Not easy selling insurance to the bottom of the pyramid, even at $1 a month

Lilian Makoi

Lilian Makoi

The majority of Tanzania’s low-income and informal workers do not have access to insurance and struggle to pay for health services. Entrepreneur Lilian Makoi, co-founder of technology company Edgepoint, last year unveiled Jamii (previously named bimaAFYA) – a health insurance product users can buy for as little as $1 a month. The award-winning entrepreneur speaks to How we made it in Africa about the gaps in Tanzania’s insurance market and the challenges of selling to poor consumers.

What motivated you to build Jamii?

The spark to create Jamii came from a personal experience. My friend lost her husband who was involved in an accident but could not afford medical services. That experience made me realise that if low-income households and people in the informal sector had access to insurance, it would make a big difference for them.

In Tanzania, more than two-thirds of the 50 million population do not have health insurance and struggle to meet their out-of-pocket health needs. We were surprised to find such a big gap in the market, so we spoke to insurance players to understand why they were not developing products for this market segment.

We received the same arguments – administration costs are too high to create a product affordable to someone who makes $50 or less a month. We unpacked what administration costs entailed and realised it was simple things around registration [and] providing a plastic card. So we looked at whether using a mobile phone would enable us to remove these costs and activities that make up ‘administration’.

This has enabled us to provide insurance products costing as low as $1 a month. We work in partnership with telco Vodacom, and Jubilee Insurance of Tanzania, which works with a network of about 500 health facilities. We use Vodacom’s mobile money platform for premium collection and making payments to hospitals.

Describe the market response so far

When we launched the product, most people were excited by the idea of buying insurance for $1 a month, which was confirmation that we could build a solid, sustainable business. However, we have faced challenges – particularly with education, which is a typical hurdle for micro-insurance providers. We are dealing with low-income, informal sector people who have a minimal general education.

Financial education is zero, so when you are talking insurance it’s a tough conversation. We came to realise that we will have to really invest in education and build strategies around that. Right now we have 7,800 customers (mostly based in Dar es Salaam), and our target is to cover 3 million customers nationally by the end of 2017.

Are you happy with progress in the last year? Could you have moved faster?

The last 12 months has been about a lot of learning. We are relaunching the product in September. We have made a number of improvements and the user experience is simpler.

I think we could have done even better, but as the first entrant in this market we needed to go through this learning phase. Right now we have the right partners backing us – including Barclays and the Bill and Melinda Gates Foundation – to achieve the numbers we want to achieve by the end of 2017. So I have no regrets.

What are the fundamental difficulties in Tanzania’s insurance industry?

For starters, insurance is pretty new to this market. We are usually the first people to talk insurance to our customers. If someone else had at least introduced them to insurance, it would have been easier. When we tell them they will be paying $1 a month and get benefits of $30, but if they don’t get sick we will not pay them back – they just don’t understand that.

They have to trust that what you are doing is legit and that you are always going to be in the market. When you speak of giving someone access to three services worth $30 for their $1 monthly premiums, it looks like a scam. So education is a huge problem.

Talk about the best sales strategy for your target market.

What we have come to realise is for micro-insurance to make a sale you have to have one-on-one conversations with your target customers. Only sending an SMS or doing TV and radio broadcasts won’t work. It has to be a combination of grassroots activation activities and above-the-line marketing. The most important piece is the grassroots activation activities, which is time-consuming and needs a large workforce on the ground.

But when you convince one person, the households around them easily buy in. So we need to invest a lot in one-on-one conversations.