Getting Everyone Insured: Micro-Insurance and the embedded
Micro-Insurance and the embedded: can embedding insurance in digital services fix what’s wrong with insurance today? Can micro-payment drive more insurance inclusion?
Greetings!
The number of people that are still paying for healthcare out-of-pocket is increasing year on year, especially in Africa, WHO data stated; “which is particularly noticeable in low- and middle-income countries where health spending is growing on average 6% annually compared with 4% in high-income countries.”
Healthcare is not cheap. Quality healthcare is expensive
In last week’s newsletter, we highlighted that the number of emigrating medical professionals from Africa is happening at a very steep rate that we now have 10,000 patients to 1 doctor in Africa.
So, the question posed – “how do we get more people insured to reduce the pain of paying out of pocket for healthcare?”. Get them insured. Finish!
Just like getting the unbanked, banked;, we should get the uninsured, insured. Period.
Despite Africa’s rising population and the emergence of technology, we are still at a meagerly 2.78% penetration rate (in 2019), compared to the global average insurance penetration rate of 7.23%.
What can solve this for us in Africa? Education? Buying power?
The problem.
Not enough education, buying power and trust. That’s the issue right there.
We do not have enough educational material when it comes to insurance. If it is available, it is usually boring. Nothing interesting. Looks like an after-thought than a need-to-have. Nobody remembers getting health insurance until they’re sick. And mostly because someone only gets to tell them at the point of sickness. Either way, more education, not information, need to get to more people in the language they know.
The second one is buying power. Healthcare is expensive, no one gives it out for free. Even the NGOs get paid from somewhere. How do you expect an individual whose income cannot take him outside Maslow’s hierarchy of need, to be invested in buying insurance?
The third is trust. As the word goes, you do business with the person you trust. How many people trust that a policy will be settled promptly when a claim is submitted? So, many people, especially those that are uninsured have grown to see that insurance. Low trust between the insurer and the insured.
Bringing them together. For insurance inclusion, people must understand the need for insurance, it must be attainable and cost-effective for them and they must trust the process of collection and settlement.
Back to out-of-pocket healthcare.
To get more people insured, a workable plan for insurance inclusion must be put in place. In Africa, a lot of companies are already employing the use of tech to enable health insurance delivery and inclusion – through easy policy buying e.g. Aella, WellaHealth or providing tech infrastructure for insurers e.g. Curacel, Lami. (Disclaimer: I work with Curacel; building AI-powered products that enable insurance companies to process claims faster and better, and early in fraud detection.)
As good as it sounds, creating the solution to spend does not in an actual sense make it easier to buy a policy. What makes buying a policy easy is – buying power. Do I have the buying power? For me, is insurance an investment or …?
For the uninsured, they really do not care about the elaborateness of your offering if it doesn’t provide an opportunity for them beyond ‘looking forward to being sick’. Yes. Being sick is the easiest way for them to access the value tagged to their plan. What if they will not be sick?
We all can go on with the whole story of; ‘you never know when it will happen’. In Africa, we trust God to take care of us. To many, health insurance is saying they don’t trust God. That’s where education is needed. If you do not get into their mindset and educate it right, we are sure not to get to the insurance inclusion goal that we want.
Ways insurtech can help fix this.
Micro-payment:
One thing is common among the uninsured – they want value. Value for their money. And they want to be able to access that value whenever. Interesting as this sounds, they want to be able to pay for the value they get, now.
For instance, is it possible – is it really possible to pay for a post-insurance policy?
Well, one might say that’s a long shot. But, who knows what’s possible these days?
Let’s make it easier. Can we have a model where a person can make payments for a policy plan anytime they have money? Could be daily for the trader, weekly for the mason and monthly for the salaried worker. This is not the same with the prevalent monthly health payment plan currently offered by many African insurtechs – Aella, etc.
This is where micropayment comes in.
To be clear, what I’m referring to is a monthly or yearly plan, that I, as a user, can be making payments towards – maybe a wallet, as my income will allow. So, I may not be able to top up my wallet this week and be able to do so in another week.
It comes with its challenges too.
For instance, how do you cost the worth of that kind of plan? How much healthcare will such a plan be eligible for? Considering the revenue per customer acquired.
As always with all sectors, the emergence of technology has managed to interrupt their traditional-usual process. It will be the same with micro-payment, once micro-payment starts gaining ground, that prevalent challenges will be solved.
We witnessed the same with the growth of fintech, until e-commerce was in gear, the need to expedite payment wasn’t so much an issue and last-mile logistics were left to the government and the DHL's. Things have changed. Right now, fintech has been an enabler to e-commerce growth, and for e-commerce to be able to do last-mile delivery gave it a huge boost for expansion. That’s the only way massive volumes of goods can be moved. Read this.
This same will happen to micro-insurance once a player or a new entrant can enable a process, so that no matter a person’s income, he should be able to pay for an insurance policy plan as their income will permit.
Health savings.
To drive insurance inclusion, money should not be a problem. I like the fact that Aella and others are pushing for this through their loan app, that when a user comes for a loan, they introduce the health plan to them. Catchy, really.
We need more of that. We also need to know more on – “how can I save towards a health plan”?
Remember, when I said that the uninsured like to pay for value and get that value immediately? Cool. The question: why should I keep my money with you, servicing the account, and at the end of the premium year, I didn’t have a need to access it? That’s a loss.
Or why should my money sit at a place where there’s this assumed worth of it I can access – only when I’m not well?
