Why is Microinsurance a Powerful Safety Net for Clients?

Last week, Opportunity supporters and staff dialed in for a lunchtime conference call with Richard Leftley, the president and CEO of MicroEnsure, Opportunity’s microinsurance subsidiary. Leftley shared background on MicroEnsure’s growth in recent years and then answered callers’ questions on what he envisions for the organization’s future. He detailed how insurance is an indispensable tool for our clients that can help protect them from slipping deeper into poverty after loss, a death in the family, or natural disasters. Below are highlights from this informative call with Richard Leftley.

“I want to give you a whistle-stop tour of the last five years at MicroEnsure,” Richard Leftley says.

Background on MicroEnsure

• When a woman asked me where we would be if her children got sick or her property got damaged in a fire, I realized that was what we needed to do. We needed to protect people from falling back into poverty after a disaster.
• In 2002, we spent time with clients assessing their needs, we began with health products for HIV and we expanded to funeral and then property insurance, which is especially important in high-density urban environments with fires and other disasters.
• The MicroEnsure board then challenged us to expand with more products and so we offered weather index crop insurance.
• We found that people needed to be paid within days or weeks but local insurance companies could only pay in months and years, and some didn’t do health insurance. So we increased our control over underwriting, while still working through the local insurance companies.

Today at MicroEnsure

• Mobile phone companies have turned out to be the key. We partner with companies in Asia and Africa, where there are 5,000 new mobile phone clients every day. We offer a product through the mobile phone companies where people receive a certain amount of insurance for free just for using their phones.
• MicroEnsure has 3.2 million clients. In July 2011 alone, we grew by 500,000 new clients, and we hope to exceed 4 million clients by the end of the year.
• Our challenges today: MicroEnsure is three and a half years old. We spent the first two years understanding and building partnerships and went from 600,000 to 2 million clients in 2010. We continue to try to push boundaries, developing innovative products.

Caller question: About the mobile phone insurance product—is it linked to airtime and amount of customer use?

It is linked to customer use and airtime. Trust is crucial. We’ve found that people in poverty don’t trust insurance companies but they do trust mobile phone companies. Mobile phone companies investigated what would make people even more loyal and they found that people wanted insurance. So we have implemented a free life insurance contract. Customers voluntarily sign up by text messaging the company. Everyone gets a low level of life insurance for free, but if they use more air time to call or text, then they can earn higher levels of insurance, the company texts them and lets them know their level of usage month by month and how much insurance it’s earned them for the next month. They simply get a text at the end of the month that says what they’ve earned in free insurance.

In Ghana, we are working to sign up millions because virtually no one has insurance. Then we will go back and contact the client. They see how the free insurance has protected them, so we ask, “Would you like to pay a little more and add your family to your insurance plan?” Then later, we ask, “Would you like to add a health insurance policy for $1 a month?” We have found if we go right in and offer health insurance, people don’t trust you enough yet, and they won’t buy. But if build up to it, they will trust you and they will see how beneficial it is for them to buy it. This is proving to be a successful model.

Staff question from Opportunity VP Jennifer Mitrenga: I recently got back from an Insight Trip to Tanzania with the Young Ambassadors. We went and saw MicroEnsure’s health insurance product firsthand. Could you share a little about that?

Our health insurance product sprung from clients’ needs. They like life insurance products but as one woman said to me, “We’re only going to die once, but we’ll go to the doctor two to three times a year, so can you help with that cost?” In India we offer health insurance for $10/year for a family of four, and it covers inpatient hospitalization. It’s cashless with an ID card. We handle all financial costs and processes for the clients behind the scenes. We chose India to pilot that product because it’s simpler to operate there. We learned a lot.

We then wanted to do health insurance in Africa, so we chose Tanzania and began with the Kilimanjaro Native Cooperative Union (KNCU), a coffee growers’ union of several hundred members. They wanted a health insurance policy. The model we designed for them included all doctor visits for the family. We determine the annual costs of this and then we pay up front. If a farmer is hospitalized for any reason, we have provided extra insurance to cover that. We go in and advocate for their health too—if we find there are any problems with doctors, we can go in and change their behavior. We underwrite the product and we manage it, and we built out a network of existing clinics who agreed to be part of the product. We go to each of the clients’ homes and ID them with fingerprints. In fact, we downloaded an app for our mobile devices using open source software and tailored it for only $7. Now we want to scale up to reach 100,000 families in Tanzania by the end of 2012. We’re looking to set up a new vehicle called MicroEnsure Labs to innovate new ideas.

Caller question: Congratulations on your tremendous growth in the last few years. As you look forward, give us a brief executive summary of where you hope to be in five years.

We’re going to separate out our core business–mobile phones and microfinance. We realized we need to bring in strategic partners to stabilize and grow the mobile phone aspect of the business. I will bring in more companies to partner and grow that sector. Right now, we’re exclusively owned by Opportunity, but we could partner with more stakeholders who wish to get involved with us. We’re seeing that the partnerships that we have–at the rates our mobile phone partnerships are growing–expect to get up to 100 million people, so we’re growing fast.

We do need to focus on research and development to bring more impactful products to our clients and innovate our distribution policies. Not just microfinance, though that’s very important, but through mobile phone companies and the Internet. Much like the growth of mobile phones in the last few years, the Internet will explode across Africa in the next three years, and most mobile phones on the continent will become 3G. This all needs to be properly financed through philanthropy. It took seven years of Opportunity’s support through grants and donations to create our current model. We can shorten that cycle to 12 months because of what we’ve already learned. We do need individuals to support our work to help us innovate.

Want to learn more from Richard Leftley? Attend the breakout session “Microinsurance: A Powerful Safety Net” led by Richard at Opportunity’s annual conference, Oct. 14-15 in San Francisco. Go to opportunity.org/conference.