Eighty percent of customers would buy microinsurance on mobile devices, but insurers are failing to see the opportunity.
I’d like to pick up on the opportunity offered to South African insurers by this country’s huge installed base of mobile devices, something I mentioned in a previous blog. Of particular interest are the growth in the number of smartphones and the steady decline in the cost of mobile data (a road down which the cell phone companies seem to have to be dragged by the regulator).
These trends, combined with consumers’ desire for convenience and personalisation, mean that more and more of the insurance life cycle will take place over these devices. The research bears that out: globally, 71 percent are ready to purchase insurance online, and well over one in three (37 percent) of those with mobile devices have used them to deal with their insurer in the past two years—the trend is stronger in South Africa, with the comparable figures at 80 percent and 50 percent.
Sixty-seven percent are interested in new services being offered via mobile devices. These services include taking photographs at an accident scene to support a motor insurance claim. The figure is 85 percent here.
Typically, South Africans’ predisposition to use mobile technologies is capped only by China and Brazil.
So far so very logical. What’s puzzling is that local insurers I and my team speak to generally downplay the viability of the mobile channel. In part this may be due the fact that feature phones remain dominant within the mass market, but as the price of smartphones reduces, that argument is becoming ever less convincing.
Another objection, similar in tenor, is that the type of insurance that can be offered via this type of channel is too low in value to be of interest. But this is blinkered thinking, at best. A number of innovative insurers around the world are showing that there are big profits to be made from creating simple, affordable insurance products that are carefully aligned with what the expanding middle- and lower-middle-income populations of the emerging markets want. Welcome to the world of microinsurance, something that’s frequently sold via mobile devices.
The so-called “base of the economic pyramid” actually has considerable spending power—$160 billion a year in South Africa, Kenya and Nigeria, for example. Already 5 percent of this group worldwide has bought some form of coverage. These populations surprised everyone by the speed with which they adopted mobile phones; the same thing happened with mobile money.
This is a market full of people who face big risks, and who have a new-found ability to afford some risk mitigation. It is ripe for microinsurance.
And here’s the amazing thing—the same approach is working in mature markets too, just for different types of cover. Think accident insurance for an afternoon’s sky-diving offered on your smartphone by a savvy insurer using location-based information, or house insurance tailored for conditions in Brazil’s favelas.
Insurance offered via mobile, simple but cunningly crafted, is a huge, unappreciated opportunity in South Africa—who will seize it?
For more on this fascinating and growing insurance market, read Big opportunities in small-ticket insurance.