I created MicroEnsure in 2002. I was working in the insurance market in London and I became fascinated when I looked at the statistics in Africa and Asia and realised that 97% of people did not have insurance. I thought about what it might be like to live with such a level of risk and that if anyone needs insurance, it's these people, so why don't they have it? The more I looked into it, the more I realised that insurance companies have been around for many years in these markets, and yet, they haven't found a way of serving the man on the street, and not even the middle market. I saw it as a huge opportunity because the insurance companies are ignoring and have not been focused on these people, but also a way of helping people. If you think about the UK or EU or America, these are economies that are very robust, but they also have a very strong insurance market and insurance is like a safety mechanism for society. It helps people out when bad things happen. And if you don't have a solid insurance market, then how does the economy deal with shocks? When I looked at it, I realised that, in order to succeed, I needed to have very simple insurance products. Insurance products are very complicated and extremely difficult to understand. I'll admit, I don't even understand my car insurance. So, could we make a product that was so simple that it could be explained in a single text message? For example: if you die, then we'll pay you $1,000. That's it, no exclusions, no restrictions. And could we make it really easy to sign up for? Could we remove all the friction of having to fill out a paper form? Can we make it as easy as voting in X Factor or something like that? It felt to me that we were competing with apathy - I wasn't competing with AIG, or AXA, I was competing with apathy. 97% of people don't have insurance, so it's easier for them just to say: ‘I don't have insurance. I don't know anyone who has insurance. So okay, let me not take it. If you make it too difficult for me to sign up, I can't be bothered’. We know we need to educate the customers about how to use insurance and we do that at least once a month. We communicate to tell them about insurance and how it works in very simple ways and how to make a claim. When they want to make a claim, we make it very easy for them and we get the claim paid very quickly to exceed their expectations, making sure they get the money quickly. We found that this approach has led us to be very successful.
The role of insurance is to provide a safety net that stops people slipping back into poverty. Many of our clients describe themselves as being one or two emergencies away from disaster. Many of our clients are considered middle class in their countries (school teachers, security guards) with a motorbike and living in an apartment but they may earn $150-$200 a month. For them, if there was suddenly an unexpected bill to pay, or a natural disaster, or a funeral, then those unplanned events would cause them to not only use their savings but have to sell assets in order to pay for those bills and might force them to potentially be back into poverty. I was talking to one of our clients years ago, and she described her life as a game of snakes and ladders where she was working her way out of poverty. Bad things happened and forced her back down into lower sections of society. Nearly all the products we sell since years ago cover things like pandemics so actually, our clients are covered for COVID and we've seen a massive increase in uptake of our products. We use many kinds of digital channels to reach people. We work with mobile phone companies. The mobile phone company will send out text messages to its client base, offering them products. They might offer them ring tones, horoscopes, or it might offer them insurance. And if people want to take up that offer, they can respond to that text message and perform some very minimal sign up procedure and maybe give their name or give authorization to buy the product. Traditionally, take up for insurance through those digital channels has been very, very low. If you send out a million text messages, you might expect that maybe 0.1% of people would opt into insurance because basically, no one wakes up in the morning wanting to buy insurance, no one wakes up and thinks ’today, I'm going to buy insurance, how exciting!’. So when you send out a million text messages, you get very few people who actually sign up for insurance. But about two months ago, we started to notice that actually we had a significant increase so instead of 0.1%, it was near 1.5%. So suddenly 1.5% of people were suddenly saying ‘Yes, I want the insurance! And then in the last few weeks, that's increased even more to around 3%. COVID has been really frightening for people, but it has actually made them realise that maybe they need health and life insurance because otherwise their families won’t be able to manage potential cost.
We’re a b2b player so we don’t distribute directly to the consumers. All of our distribution strategies are b2b or b2b2c. We might have our own call center, that's responsible for making sales but we're always doing that leveraging someone else's brand. If we're using our own call center, they will be calling out saying ‘we're calling you from Vodafone or orange or Uber’ or any other partner. What we're looking for in a partner, is that an organization has a large number of clients but that they’re also trusted by that group of clients. What we mean by ‘trusted’ is for example: the reason that people trust their mobile phone company in Africa and Asia, is because when they buy top up (because they're all pay as you go customers) it just works. So they buy $1 of top up to make phone calls, they charge up the phone, they go through the process of putting airtime on the phone, and it just works. And if you think about the lives of a poor person, actually many things don't work. And so they're subconsciously start to realize that that brand is a company they can trust. And so when that brand says, ‘if you get sick, or if you die, I will pay you this money’ they have every reason to believe that it’ll work. So we want to leverage brands with that kind of frequency of use and trust by their clients. The other thing that's important is they need to have a payment mechanism. It can be that there's an electronic wallet, a bank account, credit card, it can be airtime. A lot of products in Africa and Asia are paid for daily by deducting small amounts of air times. People's top up on their phones. That means we can work with mobile companies, ride hailing companies like Uber, but also banks and microfinance organizations, and ecommerce companies. It can't just be a passive product so if their idea is to put the advert for insurance, as a banner ad or some kind of passive digital advertising on their platform, then that won't work. But if they want to introduce it and integrate it into the customer journey, like when someone buys a new handset or phone, and at the checkout, they’re asked if they want insurance for their new handset then that's going to be much more productive. We want our partners to take some level of ownership for the product so that it's not just an insurance product, it's integrated into their core product offering.