Instead of a straight come-and-buy policy, can it be a dual play where an individual can save towards any health plan, which is also servicing an insurance plan?
For instance, I start saving for a plan, when it’s time to access it because I have to visit the doctor, it is accessible to me with the option to exchange it for a policy plan.
Then in a case where I didn’t need to access it, I should get an interest based on the amount in the account with the option to roll over or cash out.
For this to be effective, other issues has to be sorted. Will there be a minimum monthly or a fixed savings? Is there a place for a lump sum that is inaccessible for a longer period, maybe 6 – 12 months? What would be the business case?
Well, when the student is ready, the master will show up.
Health loan.
How do you loan to someone without a footprint? Such a person is considered high risk.
So, if for some reason I don’t fully understand how the whole insurance thing works and don’t see the need to be insured. Then I have a health issue that I do not currently have the money to treat, how do I qualify to access a health loan? What will be the limit? Should this be limited to the banks and fintech since they have the data to qualify people?
There’s no silver bullet when it comes to getting or giving health loans. Quite a dicey matter here.
So, again, this can be well-planned out.
For instance, if as an insurer – traditional or tech, your users have the option to save towards their health as an investment. What if, at the point of access, they have the option to loan against their savings, with a reasonable interest rate. So, Aella, Carbon, Fairmoney etc. fits the model – ‘only allow people with money in their account access to health loan’. Or work with the likes of Mono and Okra to have the proper data to qualify users.
It is good to note that none of these suggestions intends to run you as a company into a loss. Instead, I’m only providing a way for a new shift towards insurance inclusion at scale.
Insurance at Scale. Embedded.
Africa is an emerging market. Some say we are the new frontiers. All the issues with and towards micro-insurance will be futile without payment, especially micro-payment. This is no longer the case.
In a TeamApt’s report, the company sighted the numbers their agency banking did; “as of May 2021, Moniepoint accounted for 74% of agency banking transactions with ₦1.4 trillion ($3.5 billion) from 68 million transactions”. The penetration of agency banking and the daily transaction is a testament that insurance inclusion is possible.
All the players making fintech possible are not playing in silos when it comes to innovation. This has allowed for the phenomenon of ‘embedded anything’. Anything can be embedded as it is – in tech.
Embedded Insurance, part of a broader movement towards Embedded Finance, is about getting more affordable, relevant and personalised insurance to people when and where they need it most. - Simon Torrance
Fintech startups like Mono and Okra are making user verification easy. But, again without a digital footprint, how successful will this be in the context of ‘micro-insurance’.
Let’s see. If Jumia can deliver goods to a remote village, someone from that village can access different financial services on its platform – request loans, buy insurance etc. Again, can this be done via USSD? without the internet?
The idea is if money can get there; insurance can. That's inclusion.
Where we are seeing the inclusion spread
To get into hinterlands, agency banking would have to be extended beyond sending and receiving money. What about loan requests and insurance purchases? What if I could gift someone a health plan because I know I won’t need it? What if the ‘village people’ without internet access can be educated enough to start putting money away for their health with an insurance company via agency banking?
For a person who is a trader or has handiwork, is there a way to allow them to sign up for a plan where a stated percentage of the amount at every transaction, would be kept back and saved into a health plan?
Of course, the proper regulations and policy would have to be in place to make it work especially where fraud and claims processing is a concern.
For insurtech companies like Curacel (disclaimer, again), have developed products that allow for faster claim processing and early detection. For anyone looking to drive insurance inclusion in the Africa emerging markets, fraud detection should not be part of the problem.
Bottom line: Insurance inclusion in Africa should not be a nice-to-say kind of thing because it makes you look good. It should be at our forefront so more people can be able to afford good healthcare for themselves and family.
Read: Interview with Adedeji Olowe: Fintech in Africa & Open Banking. (Africa Tech Memo)
Here’s what else is going on
Deals & Debuts
Nigerian Fintech Kuda Raises USD 55 Mn Series B Round
Nigerian fintech startup, Kuda, secured a USD 55 Mn Series B funding round co-led by Valar Ventures and Target Global. The startup intends to use this new investment to double down on new services for Nigeria and expand into other Africa countries. The startup plans to use the fund to broaden its product offerings and expand into new markets.
South Africa’s Khula Closes USD 1.3 Mn Seed Round
South African agritech startup Khula announced the close of a USD 1.3 M seed round to scale its software-for-agriculture platform. AECI led the funding round with participation from South African impact investor E Squared Investments.
Kenyan Fintech Wapi Pay Raises USD 2.2 Mn pre-Seed Round
Kenyan fintech Wapi Pay raised USD 2.2 Mn pre-seed funding to scale its global payments and remittances between Africa and Asia. Investors in the round included, China-based fund MSA Capital, EchoVC, Kepple Africa, Future Hub, and Pan-Asian firms Transsion Holdings and Gobi Ventures.
Big Numbers
Farmforte Subsidiary, Forest Capital, Completes Acquisition of Kayvee Microfinance Bank
How to prepare for big mergers and acquisitions in Africa
Access Bank is bridging the gap to sustainable expansion
What we are reading and watching
Fundraising African startups invited to apply for deal summit
Africa's accelerating venture capital financing for tech startups: What is Huawei's role?
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About Omamuzo Samson
Omamuzo Samson is a writer at The Edition writing about the tech and creator economy. He also works as a Product Marketer at Curacel. Based in Lagos, he can be reached at omamuzo@thespicenetwork.com or on LinkedIn at omamuzo-samson.
Image: How we made it in Africa