Thinking Big: Drivers of Scale. 9 th International Microinsurance Conference: Drivers of Scale, 13 November 2013

Transcription

1 Thinking Big: Drivers of Scale 9 th International Microinsurance onference: Drivers of Scale, 13 November 2013

2 Why is Scale important? Net premium $50 5% Profit $2.5 70% Net claims $35 5% $5 Profit $ % 10% Total expenses ommission $7.5 $5 55% 20% 20% Net claims Expenses ommission $2.75 $1 $1 Need to Maximise Volumes Traditional insurance vs. Microinsurance

3 Emerging Trends in Scale: Geography and Distribution Microinsurance initiatives that have achieved scale lient Interface for Scale Post Office MNO Funeral Parlour MNOS and Retailers account for less than 14% 18% 25% 53% Retailer State Direct Sales Groups MFI Bank MFIs, and banks account for 52% # of schemes that have achieved scale Scale = >1m policies/ lives covered in Asia, Latin America Scale = >500k policies/lives covered in Africa Number of initiatives: # 95 schemes

4 Emerging Trends in Scale: Products No voluntary 72% Voluntary? 72% of schemes offer some voluntary products No subsidy 50% 50% Gov t subsidy 35% Subsidies? 50% do not have subsidies Yes some voluntary Donor subsidy 15% Agriculture Accident Asset Health Other 50% Life Funeral redit Life Product Type? Life (life, funeral or credit life) dominates with 50% of the products Health and Agriculture largely subsidised

5 Overview of case studies 4.1m 25 m 1.3m > 1m 7m > 500k 3.4m 3m to 4m

6 Factors driving scale Simplicity Affordability onvenience Tangibility Tailoring of product Awareness and communication Demonstration effect Internal: within the insurers control External: Beyond the insurers control ompulsion Access to voluntary Partnership Brand Subsidy Latent demand Product and process design Agents Drivers of Scale Enablers for Scale Internal: within the insurers control Technology (client interface) Technology (administration) Human resources External: Beyond the insurers control Subsidy Regulation Market structure Market infrastructure

7 Drivers of scale by stage Agents Target new markets = individuals sales Product & process design Brand Partnership Target new markets = voluntary Access to voluntary ompulsion Stage 1: ompelled Stage 2: Voluntary Stage 3: Individual Sales

8 Increasing Scale Frontier markets drive stages of scale Stage 3: Individual sales Agency: Initiatives start targeting clients on an individual, voluntary basis and contract agents to make sales. Stage 2: Voluntary Partnership Insurance is sold to existing or client databases but on a voluntary basis. Products generally sold through crossselling. Stage 1: ompelled ompulsion A group of people are either automatically enrolled into an insurance product (e.g. as public policy or loyalty initiative) or compelled to buy insurance.(e.g. compulsory credit life). The choice may exist to opt-out of the policy.

9 Skipping Stages Stage 3: Individual Sales Agency Stage 1: ompelled ompulsion Ideal - Stage 1 requires: - Enabling regulation - Availability of group Stage 2: Voluntary Partnership Difficult - skip straight to stage 2 requires: - External drivers: - latent demand - Subsidy - Active and affordable sales Hardest To skip straight to stage 3 requires: - Understanding of - lients - Products - Technology - Agency - Economics of Scale

10 Stages of scale: Regulation and Technology Stage 1: ompelled Stage 2: Voluntary Stage 3: Individual Sales ompulsion Partnership Agency Regulation allows compulsion Regulation allows alternative intermediation and regulatory coordination important Simple agent requirements that protect client and offer access to information Basic back-office system More complex back-office system and basic client interaction omplex backoffice system and sophisticated client interaction

11 Stages of scale: lient Value Stage 1: ompelled Stage 2: Voluntary Stage 3: Individual Sales ompulsion Partnership Agency ost reduction through subsidy and potential saving on product design/ sales cost lient database onvenience Reduction in distribution cost Tailored product meet consumer needs Information to make informed choice Low awareness (autoenrolment) Product does not meet needs of consumer ost to remunerate partner Product designed for partner, not consumer High sales and distribution cost impacts affordability

12 Take aways Scale strategy depends of frontier target market Different drivers of scale need to be implemented when targeting different frontier markets in the 3 stages of scale. ompulsion or actively targeted captive markets a good kick-start to scale ompulsion or similar drivers important to initiate scale. Many schemes evolve from there to add further voluntary tailored products. Thinking big Most initiatives that achieve scale in microinsurance do not build up to scale over time. A decision to access a large group through a partner is the most successful strategy.

13 Thank You! Please contact us at Tel: +27 (0)

14 ase Studies Icon Legend Panellists Additional cases reviewed Retailer/Pawnshop MFI Bank Post Office Group Direct sales Subsidies No subsidies Voluntary ompulsory Life redit-life Funeral Agriculture > 500k 7m 25 m 1.3m 3.4m 4.1m 3m to 4m > 1m