EXPERTS IN CREATING

INCLUSIVE DIGITALINSURANCE MARKETS

DIGITAL FINANCE – BUILDING TRUST IN DIGITAL FINANCIAL SERVICES THROUGH FINANCIAL EDUCATION

Towards building an inclusive insurance market

30 September 2016

AGENDA

1. Setting the scene

2. Digital Financial Education

3. Conclusions

3

SETTING THE SCENE

3

Backed by

5

DIGITAL FINANCIAL INCLUSION HAS BECOME PARTICULARLY RELEVANT DUETO THE SHEER SCALE DIGITAL MODELS CAN ACHIEVE

EcoLife Zimbabwe reached 20% of the adult population in 7 months

Tigo Bima Ghana reached almost 1 million lives in 3 years

Airtel Nigeria had 200,000 customers in the first 3 weeksLoyalty

(life + HC)

Telenor India had more than 10 million subscribers opt-in in 10 weeks

Telenor Pakistan enrolled 1 million customers in first 6 months

Loyalty(life)

Freemium(life)

Loyalty(life)

Loyalty(life)

Tigo Bima Ghana supported 1.1 million people within first 2 yearsPaid(HC )

MTN Nigeria reportedly reached 1 million customers in a yearPaid(life)

Many of these models have realized “the value of zero” from behavioural economics as they launch ‘free to the consumer

DESPITE THE AFFECTS OF SCALE, INSURANCE IS THE HARDEST FOR HOUSEHOLDS TO TEST

Opportunities to check if something went wrong

Amount of money at stake

More opportunities to check if something went wrong

Less money at risk

Fewer opportunities to check if something went wrong

More money at risk

M-PesaBank

Account

Joint Liability

Loan

Money-

lender LoanInsurance

Reference: BFA

..AND THIS IS COMPOUNDED BY LIMITED EXPERIENCE OF INSURANCE, WHICH IMPEDES EFFECTIVENESS OF WORD OF MOUTH

Whilst in South Africa 61% of the population have some form of (formal or informal) insurance:

– Despite the fact that only 20% have non-funeral insurance, primarily in the upper end market

– And worryingly 4,6m declared they were no longer insured vs 2,7m in 2014

Outside of SA, only ~5% of Ghanaians have insurance, ~6% of Kenyans and Zambians and only ~2% of the Nigerian and Pakistan population have insurance. FinScope

Sourc e: FinSc op e surv ey s

SO, HOW DO WE GET ‘THERE’ FROM ‘HERE’?

Current reality: Low penetration,

low levels of trust, low levels of

understanding

Desired future

We can’t define our desired future in terms of solving financial education only; we need a compelling vision of how the pieces may fit together. But

addressing financial capability can certainly go a long way!

HOW TO GET THERE: THERE ARE AT LEAST THREE NECESSARY COMPONENTS

1. Drive massive awareness of the need and benefits of insurance (not necessarily positive messages): and of course breadcrumbs on the water only goes so far.

2. Make insurance useful and relevant to consumers – auxiliary in-life benefits (eg discounts) and tangible cover (funeral assistance)

3. Ensure that clients can claim and experience the benefits of insurance: compulsory motor insurance has been required in many African countries but has been perceived as a tax with limited perceived value. Insurance remains one of the least trusted financial products.

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DIGITAL FINANCIAL EDUCATION

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DRIVING FINANCIAL EDUCATION

Financial education and (women’s) empowerment workshops

Features•Financial education workshops, interactions and events used to engage with ones base (Hollard, Old Mutual, KaizerChiefs, SAIA, Orange Foundation etc)

•Aim to both educate and channel clients to suitable products with mobile devices increasingly being used

Potential Benefits•Greater understanding of risks and benefits of insurance can create demand and better customers (better proven in housing finance but Hollard is having some success)

Disadvantages / dangers•High cost and economics only partly proven except for CSI….although may be a requirement for a responsible insurer.

•Education may be abused as marketing pitch

11 Sourc e: H ollard; Orange Foundation ( w ith thanks to P osit iv e P lanet)

High touch Low touch

DRIVING FINANCIAL EDUCATION

Mass communication: mobile based messaging

Features

• Information and engagement through sms, USSD or IVR.

