gaps and opportunities Innovation Forum and FSDU Insurance Challenge - - PowerPoint PPT Presentation

Insurance innovation: needs, gaps and opportunities

Innovation Forum and FSDU Insurance Challenge Fund Launch Kampala, 10 December 2018

• 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
• pportunities?
• The innovation imperative

Contents

Innovation is changing the insurance game in the emerging world

Smart solutions across the product cycle…

Behavioural data from sensors used in risk assessment and pricing Chatbots for personalised and efficient sales Flexible payments and coverage updates via SMS Nudges and rewards for less risky behaviour Aerial images for accurate claims AI and ML to handle claims Voice and facial analytics for detecting fraud

Claims processing Product development Sales Premium collection Servicing and Risk management

…and new models that challenge the very ry foundatio ion of f in insurance

P2P models without a licensed risk carrier Models

• perating
• utside national

jurisdiction Use of cryptocurrency New players that don’t fit in traditional broker or agent categories Robo advice and black box algorithms

Who is an intermediary? What is insurance? What can I regulate?

In Insurance needs in Uganda

Ris isk experience

Most Ugandans have faced insurable risks within the last year

61% 2% 3% 6% 7% 7% 14% 19% 30% 50% 53% Total risk Theft Accident Natural disaster Family & friends Business Other Income Death Agri Health

A substantial gap between pla lans to cope and rea eality

Insurance not even considered

6% 4% 11% 3% 2% 15% 7% 22% 30% 42% 16% 14% 8% 6% 6% 6% 2% 0% Coped Plan

In Insurance uptake

Low overall uptake

Concentrated in health insurance

110 005 18 268 22 273 12 237 15 553 31 093 8 355

• No. adults with insurance

46% of adults had borrowed in the last year Only 1.4% of adults have any kind of insurance 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

Not know how works 40% Benefits unknown 25% Not know where to get 9% Affordability 20% Other 4% Do not trust insurers… Protect self in

• ther ways

1% 73% of reported a lack of information

Average loss ratio 2013-17 Life Individual 16.80% Life Group 33.48% Medical 56.14% DAP 55.46% Industry average (%) 32.50 Average loss ratio 2013-17 Fire 19.08% Marine/Aviation 28.91% Motor 38.72% Public Liability 37.16% Workers Compensation 48.57% Burglary 42.09% Engineering 29.25% Personal Accident 31.49% Bonds 16.69% Medical 61.80%

• Misc. Accident

50.01% Industry average 42.15%

Life Non

• Life

0,0 0,5 1,0 1,5 2,0 2,5 3,0 3,5 4,0 4,5 5,0 1 500 000 3 500 000 5 500 000 7 500 000 9 500 000 Million adults

Lack of f in income is is not th the binding constraint to ext xtending in insurance reach

PPP exchange rate: 1143 UGX to USD

$1/day → UGX 289k/year 28% of adults below $2.5/day → UGX 724k/year 48% of adults below $5/day → UGX 1,45m/year 65% of adults below $ 10/day → UGX 2,9m/year 80% of adults below 3.76 million adults earning more than 10 USD per day 250,000 already insured

Target markets

In Introducing th the target markets

Characterised by main source of income

8,8 3,7 2,7 1,1 1,0 0,8 0,5 Farmer Dependent Casual labour Trader Salaried Other Service provider

Millions adults

In Introducing consumer tar arget markets

Informal employees Trader Service providers Farmers Dependants 18.6 million adults UGX3.1 mil 70% 10% UGX4.4 mil 87% 49% UGX9.1 mil 95% 14% UGX4.4 mil 85% 11% UGX2.8 mil 65% 8% UGX0.6 mil 60% 7% UGX2.9 mil 71% 7% All adults 5% 15% 48% 6% 20% 2% Share of adult population Average income (UGX million) Phone access Bank account Salaried employees

50 13 28 69 47 47 50 100 150 200 250 Thousand adults

In Insurance uptake wit ithin target groups

Formal insurance concentrated in salaried employees with regular income

5,0% 3,0% 2,5% 1,9% 1,7% 0,5% Salaried Service provider Trader Dependent Casual labour Farmer

1.4% uptake by population Ease of reach

In Informal more attractive th than formal

Informal membership quite pervasive – opportunity to learn & leverage?

