George G. Nyakundi Chief Executive Officer Alliance Life Assurance Limited Dar Es Salaam Tanzania

Contents Distribution: what has changed, then and Now? The Impact of Internet on Life Insurance Distribution Mobile Providers

HOW IT HAS CHANGED The demand for insurance has changed over time Door to door in the olden days Human Interaction was paramount, customer’s bought people first Clients not fully aware of what is available out there Insurers not fully appraised on the needs of customers and how to go about pricing them Intermediaries continue to play the dominant role in distribution in most insurance sectors.

Share of premiums, percent Intermediated vs direct insurance sales Within the developed nations, the role of intermediaries has been reduced, especially in the non life space

EMERGING NEW DISTRIBUTION CHANNELS New types of intermediaries from both within and outside insurance have emerged Bancassurance - an increasingly important distribution channel in a number of countries. Take KCB Kenya with a 20 million database. Strategic alliances between insurers and aggregators e.g. NSSF in Tanzania have emerged as an alternative means of distributing insurance.

Change in the share of premiums for different distribution channels The shares of premiums for direct, agent /broker and bancassurance are based on simple averages of sector-wide shares for selected countries in each region. In most cases, the data compare developments in 2011 against Latin America and Asia can be used as a proxy for Africa

Modern multi channel distribution model Growing importance of multi-channel, multi-touch interaction

SO, WHAT IS IMPORTANT TO NOTE? There is a paradigm shift-from Old to New ways of distributing life insurance aided by technology Access to insurance information has changed –agents and brokers role has been redefined. Many options now available for the purchasing consumer

IMPACT OF THE INTERNET The internet is transforming nearly all stages of insurance distribution. Gathering online information is often a key step in the pre- purchase process. Other pre-sales activities such as advice and negotiation have also migrated to the web, though to a lesser extent. Purchase completion of some types of insurance is also possible online, but to a more limited degree in many markets. Legal framework needed to support transaction of insurance online-this is the case in SA

Consumers’ sources of information about financial services in Asia-Pacific, Legend: 1 Internet 2 Family, friends and colleagues 3 Insurance agent 4 TV 5 Bank 6 Independent financial adviser 7 Internet enabled mobile phone 8 Social media

Variation in internet penetration explains part of the cross-country differences in the level of online search. Other cultural, technological and institutional factors also influence consumer behaviour Aggregator or price comparison websites (PCWs) have in some cases been a catalyst for the use of the internet to research insurance.

Social media Provide consumers with advice from their friends, acquaintances, online groups and even experts who frequent the same sites. In the US, about 35% of customers aged 18–34 say they currently use or would consider using social media to educate themselves about insurance products and services, and would also gather feedback from other consumers on social media sites

Peer-to-Peer insurance initiatives Social media networks are moreover being used to create groups through which individuals OR groups can underwrite each other’s risks or negotiate better terms for insurance with carriers. SCULLT in Tanzania While risk groups are not new to insurance, technology makes it easier for persons wanting to self- insure to come together-SACCOS in Tanzania

Mobile Devices Mobile technology includes basic cellular telephones, smart phones and tablets etc Mobile insurance in the emerging markets now reaching previously uninsured and low-income consumers Mobile has the potential to reduce costs and increase customer contact at every stage of the insurance distribution process. In addition, mobile devices provide great convenience and facilitate data collection and behaviour tracking, thus expanding access to the previously uninsured.

Insurance application In life insurance the use of mobile apps or wearable devices to track information related to individuals’ exercise, diet or health behaviours is influencing design, pricing and claims management. Some companies allow users to record activities with web- enabled mobile devices, receiving premium discounts in exchange for providing information to underwriters. Mobile distribution now making insurance more affordable by enabling short term contracts and frequent premium collection.

Mobile penetration and usage The total number of smartphones and tablets far exceeds that of personal computers. There are country differences in mobile use due to a combination of income, cultural and regulatory differences, but smart and basic mobile users are not strictly divided along geographic boundaries. Smart phone access is currently much greater in the developed world, it is spreading within emerging markets. For example, 3G penetration in sub-Saharan Africa is forecast to grow by 46% through 2016 as the use of mobile-specific services develops. Smart mobile devices can increase traffic to online portals. As of December 2012, 13% of global internet traffic originated from mobile devices. As with the internet more generally, mobile is still predominantly used for research and to gather information rather than purchase insurance. But that is likely to change shortly as technology is being built and enhanced.

Mobile Benefits Main benefits of mobile are reducing the distribution costs e.g. promoting customer education Technology eliminates physical and geographical barriers-why have branches all over Tanzania? Insurers can reach more customers at a lower cost, for both potential and existing customers For individual life, reminders can be sent by text Can be used to monitor the quality of their agents. Sample 5% of the agent’s clients to verify that customers have been well attended to. In some countries, clients can pay their premium through mobile-MPESA!! Deducting airtime directly as a form of premium payment- Vodacom

Mobile Benefits It facilitates fully remote underwriting ‘partnering with a local seed company, this innovative insurance pilot project provided a contact number card in each bag of seed. When the farmer texted the number, the insurer captured two data points: GPS location and date. The insurer then sent a confirmation text to the farmer containing the policy number and coverage details. By matching the GPS location and date to the nearest weather station, Kilimo Salama provided 180,000 farmers coverage against drought’. Swiss Re Sigma.

Mobile Benefits Simplification helps reach new customers via mobile- reduced number of data points make it easier for consumers to buy insurance Ability to download app forms Direct access to information by clients Products include term insurance and annuities

Implications for strategy & innovation Mobile technology key to increasing insurance penetration in the emerging markets Insurers facing a big risk of losing relevance in this market since technology service providers (TSPs) have essentially taken over insurance functions e.g. product design, underwriting, policy admin and claims and use insurers mainly for licensing and capital requirements –Vodacom has obtained an insurance license in SA, Google in USA! There is a crucial trade off between the experimentation required to innovate and the checks necessary for consumer protection with new products. Failure to pay micro claims, reputational damage could have long lasting effects

Use of mobile devices for insurance distribution

Mobile as a payment tool, can it be transferred to upscale insurance distribution