About two billion people have no insurance, but micro-payments via mobile phone are helping give low-income households the cover they need.
When Francis Ahiale was trying to remove a car tyre from its rim, the metal tool he was using flew up into his eye. In great pain and bleeding profusely, he went to hospital for treatment, but unfortunately lost his left eye.
“I felt really bad,” says Mr Ahiale, 37, from Adenta, Ghana. “But I came to realise that accidents happen, especially in my line of work.
“Ever since the accident I can’t work as well as I did before – I need help, so I’m suffering financially.”
The hospital treatment cost him 1,500 Ghanaian cedis – about £270 – which he could only pay after borrowing money from friends.
That debt would have made his life even harder had he not taken out a new type of personal accident insurance paid for in micro-instalments over his mobile phone.
The total monthly cost of the policy was about £1.
After sending a doctor’s report to the insurance company’s office in Accra to verify the claim, Mr Ahiale received a payout of about £450.
“They paid up straight away,” he says. “I was very happy because I wasn’t expecting this type of money – it meant I could pay off my debt.”
Mr Ahiale is just one of millions of lower-income people across Africa and the rest of the developing world increasingly benefiting from affordable insurance paid for by mobile.
“It’s very good that we can now buy insurance,” says Mr Ahiale. “My friends and neighbours are coming to accept that it is affordable and helpful.”
Vodafone and Safaricom’s M-Pesa blazed a trail in mobile-to-mobile payments and banking services in Kenya, but for a long time in developing economies insurance seemed like the Cinderella of financial services.
“When you started to look across emerging markets, mobile penetration was about 70%, but insurance penetration was only about 3%,” explains Gustav Agartson, chief executive of Bima Insurance, the Swedish firm that insured Mr Ahiale.
“Insurers in the developing world behaved much like insurers in the developed world, linking insurance with bank accounts.
“But many people in emerging markets don’t have bank accounts.”
Bima developed a platform to allow low-income consumers to pay for insurance from their mobile phone credit. Subscribers make small daily payments and can stop the contract whenever they like.
Partnerships with local telecoms providers were crucial to this business model.
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Six years later and Bima has 30 million subscribers in 16 countries in Africa, Asia and Latin America, with 90% of people buying insurance for the first time, says Mr Agartson. Most of the firm’s customers live on less than $10 (£8) a day.
The range of policies includes life, personal accident, and hospitalisation, and the firm has plans to expand to include education and income protection.
M-Pesa launched a health insurance premium collection platform in 2014, and telecoms providers, such as Africa’s largest player MTN, Tanzania’s Zantel, and Etisalat in the United Arab Emirates, have been expanding their mobile digital wallet products to include insurance in recent years.
Meanwhile, another specialist mobile insurance provider, MicroEnsure, says it has registered nearly 55 million customers across 20 countries, offering a growing range of insurance products, including cover against political violence and crop failure.
It has paid out more than $30m (£24m) in claims so far.
“Now customers expect their mobile operator to offer a digital wallet – mobile person to person payments have become the norm – so to differentiate themselves operators are having to offer additional services, such as insurance,” explains Jack Kent, mobile analyst at research consultancy IHS Markit.
While mobile platforms have helped automate premium collections, insurance is still a product that needs to be sold by humans, argues Mr Agartson, especially in countries where it is little understood.
“Even if everything is digitalised – applications, payments, claims – it’s not enough, because people aren’t aware of how insurance works,” he says.
“People need to be educated… so we have 3,500 people in call centres and out in the streets.”
As profit margins are small on such low-cost policies, the company needs to sell large volumes to make a profit, he says. But the sales agents also have to make sure customers can afford to keep up the payments.
“Having a network of agents that can also cash in and cash out money is useful for operators to have in such markets,” says Mr Kent.
As more people buy smartphones – take up is now 30% to 40% in developing economies – there are opportunities to offer more interactive and targeted services, informed by analysis of the usage data such phones provide.
“Companies are applying analytics and machine learning to all this data to help operators assess the creditworthiness of prospective customers,” says Mr Kent.
By analysing how people use their phones, what they search for, what apps they use, and how financially literate they are, operators can decide what types of products would be most suitable for them and how much risk such customers represent.
Tech companies such as Juvo and Nuance have been moving into this space, offering analytics services to mobile operators.
But the uptake of insurance by mobile could be further accelerated once electronic signatures are more widely accepted.
Some countries still require physical signatures; others, like South Africa, have allowed digital signatures for several years.
Back in Ghana, Francis Aziale is one of 1.5 million people who now buy mobile insurance out of a population of about 28 million.
There is still plenty of room for growth, accelerated by technological innovation.