Innovative mobile microinsurance providing crucial safety net for Papua New Guineans
A simple text message is all it takes for a Papua New Guinea (PNG) citizen to sign up to affordable, new microinsurance products providing a crucial safety net for families.
These new microinsurance products have managed to do away with the usual lengthy paperwork processes, preliminary health checks and identification associated with some traditional insurance products. Subscription via text message leads to enrollment and periodic insurance premiums are set up for automatic, deductions.
For a price as low as PGK3.60 (USD $1.43) per month, a person’s life can be insured for a minimum of PGK 4,000 (USD $1,596). The maximum cover an individual can take up under the Family Life Insurance scheme, costs just PGK10.80 a month, providing a payout of PGK12, 000 (USD $4,788) to beneficiaries upon the death of the insured person.
Another product called Hausik Hospital Insurance has affordable plans that range from as little as K3.60 (USD $1.14) per month for ‘basic cover’, PGK 7.20 (USD $2.29) per month for ‘medium cover’ and PGK 10.80 (USD $3.41) per month for ‘high cover’, which pays out PGK 32 (USD $10.11), PGK 64 (USD $2.22) or PGK 96 (USD $ 30.34) respectively per night if a policy holder stays in hospital overnight.
According to World Bank data, the average weekly wage for PNG in 2015 was PGK140.80, or PGK 3.52 per hour (based on a 40 hour week). In this economic context, an investment of PGK 3.60 is affordable for the mass market. In comparison, it would take 92 years of saving PGK 3.60 per month to save PGK 4.000 – the typical payout for the life insurance product.
Though the sum insured may seem relatively small in the developed world, these timely payouts (claims are paid within three business days) can greatly help low income families with the high cost and resulting financial stress of funerals for example, especially if the deceased was the sole bread winner. Policyholders enjoy the peace of mind that their families will be taken care of financially, even while dealing with the loss of their loved ones. Payouts could also help cover the cost of rent, school fees and day-to-day expenses for a few months, allowing families to recover faster, rather than falling prey to predatory moneylenders or having to rely on borrowing money from family and friends.
These innovative and first-of-their-kind microinsurance packages were introduced to PNG by BIMA, a world-leading mobile micro-insurance provider, focused on offering mobile financial services to financially underserved communities.
BIMA entered the PNG market in 2014, operating in partnership with local insurance company Capital Life Insurance (the underwriter) and the largest mobile network operator in PNG, Digicel.
The company embraces an ecosystem approach providing end-to-end microinsurance solutions harnessing the resources and expertise of mobile operators and insurance companies to bring affordable insurance to a low-income market. BIMA’s insurance products are cheaper and more convenient to buy than traditional insurance available in the market, which makes them appealing to low-income customers.
BIMA operations in PNG
BIMA began operations in PNG in June 2014 despite facing notable scepticism and advice against trying to penetrate the PNG market.
BIMA conducted market research amongst its potential customers before launching. Initial feedback received was that the product would fail because most Papua New Guineans depended on the ‘Wantok’ tradition (one talk = one language) – a system of communal sharing and mutual assistance. Most people surveyed said that they would rely on their ‘Wantok’ if they needed money for expensive events like a funeral or hospitalisation.
Undeterred, BIMA sent their agents onto the streets of Port Moresby in June 2014 and was able to sign up 30 customers on their first day of sales. Within two weeks, they managed to sell around 200 policies proving that there was demand for the product.
Locally recruited and trained young graduates as agents, has been key to BIMA’s success strategy - allowing them access to multiple communities and being able to converse in multiple languages means that their customers clearly understand the product being sold to them.
BIMA uses a hybrid model of both an outbound call centre and field agents who visit communities in person to explain their products and recruit customers.
By the end of March 2016, nearly two years into operations, BIMA has 606,792 active insurance policies (54% of which are life insurance and 46% of which are hospitalization insurance policies) to 328,998 unique customers. Importantly, BIMA estimates that 85% of these (or 278,233) are first-time insured customers.
Of these customers, outreach to almost 215,000 was made possible through a grant of over USD $500,000 provided by the Pacific Financial Inclusion Programme (PFIP) in June 2015. The grant enabled BIMA to establish an office in Mount Hagen in the Highlands region and to substantially increase its number of agents there.
Under the grant agreement with PFIP, BIMA conservatively targeted reaching 66,000 new customers overall during a four year period. Instead, the combination of a successful customer value proposition and aggressive expansion strategy has led to BIMA’s reaching 213,536 additional customers across PNG (324% achievement of this target) in less than a year, a record achievement.
Nearly 400 claims have been paid out over less than a two year period (March 2016) amounting to over 3 million Kina (USD 1 million).
BIMA’s track record, globally proven business model, and PNG roll out strategy had a significant impact on PFIPs level of confidence and investment in BIMA. BIMA’s outreach has outstandingly contributed to 21% of PFIP’s overall goal of providing financial services to 1 million people in the Pacific by 2019.
This year BIMA plans to expand its services to other parts of the Pacific through its existing partnership with Digicel and continued support from PFIP. A ‘Pacific hub’ will be set up from a central pacific country and with plans to serve five markets through a centralised call centre. Building off the outstanding success of BIMA’s work in PNG, many people in the Pacific will have access to affordable insurance plans for the first time through the new Pacific Hub.
PFIP is a Pacific-wide programme helping low-income households gain access to financial services and financial education. It is jointly administered by the UN Capital Development Fund (UNCDF) and the United Nations Development Programme (UNDP) and receives funding from the Australian Government, the European Union and the New Zealand Government.
PFIP aims to add one million Pacific Islanders to the formal financial sector by 2019 by supporting policy and regulatory initiatives, facilitating the development of financial services and delivery channels and by strengthening financial competencies and consumer empowerment.