Emerging business models: technology innovations and their regulatory implications
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Emerging business models: technology innovations and their regulatory implications. JACKY HUMA 41 st AIO CONFERENCE 2 JUNE 2014, Kigali. Outline. Trends from a regional perspective Overview of technologies in mobile insurance (m-insurance) Highlights of the m-insurance business in Africa

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Emerging business models technology innovations and their regulatory implications

Emerging business models: technology innovations and their regulatory implications

JACKY HUMA

41st AIO CONFERENCE

2 JUNE 2014, Kigali


Outline

Outline

  • Trends from a regional perspective

    • Overview of technologies in mobile insurance (m-insurance)

    • Highlights of the m-insurance business in Africa

    • Examples of ‘sprinter’ schemes

    • Situation in South Africa

  • Regulatory challenges

    • Overviewofchallenges

    • Consumer protectionrisks

    • What can go wrong in technical innovations?

    • How to regulate m-insurance?

  • Conclusion


I the m insurance business in africa a regional perspective

I - The m-insurance business in Africa –a regional perspective

Insurance that relies on the mobile phone becoming a dominant technology as opposed to others technologies (Point of Sale, Internet sales etc.)

  • MNOs and special intermediaries driving this

  • "Freemium" products on the rise

  • Involvement of mobile phone in insurance value chain allows insurers to

    • Leverage on large customer bases

    • Piggy back on a trusted brand

    • Use mobile for various services (enrolment, payments, claims settlement)

    • Achieve massive scale

  • 1 million clients of schemes in Ghana and Tanzania, 80% of which had never had insurance coverage before


African sprinter schemes

African ‘sprinter’ schemes

The potential for scale of m-insurance brings significant opportunity to increase financial inclusion as demonstrated by the m-insurance ‘sprinters’:

  • EcoLifeZimbabwe reached 20% of the adult population in 7 months

  • TigoGhana reached almost 1m lives in 12 months

  • Leo Namibia reached 15% of the adult population

  • Airtel Zambia reached an estimated 2m at launch

  • Robi Bangladesh has reportedly hit 4m clients

  • MTN Nigeria sign up 100,000 clients a month in Nigeria

    Source: Leach 2014


Situation in south africa

Situation in South Africa

  • Vodacom MPesa Funeral Cover (paid through airtime)

  • Cover2Go accidental death & funeral cover – Metropolitan Life Insurance

  • Take It Eezi My Funeral Card – Hollard Life (Paid through Cash)

  • Clicks offers a ‘free’ funeral insurance product (Loyalty) – Regent Life


Ii challenges for insurance supervisors

II - Challenges for insurance supervisors

With regard to mobile phone based channels, insurance supervisors need to be concerned with:

  • defining the relationships/responsibilities of multiple parties:

  • disclosure requirements: the client needs to -:

    • know that they have insurance;

    • know who the insurer is;

    • know their obligations under the product;

    • know how to access the services under the product;

    • know when the insurance ceases.

    • Regulatory coordination necessary between

      • Telecommunication Regulator

      • Banking/Payments Regulators

      • Insurance Regulator


Challenges for insurance supervisors consumer protection risks

Challenges for insurance supervisors: consumer protection risks

Nine concrete consumer protection risks associated to m-insurance business:

  • prudential risk

  • aggregator risk

  • sales risk

  • policy awareness risk

  • payment risk

  • post sales risk

  • data risk

  • regulatory backlash risk

  • systemic risk

    Source: A2ii Synthesis and Leach/FinMark Trust (upcoming 2014)


What can go wrong lessons learned from an m insurance failure

What can go wrong? Lessons learned from an m-insurance failure

  • Yet Ecolife Zimbabwe shows risks m-insurance brings

  • EcoLife launched in October 2010 as a partnership between First Mutual Life, Econet and Trustco, an (unlicensed) technical service provider.

  • Scheme was cancelled in 2011 due to a dispute between Econet and Trustco over royalties, the scheme was cancelledwith following impact:

    • 20% of the adult population (1,6m) lost their cover overnight

    • 62% not notified about discontinuation of EcoLife

    • 63% Ruled out use of similar products in future

    • 42% Dissatisfied with insurance

    • 30% Better ways to protect against future problems than insurance

      Source: Leach 2014


What can go wrong lessons learned from an m insurance failure1

What can go wrong? Lessons learned from an m-insurance failure

  • At this level of exponential growth, some m-insurance schemes can have market wide impact and may require more regulation

  • For m-insurance, the business risk framework needs to be extended to include data risk, systemic risk and regulatory backlash risk.

    How best can regulators manage the potential risks arising from m-insurance products?


Iii conclusions for industry

III - Conclusions for industry

  • Know your partner very well

  • Be persistent to sell value for money insurance products

  • Learn from pitfalls of other schemes and identify them early

  • Take care of the precious consumer

  • Start with a predefined exit strategy

  • Contribute to a real success in the insurance sector


Iii conclusions for regulators

III - Conclusions for regulators

  • Understand the business

  • Collaborate

  • Make sure that consumer recourse options are available

  • Monitor differently

  • Consider the business exit and intervene early


Emerging business models technology innovations and their regulatory implications

THANK YOU


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