1. Presented by Branko Wehnert
Mitigating the Risk of Mobile Insurance in Ghana CIMA – workshop on mobile insurance regulation
Abidjan, May 16th / 17th 2016
Presented by Branko Wehnert
GIZ Ghana – PSED – FSD

2. Contents
About the relations of microinsurance and mobile insurance in Ghana
M-insurance landscape
Product information
Risk Framework
Recommendations
insurance-and-risk-framework-assessment-ghana .
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3. Microinsurance Framework in Ghana
Insurance companies designate microinsurance products. It is this designation that will determine whether an insurance contract is microinsurance.
Principles-based criteria apply:
Designed for low-income earners
Affordable for low-income earners
Accessible to low-income earners
Incentives for offering microinsurance
File-and- use procedure, community rating, MI logo etc.
Solvency incentives currently under development
Client protection
Simple contracts, few if any exclusions
Fast claims settlement (7 days process / 10 days payment)
Client value
Established in February 2013
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4. All insurance business of the 13 providers without MI
Microinsurance Market Size (2014)
Microinsurance
Mobile Insurance
3 Underwriters
6 products currently on the Market
2.7 million policyholders for m-insurance products (June 2015)
5m GHS premium (2014)
60% of all MI policyholders (2014)
13 underwriters
27 products on the market
7.5 million lives and risks insured
Gross written MI premium : 13.3m GHS 27
Products
7.5m lives and
risks insured
97.4%
All insurance business of
the 13 providers without MI
(GHS 489m)
2.6%
Microinsurance
Business
(GHS 13m)
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5. 2.8 Mio M-Insurance Policyholders as of 06.2015
* As of April 2016
Partnerships
 Type of product
Risks insured
Year Started
Estimated Policyholders
Partnership A
Paid
Funeral (subscriber and next of kin)
2011
5,574*
Partnership B
2010
550,000
Hospital-cash
2013
700,000
Loyalty
Funeral
70,000
Partnership C
Life, Accident, Disability, Hospital-cash
2014
1,400,000
2015
94,000
Products are being currently transitioned from a loyalty product to a paid product, since the business case is not strong enough for the MNO and/or TSP.
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6. Profitability of M-Insurance Products
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7. Approximation of Gross Premium Structures for Micro and Mobile Insurance from the Insurer‘s View
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8. About active and passive m-insurance
Loyalty Product (passive) Client-Paid Product (active)
MNO pays insurance premuim on behalf of the subscriber
Subscriber pays the premium directly through automated deductions of airtime or mobile money
MNO serves as master-policy holder
MNO serves as corporate agent
„low-touch“ product, since all subscribers are automatically insured
„high(er)-touch“ product, since subscriber has to decide for the product; product needs to be marketed
From a certain threshold of airtime usage the subscriber is automaticallly insured; more top-up increases cover with hybrid product
Trigger for cover is the payment of premium, to be done via airtime or mobile money; to be rendered by automated deduction through the MNO
Subscribers are very often not aware about their insurance cover
Subscribers are more aware about their insurance cover;
Economics of MNOs: increase subscription levels and client retention; expensive, since covering all subscribers of the tariff
Economics of MNOs: increase subscription levels (ARPU) and client retention, commissions from insurer; scale is difficult to be reached
Economics for insurers: good risk pooling possible; high volumes of premium; high margins through low claims ratio; risk of discontinuation by MNO
Economics for insurers: Risk of adverse selection and fraud can affect the insurer; commissions to be paid to the MNO reduces gross premium income of product
Freemium (hybrid)
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9. Risk Framework (1/5) Client Value Risk;
Using the key risk identified , all six m-insurance products were analyzed by risk-scoring each product. Rating was done on a scale of 1-5, with 1 being very low risk and 5 very high risk.
Client Value Risk;
Subscribers may not be aware of product (particularly loyalty products)- hence very low claims frequency, very low claims ratios;
Even when aware, subscribers may not fully understand product coverage, Terms &Conditions;
Customer complaints and queries are not adequately handled;
Claims process is complicated, burdensome and lengthy;
Customers perceive poor value if low utilization or very few claims being paid out.
Client Value risk has been defined as the risk that the products do not deliver adequate value to the clients or are not appreciated by the clients or not suitable for client needs
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10. Risk Framework (2/5) Distribution Channel Risk
MNO does not fully understand the implications of changing/cancelling insurance products; it perceives insurance as a pure marketing tool rather than a relatively long term financial service;
Premium cost must be scaled commensurate with MNO service cost: low insurance coverage and risk assumptions based on under-reported claims;
Business case for loyalty-based products is weak for MNO's (no significant increase in ARPU nor reduction in churn)
MNO’s reputation affected when there are client disputes over product/service;
Exit plans or transition plans not in place/not working properly when products are being changed or discontinued;
The insurer’s prudential risk is the risk that the insurance company incurs a loss or a lower profit than expected and consequently the commercial sustainability of the product may be at risk.