I think that's a huge mistake. In the short term, of course, they're going to receive more claims and as a result, they will get a worse financial outcome. But in the medium to long term there is huge potential to sell more health and life insurance. This is just another example of why people don't trust insurance companies. Some insurance companies always look for the way to not pay claims. I've never had a conversation where you'll say ‘Oh yeah, insurance, I love insurance, because they are such a kind and generous business, they always pay my claim’. People's expectation is that insurance companies are going to try and not pay the claim. 80% of our clients have never had insurance before and they they've heard these horror stories about insurance companies being difficult. We decided that this was a huge opportunity to completely reset that understanding of insurance. This is the first time they have insurance and this is the first time they've needed to make a claim. And if we can make it positive, and get claims paid same day or next day, very quickly without any difficulty, then, they're going to go back into their communities and say that insurance was a really big benefit for them and it really helped them when they needed it, and they’re glad they spent the money on that product. And that's the best marketing!
The Asia insurance market is classic and almost representing two worlds. You've got Singapore and Malaysia which are very similar in some ways to the UK, the EU and the US markets - these are very sophisticated markets with sophisticated consumers, and they've got the insurance they need. It's a supply sensitive market, and people are now looking at insurance for additional products like investment or pension. However, the majority of the markets in APAC, like Pakistan, Philippines, India and even Thailand and Vietnam, are very underdeveloped. These are markets dominated by compulsory insurance, things like motor insurance and motorbike insurance, which the government insists that people have. It's also dominated by group insurance mainly sold to employees of large corporates, typically white collar workers. If you actually look into those economies, the blue collar workers and informal sector which make up 70%- 80% of the workforce are completely uncapped for insurance. There are products available to them, they're just not appealing. The products haven’t got the right price point. They're sold in places where it's very difficult for them to get access to the products. They're difficult to understand. It's really a distribution challenge. Asia is typified by very low take up of insurance, typically, less than 5% of the population has an insurance policy. And it's really an issue of simplifying the products, the selling process and the whole process of collecting premiums. When you overcome those things you find out there are big breakthroughs. In places like the Philippines, you've got pioneer insurance companies, very forward looking and I think they're doing a great job. Then you've organisations like MicroEensure who are coming along and trying to create markets in these markets and getting some good traction.
In many ways, Africa and Asia insurance markets for the mass market for the middle and middle-low income are very similar. At the moment, whilst there's a wide range of products that are sold in both Africa and Asia, you're seeing 80% of the demand being around three products: basic life insurance, accident, and hospitalization. Hospital cash type products make up the majority of insurance sales but we’re starting to see a take up on gadget insurance. As people get more and more smartphones, especially in Asia, there's quite a lot of interest in ensuring those phones especially because they're probably big investments for people. It's probably, after their house or maybe their car, the next most expensive thing that they have. We're also starting to see take up of short term insurance such as single trip insurance. People will start to fly a lot more, especially in countries like the Philippines and India.
MicroEnsure has been founded upon a desire to help people that are otherwise excluded from the financial system. The whole company, in some ways, is a philanthropic response. What we're trying to do is use capitalism to bring a safety net to people. We’re trying to do this as profitably as we possibly can, but frankly, selling insurance to low income people, isn't the best way of maximizing your profitability - there are more profitable things that we could do with our time and so our nature is very philanthropic. We tend to draw people to work for us, who are naturally more socially minded, who like the balance between a capitalist mindset and the power of capitalism, but also social benefit and social good and maximizing social benefit over profit. Profits are good, but it isn't the only thing right? There's profit with a purpose. There's profit with a desire to actually help society. Recently there was a volcanic eruption near to our office in Manila. It's a tourist spot in the Philippines, many people run businesses in that area. Our team decided, it wasn't organized by head office, they wanted to help the community. They all donated money and their time to help rebuild the community. It's not just about selling insurance to people, we really want to help these societies.
If you look at the bigger picture, many insurtechs that sprouted up 3 years ago said that they were going to replace the insurance companies, they thought they were better than them and that they were going to completely disrupt the industry . And then about a year ago, we moved from kill to marry. It became interesting because I lot of these guys realised this is actually more difficult than they imagined. And they’re now focusing in partnering and collaborating with the insurers. If I have to predict, some insurtechs will get the sufficient scale where they feel one of their main constraints is to have to partner with insurers. Some of them will transition and turn into insurance companies but it won’t be a threat to current insurers. They will become providers of very specialist insurance products like microinsurance to the mass market or delay flight insurance and might be even bought by the big insurance firms.