In the early 2000s, UK-born Richard Leftley spent two weeks doing voluntary work in Kitwe, northern Zambia. During his stay, he met a woman who described her life as “a game of snakes and ladders” – no matter how hard she worked to get herself out of poverty, she kept finding herself right back where she started every time life rolled the dice against her.

For example, just five years before Leftley met her, she had managed to move from living in a village in poverty, to becoming a teacher and residing in an apartment in Lusaka with her husband (who was then a security guard). But when her husband got diagnosed with HIV/AIDS, they were forced to spend all their savings on his medication – and later his funeral. She lost everything and ended up having to move back to the village.

“And this [situation] has just been played out time and time again across Africa – where people are trying to work their way out of poverty and then disaster strikes and they kind of fall all the way back,” Leftley told How we made it in Africa, on the sidelines of the Mastercard Foundation’s 2017 Symposium on Financial Inclusion last week .

“And so that whole idea of putting in a safety net – something that kind of follows people as they work their way out of poverty – was really the beginnings of MicroEnsure.”

In partnership with global microfinance NGO, Opportunity International, Leftley started off by introducing a micro-funeral-insurance product targeting low-income Zambians in 2002 – the height of the HIV/AIDS epidemic. It did well, but didn’t reach the scale that Leftley envisioned.

“We tried to work with a range of different organisations – cooperatives, church groups, and big international NGOs… but it didn’t work out like we intended,” he noted.

“We needed a partner that had three things: they had to be trusted by the low-income market, they had to be accessible to that market, and they had to be able to process payments.

“So we were looking for partners who fitted that bill, and clearly telcos did.”

Selling insurance via mobile network operators

In 2009, Leftley’s company MicroEnsure started developing a life insurance product for MTN in Ghana. At the time, the mobile network operator had launched its mobile wallet, MTN Money, but it had not gained traction. The company’s management hoped by offering insurance products – where premiums were paid for via mobile money – the platform would garner interest.

“But it was a complete failure,” recalled Leftley. “No one wakes up in the morning wanting to buy insurance. So just because you put it on a phone doesn’t make the dullest product in the world sexy. It just doesn’t work.”

Leftley and his team were forced to rethink their strategy, and began by looking at the buying habits of low-income mobile phone users. They realised that in Ghana (as with many other African markets) most subscribers are pre-paid customers who buy small amounts of airtime across multiple networks through various SIM cards. The reasons behind this vary from some areas having better signal than others, to customers looking to tap into specific airtime promotions.

“They are typically spending about US$5-7 a month topping up their phone, but they are doing that with $2 with Tigo, $2 with Airtel, etc. So they spread the cost across different [networks].”

Leftley realised that this mobile network ‘disloyalty’ could be used to MicroEnsure’s advantage. He approached Tigo and suggested giving subscribers free insurance every time they top up (all they had to do was sign up or “opt in” for the free benefit). This might mean that customers, who once spent $2 on both Tigo and an opposition network, might suddenly start spending $2.50 on Tigo and $1.50 on the other.

“They are still spending the same amount of money topping up their phone but now getting a reward from Tigo to top up more. So Tigo wins because they get more top-ups. The client wins because they get free insurance and address the risk that they are worrying about, and basically they are not spending any more on [airtime] only more on one network,” Leftley explained.

“So the cost of insurance is more than offset by the increase in top-up revenue.”

The strategy quickly added around one million new individuals covered by insurance in Ghana and Tanzania (where Tigo also has operations). MicroEnsure has also partnered with Airtel, deploying a similar strategy. The company now offers its services in five African markets, as well as in various Asian economies, and has 63 million customers using its insurance products.

Through its partnership with Airtel, MicroEnsure has also introduced the option to double insurance coverage (in addition to its basic free coverage) for a small monthly fee. This was only introduced once subscribers were more aware of the benefits of insurance (after they had seen how a claim works, for example). According to Leftley, of the 30% of Airtel subscribers that opted in for the free insurance, 80% were willing to pay for the top up.

Lessons in mobile micro-insurance

In addition to life cover, MicroEnsure has also designed other successful mobile micro-insurance products, such as maternity, permanent disability and hospital cover.

Leftley noted that it makes sense to target affordable insurance at the mass market, as the volumes make up for the smaller premiums. While traditional cover looks at providing $1,000,000 coverage to 1,000 people, micro-insurance targets $1,000 coverage to 1,000,000 people.

“Insurance companies have been around for decades, but they just haven’t focused on the mass market. On the continent at the moment, 3% of the population – and it’s the richest 3% – have insurance,” he explained.

“It has just been difficult for [insurance companies] to get their head around very basic products and very basic customer journeys. So they are very comfortable with sending out agents to go and sell insurance to people. But the trouble with that is if you have an agent-led sales approach then the product needs to be expensive because the agent’s commission has to come out of the premium.”

He added that insurance providers looking to target the mass market need to think outside of the box. As MicroEnsure discovered through their initial attempts with MTN: simply offering a product via mobile phones is not enough.

“I see loads of examples of this where financial services companies take their standard product off the shelf and think that if they put this on a phone, it would work. It will suddenly sell like hotcakes, but it just doesn’t work like that.”