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PROMISING STARTS IN MOBILE MICROINSURANCE: TIGO SENEGAL & TELENOR PAKISTAN
Broader lessons for the mobile financial services industry?
Of course, not every mobile operator will launch a mobile microinsurance program. However, they might be interested in whether the
early lessons from microinsurance extend to other financial products. Might a savings product benefit from a similar ground-level sales
effort and relentless focus on sales quality? Can expert partners accelerate success in areas that might be unfamiliar to MNOs such as
eCommerce? Will product simplicity trump flexibility when it comes to credit provided over the mobile channel?
Is the loyalty-based model sustainable?
Scenarios for mobile microinsurance
One major unanswered question facing the young mobile microinsurance industry is whether the loyalty model, where insurance cover
is tied to telecom usage, will be financially sustainable in the long-term. Both Bima and MicroEnsure believe there is demonstrable near-
term ARPU and churn benefits to offering some level of free cover. MicroEnsure estimates that MNOs typically pay less than 3% of ARPU
in underwriting costs to the insurance partner for enrolled customers and generate at least a 10% increase in ARPU and churn reduction
(these numbers vary by market, however). Bima has conducted customer surveys that show insurance to be a greater driver of MNO
loyalty than comparable VAS products.
One scenario for the mobile microinsurance industry is that these loyalty benefits prove to persist indefinitely. In this case, MNO-led
mobile microinsurance programs may be able to justify themselves on that basis alone. But what happens if the loyalty benefit actually
erodes over time? Two microinsurance practitioners provide another prognosis for mobile microinsurance: An evolution from a loyalty-
based to pure revenue-based model.
Richard Leftley, CEO of MicroEnsure, has seen the near-term MNO loyalty benefit provided by mobile microinsurance. However, he does
not believe that the economics of pure loyalty-based programs can be sustained long term. He reasons that, as customers become more
familiar with insurance and competitive offerings enter the market, loyalty benefits will gradually diminish. A microinsurance program
must evolve alongside these market changes and ultimately justify itself through direct revenue contribution.
Gustaf Agartson, CEO of Bima, believes that while loyalty prgoducts like that used in Senegal should still be economically sustainable,
delivering positive margins to all parties, the end goal will be a robust paid offering. Like Mr. Leftley, he predicts a gradual migration away
from policies that tie cover to MNO loyalty and toward a suite of self-sustaining paid products
Will operators be able to generate enough direct revenue from these newly-acquired insurance customers to justify these programs?
With these pioneering services only in the first few years of operation, it is probably too early to say. Mobile financial services practition-
ers will want to keep a close eye on these stories.
20
Broader lessons for the mobile financial services industry?
Of course, not every mobile operator will launch a mobile microinsurance program. However, they might be interested in whether the
early lessons from microinsurance extend to other financial products. Might a savings product benefit from a similar ground-level sales
effort and relentless focus on sales quality? Can expert partners accelerate success in areas that might be unfamiliar to MNOs such as
eCommerce? Will product simplicity trump flexibility when it comes to credit provided over the mobile channel?
Is the loyalty-based model sustainable?
Scenarios for mobile microinsurance
One major unanswered question facing the young mobile microinsurance industry is whether the loyalty model, where insurance cover
is tied to telecom usage, will be financially sustainable in the long-term. Both Bima and MicroEnsure believe there is demonstrable near-
term ARPU and churn benefits to offering some level of free cover. MicroEnsure estimates that MNOs typically pay less than 3% of ARPU
in underwriting costs to the insurance partner for enrolled customers and generate at least a 10% increase in ARPU and churn reduction
(these numbers vary by market, however). Bima has conducted customer surveys that show insurance to be a greater driver of MNO
loyalty than comparable VAS products.
One scenario for the mobile microinsurance industry is that these loyalty benefits prove to persist indefinitely. In this case, MNO-led
mobile microinsurance programs may be able to justify themselves on that basis alone. But what happens if the loyalty benefit actually
erodes over time? Two microinsurance practitioners provide another prognosis for mobile microinsurance: An evolution from a loyalty-
based to pure revenue-based model.
Richard Leftley, CEO of MicroEnsure, has seen the near-term MNO loyalty benefit provided by mobile microinsurance. However, he does
not believe that the economics of pure loyalty-based programs can be sustained long term. He reasons that, as customers become more
familiar with insurance and competitive offerings enter the market, loyalty benefits will gradually diminish. A microinsurance program
must evolve alongside these market changes and ultimately justify itself through direct revenue contribution.
Gustaf Agartson, CEO of Bima, believes that while loyalty prgoducts like that used in Senegal should still be economically sustainable,
delivering positive margins to all parties, the end goal will be a robust paid offering. Like Mr. Leftley, he predicts a gradual migration away
from policies that tie cover to MNO loyalty and toward a suite of self-sustaining paid products
Will operators be able to generate enough direct revenue from these newly-acquired insurance customers to justify these programs?
With these pioneering services only in the first few years of operation, it is probably too early to say. Mobile financial services practition-
ers will want to keep a close eye on these stories.
20
