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Around half of Latin America's population is unbanked. That, combined with the fact the region's economy is growing, provides opportunities for insurers as well as bankers.
But how do you access these potential clients and provide them with key financial services in a viable manner?
BNamericas spoke to Benito Hernandez (pictured) , Latin America manager for Swedish microinsurer BIMA, about this, and more.
BNamericas: Globally BIMA has reached 26mn customers. That's an impressive number. What's the secret to your success?
Hernandez: BIMA's rapid growth is driven by several crucial factors - our mobile microinsurance model, partnerships with mobile operators as well as our agent-led distribution model.
Traditional insurers failed to reach the masses in the developing world because of two significant obstacles - high distribution costs and lack of an effective payment channel. Given the high mobile penetration rate in emerging markets, BIMA has recognized the enormous potential in using mobile technology to reach out to poor and remote communities without the need of establishing a costly physical network.
At the same time, our partnerships with leading mobile operators in our markets enable us to access large volumes of potential customers to achieve scale and a digital payment channel for the unbanked (by deducting premiums from customers' airtime credit).
However, technology and efficient delivery won't matter if people don't understand the value of your products, which is why we employ 3,500 agents globally whose job is to educate consumers on insurance and our products. Emerging market consumers often lack trust in financial services and taking a human approach is therefore key to overcoming awareness issue and generating trust.
BNamericas: With microinsurance, cost control (in areas such as distribution and claims processing) must be critical. How do you keep costs down?
Hernandez: Per unit revenue is extremely low in microinsurance, so the key to achieving financial viability is through large volumes. Our partnerships with mobile network operators are crucial to achieving scale and profitability.
We also seek to work as efficiently as possible while creating a good customer experience. Traditional insurers require enormous amount of information and paperwork when selling insurance policies. Given the very small product value of microinsurance, and the fact that most of our customers haven't had experience with insurance before, we have radically simplified our approach by removing unnecessary steps. For example, we limit information gathering to asking a few simple questions. We make the claims forms as simple and straightforward as possible and require only a minimal number of claims documents to ensure minimal delays in processing time and payment.
In some of our markets, we now allow customers to submit claims via social media channels such as Facebook Messenger or Whatsapp. This not only simplifies the claims process for the claimants but also allows us to reduce costs.
BNamericas: You have more than 3,500 agents. What is their role and how important is it for insurers to adopt a client-centered approach in today's world?
Hernandez: Our agents are central to our mobile microinsurance model. They help overcome the low awareness of insurance in emerging markets and provide vital product education to our customers. We also make outbound calls to customers to access the effectiveness of the education and validate their understanding of the product. This has resulted in higher engagement rates (as measured by claims and renewals) than with purely digital insurance offerings.
Adopting a client-centered approach is fundamental to long-term business success. At BIMA, for example, we realized that emerging market consumers need solutions that go beyond simple financial protection because they often perceive their health as a key risk. This has led us to develop insurance-led healthcare products that provide access to tele-doctor consultations, giving customers protection against both financial and health risks. Insurers must acquire the ability to uncover unmet customer needs so they can offer genuine solutions that drive industry improvements and customer satisfaction.
BNamericas: In Latin America, you operate in Haiti, Nicaragua, Honduras and Paraguay. Why is Latin America attractive to BIMA? Any plans to continue expanding in the region?
Hernandez: Almost half of the population is unbanked in Latin America. This amounts to around 325mn people who are currently unable to access basic financial services such as bank account, loans, or insurances. At the same time, the penetration rate of SIM connections in the region already reached 105% in 2016. We therefore see a massive market opportunity to bring low-cost insurance to the populations on the continent using mobile technology.
Just recently we've launched new operations in Nicaragua in our first official partnership with Telefonica Movistar in February and we will be continuing geographical expansion in emerging markets, including in Latin America. In Paraguay, where we are already offering tele-doctor consultations, we will also be expanding our core mobile health offering to include additional service features such as consultations with health specialists including pediatricians and gynecologists, health coaching programs, hospital appointment services and medicine discounts etc.
BNamericas: What are the potential barriers to increased microinsurance penetration in Latin America?
Hernandez: Microinsurance is a developing sector in emerging markets, hence the existing legal and regulatory framework might not be attuned to the sector's needs and requirements. In particular, microinsurance sold via digital channels is an entirely new concept to regulators who have been used to regulating their individual industries in silos in the physical space (e.g. insurance, financial services, telecommunications, health services etc). They must now work together to develop a joint approach that incorporates digital technologies into their regulatory framework.
Customer education remains another key challenge. Most consumers in developing countries are experiencing insurance for the first time and many of them lack trust in financial services. Increasing awareness and knowledge of insurance, as well as building trust with customers, will be key to driving insurance uptake.
BNamericas: Finally, are there other microinsurers that use the same model as you? If not, do you expect new players to emerge?
Hernandez: There is an increasing number of microinsurance companies looking to replicate BIMA's model. However, what makes BIMA stand out - in addition to our high growth rates - is that we place much heavier emphasis on customer education and on raising awareness of insurance. We have created the largest dedicated microinsurance agent force in emerging markets to educate consumers on the value of insurance.
BIMA also has a multi-country approach and a global footprint across Asia, Africa and Latin America, compared to many of the market players who tend to focus on one market or several markets in a region. Our geographical spread has allowed us to build one of the world's largest emerging consumer data set based on 26mn customers, giving us unrivalled insight to develop platforms, processes and products to suit the needs of the underserved segments.
About Benito Hernandez
As regional manager for Latin America at BIMA, Benito Hernandez is responsible for driving performance and maintaining partnerships with mobile network operators in the region. He brings over 25 years of experience in the telecommunication sector, having previously worked for cellular manufacturers, distributors and telco companies. Prior to joining BIMA, Benito led the commercial operations at Motorola, Brightstar and Celistics with senior responsibilities in sales, strategy and business development.
Benito has a BSc from Pontificia Universidad Javeriana, Bogotá, Colombia and an MBA from Nova Southeastern University, Plantation, Florida.
BIMA uses mobile technology to deliver affordable insurance and health products to underserved consumers in emerging markets who cannot access these products through traditional channels.
Its technology platforms create a paperless experience and enable scale, while its agent force distributes products and provides vital customer education. With a global footprint in 15 markets across Africa, Asia and Latin America, BIMA has sold 33mn policies worldwide.
BIMA works with mobile operators, banks and microfinance institutions as well as a growing range of corporates. More than 90% of its global customer base live on less than US$10 per day and 75% are accessing insurance for the first time.