Insurance innovation: needs, gaps and opportunities Innovation Forum and FSDU Insurance Challenge Fund Launch Kampala, 10 December 2018
Contents • The changing insurance landscape globally • The need for insurance: unpacking the risk experience of Ugandans • A closer look at specific target markets: what are the gaps and opportunities? • The innovation imperative
Innovation is changing the insurance game in the emerging world
Smart solutions across the product cycle… Claims Servicing Sales Premium Product processing and Risk collection development management Aerial images for accurate Behavioural claims Chatbots for Flexible data from Nudges and personalised payments and sensors used in AI and ML to rewards for less and efficient coverage risk assessment handle claims risky behaviour sales updates via SMS and pricing Voice and facial analytics for detecting fraud
…and new models that challenge the very ry foundatio ion of f in insurance Who is an What is What can I intermediary? insurance? regulate? New players that don’t fit in Models traditional P2P models operating broker or agent without a outside national categories licensed risk jurisdiction Robo advice and carrier Use of black box cryptocurrency algorithms
In Insurance needs in Uganda
Ris isk experience Most Ugandans have faced insurable risks within the last year 61% 53% 50% 30% 19% 14% 7% 7% 6% 3% 2% Total Theft Accident Natural Family & Business Other Income Death Agri Health risk disaster friends
A substantial gap between pla lans to cope and rea eality Insurance not even considered 42% 30% 22% 16% 15% 14% 11% 8% 7% 6% 6% 6% 6% 4% 3% 2% 2% 0% Coped Plan
In Insurance uptake
Low overall uptake Concentrated in health insurance Only 1.4% of adults have any kind of insurance 110 005 No. adults with insurance 46% of adults had borrowed in the last year 31 093 22 273 18 268 15 553 12 237 8 355 0 Source: FinScope 2018 (2017 data)
Understanding, g, la lack of f value majo jor barriers Generally low awareness, but low claims ratios suggest low value Average loss ratio 2013-17 Life Individual 16.80% Protect self in Do not trust insurers … 33.48% Life Group Life other ways Medical 56.14% Other 1% DAP 55.46% 4% Industry average (%) 32.50 Average loss ratio 2013-17 Fire 19.08% Affordability Marine/Aviation 28.91% 20% Not know how 38.72% Motor works Public Liability 37.16% 40% Workers Non Compensation 48.57% Burglary 42.09% -Life Not know where to 29.25% Engineering get Personal Accident 31.49% 9% Benefits unknown Bonds 16.69% 25% Medical 61.80% Misc. Accident 50.01% 73% of reported a lack of information Industry average 42.15%
Lack of f in income is is not th the binding constraint to ext xtending in insurance reach $1/day → UGX 289k/year 28% of adults below 5,0 $2.5/day → UGX 724k/year 4,5 48% of adults below 4,0 $5/day → UGX 1,45m/year 3,5 65% of adults below Million adults 3,0 $ 10/day → UGX 2,9m/year 2,5 80% of adults below 2,0 1,5 3.76 million adults earning more than 10 USD per day 1,0 250,000 already 0,5 insured 0,0 0 1 500 000 3 500 000 5 500 000 7 500 000 9 500 000 PPP exchange rate: 1143 UGX to USD
Target markets
In Introducing th the target markets Characterised by main source of income 8,8 Millions adults 3,7 2,7 1,1 1,0 0,8 0,5 Farmer Dependent Casual labour Trader Salaried Other Service provider
In Introducing consumer tar arget markets Phone access Share of adult population Average income Bank account (UGX million) All adults 18.6 million adults UGX3.1 mil 70% 10% 5% Salaried employees UGX4.4 mil 87% 49% 2% UGX9.1 mil 95% 14% Service providers 6% UGX4.4 mil 85% 11% Trader 15% UGX2.8 mil 65% 8% Informal employees 20% UGX0.6 mil 60% 7% Dependants UGX2.9 mil 71% 7% Farmers 48%
In Insurance uptake wit ithin target groups Formal insurance concentrated in salaried employees with regular income Ease of reach 5,0% 1.4% uptake 3,0% 2,5% by population 1,9% 1,7% 0,5% Salaried Service provider Trader Dependent Casual labour Farmer 50 13 28 69 47 47 0 50 100 150 200 250 Thousand adults
In Informal more attractive th than formal Informal membership quite pervasive – opportunity to learn & leverage? 60% 50% 41% uptake 40% by population 30% 20% 10% 0% Service Farmer Trader Salaried Casual labour Dependent provider 4 336 947 0 1 000 000 2 000 000 3 000 000 4 000 000 5 000 000 6 000 000 7 000 000 8 000 00 Adults Enterprises
