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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

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
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