Insurtech and digital insurance have become buzzwords these days and that is all for good reasons. But in the context of emerging and frontier markets, digital insurance has more to do with market-creating innovation than disruption which is normally the case with Western or developed markets with deeper insurance penetration.

Market-creation involves bringing never-insured-before customers to the fold of insurance and that is easier said than done for a range of reasons and distribution is undoubtedly one of them. In my personal experience of running an inclusive and digital insurance business targeting masses, out of each hundred customers insured, an estimated 95 never had prior insurance experience.

Distribution in the insurance business is as old a problem as the hills. Consumer insurance in particular is by far one of the few products that struggle in distributing themselves and need support from other businesses for reaching out to end-users — bancassurance or selling insurance through banks is an example. Inclusive insurance is no exception and delivery — distribution is a part of that — is one of the key challenges in the growth of insurance in large un/underinsured communities of society.

A telecom operator or a ride-hailing company is not a distribution channel rather a delivery partner giving an insurance supplier access to potential customers and the suppliers are still required to create distribution channels

The good news is that compared to a decade or so ago, the community excluded from insurance is significantly included in some other businesses such as telecommunication, mobile money, internet access, access to smartphones and smartphone applications, and synergies with those businesses can help solve the ages-old distribution puzzle. For example, there is a telecom operator in an emerging country with 70 million subscribers, 20m have opened a mobile wallet and 28m use smartphones.

Clearly, there appears, at least in theory, no challenge in leveraging the telecom operator’s key assets — brand and outreach — and delivering insurance to a minimum of 5m customers who are using both smartphones and mobile wallets with enough money in there.

The real question is how to actually do it? A combination of business-to-business partnerships and digitalisation are key for creating a successful, meaningful and scalable delivery model. Leveraging existing consumer brands and their outreach to access tens of millions of potential buyers of insurance is a quick and cost-effective way. For a very long time, insurance suppliers have been confusing ‘delivery partners’ with ‘distribution channels’ and this is where it all goes wrong in my opinion.

In my experience of implementing inclusive insurance reaching out to tens of millions of first-time buyers, a telecom operator or a ride-hailing company is not a distribution channel rather a delivery partner giving an insurance supplier access to potential customers and the suppliers are still required to create distribution channels. This is where digitalisation comes in. Quite often we find large delivery partners thriving on digitalisation in their core businesses. What is needed is to create simple insurance products, frictionless processes and distribution channels leveraging on delivery partner’s outreach to offer insurance — in essence, insurance should mimic the same process through which delivery partners offer their core services and it will be a job well done.

Teaming up with strong delivery partners and creating digital distribution channels can help overcome geographical, infrastructure and social constraints. For example, an SMS broadcast triggered at one million customers can provide access to those living in one corner of the country to another in few seconds and several thousand can buy a simple insurance product covering a risk or two by pressing a Y or 1 through their mobile phones; it does not require a smartphone and customers can enrol even using their feature phones with basic functionalities.

As said earlier, teaming up with a delivery partner enables an insurance supplier to get access to their key assets and infrastructure such as brand, a large number of potential customers, customer profiling and payment gateways and all that helps to create distribution channels and reaching out to scores of customers becomes fairly quick and cost-effectively. SMS, unstructured supplementary service data or simply USSD, smartphone apps, microsites — all these channels are created without much investment in new infrastructure as that is provided by the delivery partner. Looking at the more conventional side of inclusive insurance, even banks and microfinance institutions provide infrastructure in the form of branches, field officers and loan officers to leverage and distribute.

On societal constraints, a key to distribution channel is that it must match the customer type. You cannot offer an SMS channel to a segment with a low level of literacy or no financial literacy at all. For such segments, there is a need to create medium touch channels such as call centres or light touch digital channels such as robocalls.

Our learning shows that a high level of penetration in mass-market emanates from the design of products and services. Learning from other industries having reached millions or tens of millions of clients, we find these similarities in their offerings: They provide value for money in that when customers avail those products, they do not feel robbed rather satisfied that their money is well spent. There is a high level of understanding of these products. Look at ride-hailing or using a mobile wallet — those are complex products but packaged in such a way that even customers with no formal education can also use them with a fair level of understanding. Relevance to needs. These products offer some real needs customers can relate to such as going from point A to B and a ride-hailing app addresses that and that’s it. These services also provide a great sense of fulfilment, it does not have to be a life-changing experience for a product to be embraced by customers and it can be as simple as ordering your favourite pair of sneakers on an e-commerce platform and customers will love it. n

The writer is an insurance professional based in Pakistan

Published in Dawn, The Business and Finance Weekly, October 11th, 2021

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