0% 10% 20% 30% 40% 50% 60% Service provider Farmer Trader Salaried Casual labour Dependent 4 336 947 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 41% uptake by population

Dis istribution ch channels focus on ea easy to reach

But many potential touch points even beyond

MFIs Associations Bancassurance Web sales Brokers Agents Mobile Easy ease of reach Hard

Distribution channel

Target markets

Number of active platforms

Rwanda

23

58

78 87

34 55 31

Ghana Nigeria

Uganda Kenya

Tanzania Zambia

26

South Africa

Dig igital pla latforms may offer a new opportunity to rea each small business and in individuals wit ith in insurance

284

unique platforms

81% of which are

homegrown

Dig igital pla latforms in in Uganda

26 31 34 23 5 2 2 4 3 1 1 3 Zambia Uganda Tanzania Rwanda Platforms Financial services Insurance

Digg gging deeper: specific target market

• pportunities

0,0 0,5 1,0 1,5 2,0 2,5 3,0 3,5 4,0 4,5 5,0 1 500 000 3 500 000 5 500 000 7 500 000 9 500 000 Million adults

Much untapped potential l wit ithin higher in income market

PPP exchange rate: 1143 UGX to USD

3.76 million adults earn > 10USD per day of which: 250 thousand already insured

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

3.8 million adults earn 10USD per day

UGX

Of which 2.8 million have a mobile phone Of which 1 million have a bank account Of which 0.4 million income salary/wages 40,000 (9%) insured 361 thousand without insurance

1. . Easy to reach sala laried em employees

Risk experienced by connected employees

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

• 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

Hea ealth in insurance

Product and distribution summary

Examples of f health in insurance in innovations fr from other markets

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

2. . Wealthy farmers

Harder to reach but informal insurance touch points and ability to scale

3.8 million adults earn 10USD per day

UGX

Of which 1.6 million are farmers Of which 925 thousand are part of a savings group 24 thousand (3%) insured 901 thousand without insurance

2. . Wealthy farmers – ris risk experience

Agriculture risk is high with health risk also significant

0% 10% 20% 30% 40% 50% 60% 70% 80%

Agriculture Ris isks

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)

3. . Successful l business owners

Similar to salaried employees but don’t have regular income

3.8 million adults earn 10USD per day

UGX

Of which 2.8 million have a mobile phone Of which 0.57 million are traders or service providers 27 thousand (5%) insured 543 thousand without insurance

Ris isks experienced by business owners

Strong agriculture links and personal risks are still important

11% 0% 10% 20% 30% 40% 50% 60% 70% 80%

Vehicle Driver Goods Warehouse Exports Imports

Serving th this is market may require an in in-depth understanding of f th the value ch chain: the example of transport in Ghana

Access to credit Risk management Risk transfer

= 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

check drivers’ competency.

• Hires specialist driver-training

firms to ensure drivers receive adequate training.

• Prerequisite that all vehicles

are roadworthy and if they are valued over USD20,000, they must be fitted with a tracking device.

• Partners with Ctrack who

provide MiWay’s heavy commercial vehicle clients with insurance telematics solutions.

• Provides granular data on

driver behaviour and location services.

Conclusion

Th Three im immediate target market opportunities

Significant potential to expand insurance uptake

361,000 adults without insurance 901,000 adults without insurance 543,000 adults without insurance Risks Distribution Health risks Agri risks Bus. risk Mobile access Informal groups Digital plat- forms

• Low understanding, lack of trust
• Some retail innovation, but few disrupters
• Risk aversion, lack of investment in innovation & strategic

focus on new business devt

• Investment and compliance challenges for new innovators
• Regulatory framework generally conducive for incumbents
• MI framework potential
• More broadly, no explicit space for value chain players
• utside brokers or agents

Why are th these opportunities not yet tapped?

Some movers, not enough shakers

Target market Industry Regulation

• 1. Understanding consumer needs
• 2. In-life benefits/rewards
• 3. Channels and partnerships
• 4. Nudging customers
• 5. Claims processing

Not ju just business as usual

Scope for innovation

Discussion

• Bottlenecks to innovation?
• Market
• Regulatory framework
• What is needed to unlock the opportunities?
• Health
• Agriculture
• Small business
• Role for different types of players to address?

What can be done?

Discussion