African micro-insurance fintech business aYo Holdings, a joint venture between telecommunication giant MTN and traditional insurer Momentum Metropolitan Holdings (MMH), recently appointed Marius Botha as its new group chief executive officer (CEO). Botha was formerly CEO of life insurer Stangen for nearly seven years, having previously held executive positions at African Bank and Munich Re.
Here he discusses the rise of microinsurance in Africa, as much of the population is underinsured.
Africa is one of the most under-insured continents in the world. Over half of the countries in Sub-Saharan Africa have an insurance penetration rate of less than one percent, and the picture isn’t much different across the rest of the continent.
The main reasons for this are that traditional insurance premiums are financially out of reach for most people, and financial literacy levels remain relatively low. But this is slowly changing, as microinsurance starts taking off in some of Africa’s biggest countries, according to Marius Botha, Group CEO of African microinsurer aYo Holdings.
aYo is a joint venture between telecommunications giant MTN and financial services group Momentum Metropolitan Holdings (MMH) – and Botha says it is the partnership with MTN that has unlocked the ability to deliver this product, with mobile networks providing the ideal delivery mechanism for the spread of microinsurance across the continent.
In simple terms, microinsurance allows people with low incomes and in the informal sector to protect themselves for specific events – like hospital cover for accidents, for example – quickly and cheaply. Its growing popularity is giving millions of Africans access to life insurance for the first time.
“The key to microinsurance is that it protects those who need it the most. People with low income need insurance even more than those with higher incomes because they are more vulnerable and have a smaller cushion of resources to draw upon in times of need,” said Botha, who sees five key trends emerging in the African insurance industry in 2021.
Microinsurance starts moving up the value chain
Covid-19 was a major economic disruptor for millions of Africans, which means value for money will become more important than ever for new and existing clients. “Another effect of Covid’s financial impact is that people with mid-range incomes are ‘buying down’ into the microinsurance space to cover their specific risks,” said Botha.
More choice for consumers
Until recently, microinsurance was largely an ‘opt-in or opt-out’ model. That’s changing, as consumers start to demand more flexibility and choices in what they insure, and how they pay for it. The industry can expect an increased choice of collection mechanisms in 2021.
A better customer experience
As the pandemic took hold in Africa, WhatsApp and other instant messaging platforms surged in popularity. Now microinsurers are looking to use these platforms to interact with their customers, providing a richer, simpler and more engaging experience in the process. This will also drive a change in existing content marketing strategies, as the industry will be able to share more content with its target market, driving greater financial awareness and education in the process.
Health value-added services
The emergence of new technologies and services is enabling a range of value-added services for microinsurance users. These services can be linked to their cover but will be able to stand separately as well. One example of this is hospital cash plans and preventative health strategies, which are commonplace in mainstream insurance but have largely excluded people at the bottom of the economic pyramid until now.
Greater efficiency in data management
When it comes to data management, microinsurers face two issues. One is the growing cost of storing and managing data from a compliance and regulatory perspective. The second is the trend towards greater automation in how they process claims, and where possible, remove the need for customers to provide documents. While they are distinctly different, both issues are driving ongoing improvements in data management and analysis within the industry.
“In-depth knowledge of clients, and access to 3rd party data, is critical in the microinsurance service environment. We shouldn’t be asking for ID documents and evidence of hospital stays if we can access those through automated 3rd party data – and preferably, without having to store them later. The better we know our clients, the more we can predict; the more we can predict, the less admin and onerous processing they need to endure,” said Botha.