Page 59 - State-of-the-Industry-2013

Part 2 - mOBile inSuranCe, Credit and SavinGS

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tigo, bima, anD microensure bring a “freemium”
moDel to mobile insurance*

Insurance is a complicated product but one where mobile distribution models hold some promise. What works and what doesn’t?
MicroEnsure, a company that partners with MNOs to ofer insurance to the mass market, has experimented with a few models and
their experience in Ghana might give mobile operators some ideas.

MicroEnsure had originally experimented by partnering with MNOs to ofer insurance directly to customers through the mobile mon-
ey wallet. Customers would sign up for insurance directly on the phone or through an agent and pay premiums through their mobile
money accounts. Unfortunately, insurance awareness and understanding in Ghana is low (life insurance penetration is under 2%) and
the mobile money ecosystem was still developing. These schemes struggled to reliably collect premiums and secure consumer trust
in an unfamiliar product through a non-traditional channel.

In Ghana, MicroEnsure tried a variation on this model that seems to have had more success. Through a partnership between Tigo, Bima,
and MicroEnsure[1], Tigo subscribers were ofered so-called “embedded” insurance—a free beneft on an opt-in basis. Subscribers are
awarded free life insurance coverage in proportion to the amount of airtime they use as a loyalty beneft. The purpose of the free insur-
ance is to create brand loyalty for Tigo and reduce churn. The scheme has resulted in more than 1 million new individuals covered by
insurance in Ghana and Tanzania (where a similar service was launched), 80% of whom had never had insurance coverage.

Here is the innovative part: In addition to the free embedded beneft, Tigo ofered an option to double the insurance coverage for a
monthly fee of GH¢1 (US$0.52). This might be called a “Freemium” model—ofering a basic level of service for free to many custom-
ers in the hope that some customers will voluntarily upgrade to a more premium paid service. Free + Premium = Freemium.

Impressively, Tigo has seen tens of thousands of customers upgrade from free insurance to paid premium product since the pro-
gram’s launch in February. By ofering the free embedded product they have created a market of customers that want and under-
stand insurance. This market is coming back to Tigo to buy more of the product.

Peter Gross from MicroEnsure points out that Coca-Cola enters new markets with a similar model—frst ofering free samples of
Coca-Cola to customers to get them hooked on the product and then subsequently selling it to them. For new products that are not
yet well understood by consumers, this approach might have some merit.

* This text box was adapted from a blog post by Philip Levin (MMU) published on the MMU website on July 2, 2013
1. The roles between the parties are split as follows: Tigo provides the subscriber base and markets the product. Bima provides the technical interface, agency force to register users
to the insurance service, and other supporting functions. MicroEnsure handles the insurance partnerships and claims administration.

it is early days for mobile insurance, but looking at the frst successful services reveals three key factors that are currently driving success:
• the ability to automatically debit, at set intervals, an account that is likely to have an active balance (an airtime wallet rather than a
mobile money wallet);
• ofering mobile insurance in partnership with insurers and third-party implementing partners with specifc expertise in micro-
insurance; and

• employing a “freemium” model whereby customers are given free insurance in exchange for loyalty to the mnO and given the op-
tion of upgrading to a more robust paid policy with additional features or coverage.

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