By accepting ‘unbanked’ as a defining measure for financial inclusion, financial services institutions could find offering products to lower income groups due to the lack of physical banking infrastructure challenging. Hollard, which has a footprint in highly ‘unbanked’ Africa and Asia views the market in a slightly different way.
Frans Prinsloo, Managing Director at Hollard International says, “One of the obstacles to providing wider access to financial products is that financial services institutions are stuck in a paradigm that suggests that “banking the unbanked” is the solution. If the problem is framed differently then financial service providers can change tack in delivering real solutions to the financial inclusion challenge.”
By discounting the ‘unbanked’ market, financial institutions could be missing out on a customer base of 2.5 billion adults, according to the World Bank, with the majority of the these citizens residing in emerging markets.
A paper by one of the Bank’s Development Research Group’s concludes that only 24% of adults in sub-Saharan Africa have formal bank accounts, with that falling to just 18% in the Middle East & North Africa. Researchers reported a strong correlation between income levels and financial product penetration.
From the insurance perspective, Hollard notes in its 2014 Integrated Report, that low income communities are not uninsured because they face uninsurable risks; but rather because very few insurers truly understand their needs.
“To succeed in emerging markets one must focus on solutions that are financially sustainable for the insurer while at the same time having a significant and enduring positive impact, either directly or indirectly, on the lives of the poor,” says Prinsloo. “Technology is an enabler in this regard.”
Hollard recently launched a micro insurance funeral product for the Ghanaian market which relies on cover being sold and policy details accessed via mobile handsets. The initial take up of this product was relatively slow due to the scale of distribution; but since increasing capacity on the ground the insurer has achieved volumes that exceed its initial expectations.
The insurer has had similar successes in Zambia where it launched an initiative to sell insurance through a mobile network partner. “The customer accesses the product directly through their mobile handset and pays the premium via mobile money deductions,” says Prinsloo. “We took a more traditional approach with Botswana where our insurance product is distributed through 122 Post Office branches and various retail partners.”
In its 2014 Financial Access Survey (FAS) – described as the most comprehensive global source of data on access to, and use of, basic consumer financial services by households – the International Monetary Fund reported a dramatic increase in the number of active mobile money accounts in Kenya. The number of mobile money transactions increased by more than 130 times, from 5.5 million in 2007 to more than 700 million in 2013.
This statistic is not surprising given the incredible uptake of M-Pesa, a mobilephone-based money transfer and micro-financing service launched in Kenya by Vodafone in 2007. Upwards of 75% of Kenya’s adult population now use M-Pesa to process payments for a range of goods and services.
“The rapid uptake of mobile telephony, the introduction of smart phones and cloud computing, and the availability of affordable data have forever changed the financial services landscape. And this is why the mobile phone and so-called mobile money solutions could form the backbone of many insurers’ African product initiatives,” says Prinsloo.
About Hollard Insurance
As South Africa’s largest privately-owned insurance group, the Hollard Insurance Group includes the Hollard Insurance Company and Hollard Life Assurance Company. Established in 1980, the Group provides short-term and life insurance as well as investment products to a diverse customer base including individual consumers, commercial entities and corporate clients. It ranks among a growing number of companies advocating an inclusive growth model, measuring its social dividends aside its shareholder contributions.
Since inception, partnership has been at the heart of its business model, with the group today boasting over 100 ventures across the insurance value chain. Each one demonstrates the Hollard belief that there is always a better way.
Headquartered in the historic Villa Arcadia in Parktown, Johannesburg, the group embraces 6 million policy holders in 10 countries on four continents. Hollard employs almost 3000 people across the globe and posted R15.3bn in premium income in the year to June 2014.