Micro-insurance the next step for mobile payments
It’s not often you see a telecom conference where one of the top sponsors is an insurance company. But such was the case at Carriers World Asia in Bangkok this week, where silver sponsor ACE Insurance aimed to promote the concept of micro-insurance.
“There’s a big elephant in the room, and we’re here to point it out,” says Juan Luis Ortega, senior vice president and regional head of accident and health Asia-Pacific for ACE Asia.
The elephant in this case has to do with the rise of mobile payments, particularly remittance services that target the “unbanked” population.
“Carriers in this region are realizing that they’re the next banking industry,” Ortega tells your reporter. “They can do pretty much what a bank does, and that includes generating what is for banks a multi-billion-dollar industry – granting companies like us access to their massive customer base to sell insurance products”
Chris Eappariello, ACE’s vice president of global mobile assurance solutions, explains that ACE Insurance – which creates commercial and consumer insurance products, the latter of which is sold via financial companies under their own brand – already works with mobile operators in Europe and Latin America to provide insurance services covering handset replacement, and health and travel insurance.
“It’s similar to the way we work with banks for our consumer insurance products – they sell to their own customers under their own brand,” says Eappariello. “We work behind the scenes, designing products specifically for mobile and helping distribute them.”
Those kinds of mobile insurance packages have been aimed mainly at post-paid subscribers. But with mobile payments well established in markets where prepaid is the dominant customer base, Eappariello explains, “we’re seeing a significant amount of prepaid customers that have been previously outside of the financial services system – no bank account, no form of insurance, but they do have a mobile phone and a way to make mobile payments. So operators now have the ability sell low-cost micro-insurance products to their customers.”
Cellcos are in a good position to sell such products because they have the customer relationship and the collection mechanism, says Ortega.
Eappariello adds that cellcos can even add value to products such as motor insurance by leveraging location-based information and telematics to generate stats that can be used to calculate lower premiums.
Cellcos don’t necessarily have the expertise to sell insurance products (let alone to a demographic potentially unfamiliar with the value proposition of insurance), but ACE compensates by “designing the products so that they’re stripped down so customers can see the value proposition,” says Eappariello. “We design products that are very simple to explain and to sell, so it’s not complicated like normal insurance plans.”
As for the other elephant in the room – is micro-insurance a revenue generator for cellcos? – the answer is: possibly.
Ortega says the chief value proposition for operators is creating customer loyalty, stickiness and corporate social responsibility credibility. He allows that micro-insurance can potentially increase ARPU, but says ACE’s operator model is more geared towards the relationship points.
That said, Ortega points out that for banks, anywhere from 10% to 20% of their bottom line income comes from insurance distribution. “That should be the target for the telco industry. That’s how big this could be using the mechanisms they have.”
If it helps, Ortega cited one anonymous operator selling insurance products that is raking in “around $50 million [€37 million] to $70 million on a postpaid customer base of around 3.5 million users.”