Financial
Services
Board
Emerging business models: technology
innovations and their regulatory
implications
JACKY HUMA
41st AIO CONFERENCE
2 JUNE 2014, Kigali
Page 1
Outline
I.
Trends from a regional perspective
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Financial
Services
Board
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Overview of technologies in mobile insurance (minsurance)
Highlights of the m-insurance business in Africa
Examples of ‘sprinter’ schemes
Situation in South Africa
II. Regulatory challenges
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Overview of challenges
Consumer protection risks
What can go wrong in technical innovations?
How to regulate m-insurance?
III. Conclusion
Page 2
I - The m-insurance business in Africa –
a regional perspective
Insurance that relies on the mobile phone becoming a dominant
technology as opposed to others technologies (Point of Sale, Internet
sales etc.)
Financial
Services
Board
 MNOs and special intermediaries driving this
 "Freemium" products on the rise
 Involvement of mobile phone in insurance value chain allows
insurers to
 Leverage on large customer bases
 Piggy back on a trusted brand
 Use mobile for various services (enrolment, payments, claims
settlement)
 Achieve massive scale
Page 3
 1 million clients of schemes in Ghana and Tanzania, 80% of which
had never had insurance coverage before
African ‘sprinter’ schemes
The potential for scale of m-insurance brings significant opportunity
to increase financial inclusion as demonstrated by the m-insurance
‘sprinters’:
Financial
Services
Board
1. EcoLife Zimbabwe reached 20% of the adult population in 7
months
2. Tigo Ghana reached almost 1m lives in 12 months
3. Leo Namibia reached 15% of the adult population
4. Airtel Zambia reached an estimated 2m at launch
5. Robi Bangladesh has reportedly hit 4m clients
6. MTN Nigeria sign up 100,000 clients a month in Nigeria
Page 4
Source: Leach 2014
Situation in South Africa
Financial
Services
Board
Page 5
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Vodacom MPesa Funeral Cover (paid through airtime)
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Cover2Go accidental death & funeral cover – Metropolitan Life
Insurance
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Take It Eezi My Funeral Card – Hollard Life (Paid through Cash)
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Clicks offers a ‘free’ funeral insurance product (Loyalty) – Regent
Life
II - Challenges for insurance supervisors
With regard to mobile phone based channels, insurance
supervisors need to be concerned with:
 defining the relationships/responsibilities of multiple parties:
Financial
Services
Board
 disclosure requirements: the client needs to -:
• know that they have insurance;
• know who the insurer is;
• know their obligations under the product;
• know how to access the services under the product;
• know when the insurance ceases.
 Regulatory coordination necessary between
• Telecommunication Regulator
• Banking/Payments Regulators
• Insurance Regulator
Page 6
Challenges for insurance supervisors:
consumer protection risks
Nine concrete consumer protection risks associated to m-insurance
business:
Financial
Services
Board
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prudential risk
aggregator risk
sales risk
policy awareness risk
payment risk
post sales risk
data risk
regulatory backlash risk
systemic risk
Source: A2ii Synthesis and Leach/FinMark Trust (upcoming 2014)
Page 7
What can go wrong?
Lessons learned from an m-insurance failure
 Yet Ecolife Zimbabwe shows risks m-insurance brings
Financial
Services
Board
 EcoLife launched in October 2010 as a partnership between First
Mutual Life, Econet and Trustco, an (unlicensed) technical
service provider.
 Scheme was cancelled in 2011 due to a dispute between Econet
and Trustco over royalties, the scheme was cancelled with
following impact:
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Page 8
20% of the adult population (1,6m) lost their cover overnight
62% not notified about discontinuation of EcoLife
63% Ruled out use of similar products in future
42% Dissatisfied with insurance
30% Better ways to protect against future problems than
insurance
What can go wrong?
Lessons learned from an m-insurance failure
 At this level of exponential growth, some m-insurance schemes
can have market wide impact and may require more regulation
Financial
Services
Board
 For m-insurance, the business risk framework needs to be
extended to include data risk, systemic risk and regulatory
backlash risk.
How best can regulators manage the potential risks arising from minsurance products?
Page 9
III - Conclusions for industry
1. Know your partner very well
Financial
Services
Board
2. Be persistent to sell value for money insurance products
3. Learn from pitfalls of other schemes and identify them early
4. Take care of the precious consumer
5. Start with a predefined exit strategy
6. Contribute to a real success in the insurance sector
Page 10
III - Conclusions for regulators
1. Understand the business
Financial
Services
Board
2. Collaborate
3. Make sure that consumer recourse options are available
4. Monitor differently
5. Consider the business exit and intervene early
Page 11
Financial
Services
Board
Page 12
THANK YOU