Potential benefits

• Scalable, can be multi language

Disadvantages / dangers

• Overload of SMS means limited engagement, likely impact of behaviour change limited

12 Sourc e: H ollard c ourtesy of P osit iv e P lanet

High touch Low touch

Thanks! Now I would like to tell you about my friend Gloria, a policyholder like you! Continue @ 20c/20sec? 1-Yes/ 2-No

Hi, Sipho! Hollard has some questions for u; please can u answer them by dialing *120*2583*1# in order to assess your understanding of their funeral policy. R5 airtime will be sent to u. Reg. FSP. T&Cs apply

Incorrect answer: Sorry, the correct answer was Any of the Above. Thank you for your participation, your R5 will be sent to you.

Correct answer: Well done! That is the correct answer! Thank you for your participation, your R5 will be sent to you.

Gloria wants to know, if she passes away who can be nominated as a beneficiary to receive the benefit payout? 1 - Partner/ 2 – Member of extended family/ 3 –Child over 18 years/ 4 –Member of immediate family/ 5 - Any of the above

DRIVING FINANCIAL EDUCATION

Gamification

Features

• Digital technology enables clients to have an interactive experience to ‘nudge’ positive behaviour

Potential benefits

• More engaged and informed consumers, potential for viral marketing, enhanced insights, appeals to youth.

Disadvantages / dangers

• Depending on incentives, it can be costly (egReach Trust offers vouchers as a reward, albeit funded by sponsors so far), can be short lived and tough to make it exciting!

13 Sourc e: The Reac h Trust

High touch Low touch

DRIVING FINANCIAL EDUCATION

Financial management is becoming key

Features

• Smartphones can allow us to have FE self-paced, self-directed, personalized, and opportunely timed.

Potential benefits

• FE is often only needed at certain life stages so this allows effective targeting and can integrate with ones budgeting and .

Disadvantages / dangers

• Challenge is ensuring take up and viability. 22Seven is certainly valuable but reportedly is still a cost center for Old Mutual.

• Apps and smart phones are still new to emerging consumers and can be confusing.

14 Sourc e: 22 Sev en; Orange Foundation c ourtesy of P osit iv e P lanet, N ex t B il lon

High touch Low touch

DRIVING FINANCIAL EDUCATION

And don’t forget education through experience – loyalty

Features

• Loyalty models established to reward behaviour

Potential benefits

• Consumer engagement

• Learn through experience to build trust

• Drive higher conversion ratios

Disadvantages / dangers

• Nothing is ‘free’ in life!

15 Sourc e: Mic roEnsur e w ith Airtel

High touch Low touch

AND DON’T FORGET THE LESSONS FROM BEHAVIOURAL ECONOMICS

Frame the loss

Risk of losing something is a stronger motivation for action than the possibility to gain something.

KISS

Offering more choices to consumers is not always best. This is because “choice overload” can lead to inaction.

Eliminate obstacles to action

Translating intention into action is not easy. “Channel factors,” or small nudges, have a surprising power to create action. Channel factors refers to additional aids i.e. maps to direct people where to go, providing appointment slots for people to book etc.

S o u r c e “ T h e p s y c h o l o g y o f m i c r o i n s u r a n c e : S m a l l c h a n g e s c a n m a k e a s u r p r i s i n g d i f f e r e n c e ” , M i c r o - i n s u r a n c e C o m p e n d i u m V o l 2 2 0 1 2

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CONCLUSION

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CONCLUDING REMARKS

• Financial education is a key instrument in supporting responsible financial inclusion and driving uptake

– However customers perceived risk is often not the same as their actual risk

• Clarifying the ‘business case’ for financial education is critical to ensuring long term sustainable investment

– Financial education has to be ‘beyond CSR/CSI’

• Digital financial education models offer an ability to tailor education to need in a way that was not possible before

– Towards an insurance app that is actually exciting and is used..?

• Eliminating ‘obstacles to action’ is required to ensure perceived value by the clients– In terms of both access to appropriate risk mitigation solutions as well as ensuring

simplification which is critical in digital models

www.inclusivitysolutions.com

JEREMY LEACH

CEO

jeremy@inclusivitysolutions.com

EXPERTS IN CREATING

INCLUSIVE DIGITALINSURANCE MARKETS