Dis istribution ch channels focus on ea easy to reach But many potential touch points even beyond Associations MFIs Distribution channel Agents Mobile Bancassurance Web sales Brokers Easy ease of reach Hard Target markets
Dig igital pla latforms may offer a new opportunity to rea each small business and in individuals wit ith in insurance 284 unique platforms Nigeria 58 78 Uganda Ghana 31 Kenya Rwanda 55 23 Tanzania 34 Zambia 26 81% of which are homegrown South Africa 87 Number of active platforms
Dig igital pla latforms in in Uganda Platforms 34 Financial services 31 Insurance 26 23 5 4 3 3 2 2 1 1 Zambia Uganda Tanzania Rwanda
Digg gging deeper: specific target market opportunities
Much untapped potential l wit ithin higher in income market 5,0 4,5 4,0 3,5 Million adults 3,0 2,5 3.76 million adults earn > 10USD per day of which: 2,0 1,5 1,0 250 thousand 0,5 already insured 0,0 0 1 500 000 3 500 000 5 500 000 7 500 000 9 500 000 PPP exchange rate: 1143 UGX to USD
1. . Easy to reach sala laried em employees Easiest to reach with easy-to-use touch points Connected employees – very easy to reach - Income levels are over 10 USD per day - Have a mobile phone and bank account - Salaried earning a regular income Of which 2.8 million Of which 0.4 million 3.8 million adults Of which 1 million earn 10USD per day have a mobile phone have a bank account income salary/wages UGX 40,000 (9%) 361 thousand insured without insurance
1. . Easy to reach sala laried em employees Risk experienced by connected employees 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0%
Hea ealth in insurance Product and distribution summary • Public facilities significant: - When ill- 64% use public health care facility, 30% use private health care & 3% go to pharmacy • Highest use product category currently, in clear demand, yet only a drop in the ocean - Provided by all types of insurers, but many insurers seem wary of high loss ratios - Small HMO market
Examples of f health in insurance in innovations fr from other markets
2. . Wealthy farmers Harder to reach but informal insurance touch points and ability to scale Wealthy farmers – reachability not as clear as only touch point is - Income levels are over 10 USD per day - Are part of a informal savings group - Main income source is farming Of which 1.6 million 3.8 million adults Of which 925 thousand earn 10USD per day are farmers are part of a savings group UGX 24 thousand (3%) 901 thousand insured without insurance
2. . Wealthy farmers – ris risk experience Agriculture risk is high with health risk also significant 80% 70% 60% 50% 40% 30% 20% 10% 0%
Agriculture Ris isks
3. . Successful l business owners Similar to salaried employees but don’t have regular income Small business owners – easy to reach - Income levels are over 10 USD per day - Have a mobile phone - Income from either trading or providing a service (less regular) Of which 0.57 million 3.8 million adults Of which 2.8 million earn 10USD per day have a mobile phone are traders or service providers UGX 27 thousand (5%) 543 thousand insured without insurance
Ris isks experienced by business owners Strong agriculture links and personal risks are still important 80% 70% 60% 50% 40% 30% 20% 11% 10% 0%
Serving th this is market may require an in in-depth understanding of f the value ch th chain: the example of transport in Ghana Driver Vehicle Goods Exports Imports Warehouse Risk transfer Risk management Access to credit = insurance currently plays a role
In Innovation in in th the South African tr transport market Use of technology to help with risk management • Hires vetting companies to • Partners with Ctrack who check drivers’ competency. provide MiWay’s heavy commercial vehicle clients with insurance telematics • Hires specialist driver-training solutions. firms to ensure drivers receive adequate training. • Provides granular data on driver behaviour and • Prerequisite that all vehicles location services. are roadworthy and if they are valued over USD20,000, they must be fitted with a tracking device.
Conclusion
Th Three im immediate target market opportunities Significant potential to expand insurance uptake Risks Distribution 361,000 adults without insurance 901,000 adults Digital Health Mobile Informal without plat- risks access groups insurance forms Agri risks Bus. risk 543,000 adults without insurance
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