of providing mainstream insurance: identifying, understanding, and connecting with customers; providing relevant products; and carrying out the administrative work of collecting premiums and paying claims. For customers at the base of the economic pyramid, the small incomes from which premiums must come require insurers to solve these challenges in highly cost-efficient ways. Adding to the intensive cost pressure, several factors amplify the challenge of connecting with these customers: their remote locations, lower education levels, and lack of experience with formal institutions.

Strategies for effectively serving this target market include:
<ul>
 	<li>Simplifying products so they are easy to understand, easy to enroll in, and easy to claim against. For institutions, such simple products engender trust and are lower cost to provide.</li>
 	<li>Finding new distribution channels and aggregators-from telcos to farmer cooperatives to banks—to identify and connect with low-income customers.</li>
 	<li>Leveraging digital channels and new “insurtech” (insurance technology) innovations to connect with, and serve, low-income customers.</li>
 	<li>Implementing new business models and products to provide and administer the risk mitigation solutions at scale that meet low-income customers’ needs.</li>
</ul>
This report is part of a two-year initiative, <a href="http://www.centerforfinancialinclusion.org/programs-a-projects/mainstreaming-financial-inclusion">Mainstreaming Financial Inclusion: Best Practices</a>, to help advance efforts of financial institutions to reach customers at the base of the economic pyramid. This report was completed in partnership with the <a href="http://www.iif.org">Institute of International Finance</a>, and made possible with support from <a href="https://www.metlife.com/about/corporate-responsibility/metlife-foundation/index.html">MetLife Foundation</a>.