Branchless Banking and Microinsurance: A Perfect Marriage?

In previous blogs Mark Pickens has lamented the lack of innovation by branchless banking providers in products that go beyond payments. But there are some green-shoots of innovation. In this blog we take a look at some examples of early experiments that we have seen involving in micro-insurance.

It could be argued that micro-insurance is the ideal financial product to be offered via branchless banking. Insurance requires a large base of customers: the larger the base, the more diversified the risk for the insurer, and the cheaper the insurer is able to offer the product. And branchless banking, we have long argued, is a business built on high volumes and low margins.

It seems that several others share this view. Here’s a quick summary of three of the most exciting examples that we have come across around the world that pair micro-insurance with branchless banking channels:

• In Ghana, mobile operator Tigo has partnered with MicroEnsure and Vanguard Life to offer "Family Care Insurance” to their customers based on their usage of airtime. Customers sign up for the service and nominate one other family member or loved one to be included on their policy. The amount of cover that they are entitled to ranges from GHC 200 – 1,000 (USD 130 – 650) and is based on the value of airtime that was purchased during the previous calendar month. If a customer buys less airtime the next month, the cover will be reduced. Customers don’t have to have a mobile money account to qualify and the value to Tigo comes from increased customer “stickiness”.
• In the Philippines, Globe experimented with a hospitalization assistance insurance product that was linked to their international remittance service. This is another bundled service where the recipient of an international remittance transfer that lands into a GCash account is automatically entitled to cash assistance for each day of hospitalization, up to a maximum of ten days, should he/she require medical treatment within the 30 days after receiving the remittance. Again the motivation was to increase the attractiveness of the GCash channel relative to its competitors and to win more business rather than making direct revenue from the sale of insurance.
• And of course, there is innovation in Kenya too where insurance company, UAP, has partnered with seed producers, and fertilizer and chemical manufacturers to offer Kilimo Salama, an index based weather insurance product, where premiums are collected and claims settled using M-Pesa. Farmers can chose to pay a 5% premium when they buy their inputs and if there is a drought or excessive rain during the growing season they automatically receives a payout to their M-Pesa account on their phone.

None of these services has yet reached any significant scale, but they are interesting examples of innovation and, we hope, only the first movers in a global market with huge potential.

- Chris Bold