Distribution channel risk is the risk that (MNOs) discontinue the product or make sudden changes to an existing product due to either a change in strategy or because they do not perceive a strong business case for supporting the product or because of their unfamiliarity with insurance.
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11. Risk Framework (3/5) Prudential Insurer’s Risk Marketing Risk
Risk premium is underpriced (claims incidence-based and not actuarily verified);
Adverse selection and fraud risk with client-paid m-insurance;
Marketing Risk
Product not explained properly;
Sales staff not trained sufficiently;
Customer awareness during transition from loyalty to paid products;
Marketing literature not clear/misleading;
Marketing expenses higher than expected.
Marketing and Sales Risk are related to the m-insurance products not being sold responsibly, leading to poor customer awareness and/or “mis-selling”, which in turn leads to false policyholder expectations being created.
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12. Risk Framework (4/5) Legal Risk System Risk
Insufficient regulatory oversight through 3 regulators involved;
Role of the MNO can be arbitrary: Master-policyholder vs Corporate Agent
Policy documentation;
Recourse to settling disputes not clear;
Data protection;
Loss of data if product is cancelled as data stays with MNO;
System Risk
Occasional systems problems were reported by some MNOs, such as ‘down-time’ of the network coverage. This led to customers not being notified that their premium is due.
Data not available anymore if partnership collapses;
Technological breakdown;
Data not maintained properly;
Data errors.
Legal risk is the risk of lack of legal accountability and legal recourse to settling disputes between policyholders and insurers/ distribution channels and third parties.
Systems risk is the risk of systems (such as MNO’s systems, databases, ICT platform) failing to service products leading to both poor client value and also liabilities for the insurers.
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13. Risk Framework (5/5) 3rd Party Default Risk
Most insurers are not involved in the technical and operations areas of m- insurance business, the risk is that the TSP and MNO's can easily change the underwriter
Capability of partners to manage the business on behalf of the insurance company: handling claims, administration etc.
No contingency plans at hands to protect policy holders in case of break-up.
For most products, Distribution ,3rd Party Default and Marketing and Sales risk, scored very high risk ( Risk score 4 or above)
Out of the 6 products on the market 3 products scored a HIGH overall risk level.
3rd Party default risk is the risk of being heavily dependent on a third party, such as a technical service provider (TSP) and consequently being exposed to problems due to inefficiency or incapacity of the TSP or due to the exit of the TSP from the market
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14. Regulatory Questions on Mobile Insurance Products
National Insurance Commission
Insurance Act 724 of 2006
Microinsurance Martket Conduct Rules
Mobile insurance products are microinsurance in Ghana
Product approval process for microinsurance products
Microinsurance contains certain consumer protection principles
MI Market Conduct Rules do not cover specific risk management needs for a product consortium
TSPs are licensed as corporate agents
Loyalty products: MNO is not the agent but master- policyholder (no supervisory enforcement from NIC)
Insurable interest: Risk that, where group policy used, MNO as master policyholder does not have an insurable interest
Bank of Ghana
Guidelines for E-Money Issuers
in Ghana, 2015
Payment of services and goods must be done with currency; airtime is commodity
Banking Department of BoG supervises digital payment services by product license
MNOs will be licensed as Electronic Money Issuers for Mobile Wallets (licensing, market conduct rules, complaints mechanisms) – group insurance would not be covered
National Communication Authority
NAC Act 769, 2008
Value Added Service (VAS) no obligations for m-insruance risks
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15. Initial Recommendations
Product Approval Stage : to analyse jointly (NIC, NCA, BoG) before product will be launched
Guideline for m-insurance product approval has been drafted by consultant
After launch stage: semi-annual product performance review
Data collection tool under development (SDR - VIZOR)
Practitioners agreed with a semi-annual reporting requirement tied-in with Microinsurance reporting
Multi regulatory approach : coordination between regulatory authorities
Tripartite MOU develop between the three regulators NIC, NCA and BoG
Most practitioners preferred NIC to be the lead in driving the process.
Issuing of aligned market conduct rules by NIC (mobile insurance) and BoG (digital financial services)
Market conduct rules for M-Insurance are currently under development
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16. Quantitative Product Approval and Monitoring
General information on the product consortium
Product information
Policyholder information
Premium and liability information
Claims information
Expense and commission information
Other information
Reported at poduct approval stage and semi- annual to NIC; integration into VIZOR (MIS)
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17. Qualitative Product Approval and Monitoring
Availabiltiy of business contingency plans for the insurance product within the product consortium
Actuarial justification
Full policy document being used
Product marketing methods
Sample of marketing literature used
Customer enrolment methodology
Staff incentive structures in place to promote sales (MNO, TSP and Insurer)
Insurer‘s / TSP‘s complaint mechanism
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18. Thank you for your attention!
Branko Wehnert
Head of Financial Sector Development (FSD)
GIZ Programme for Sustainable Economic Development in Ghana
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