why bundling can make agriculture insurance work? fileinsurance is intangible, which makes it hard...
TRANSCRIPT
Why bundling can make agriculture
insurance work? Michal Matul, Mombasa, April 6
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What is a fundamental difference between insurance and other financial services?
(…and most other things on earth)
Insurance is intangible, which makes it hard to explain and build trust
It is difficult to ‘test’ insurance
This results in low demand, and undermines scale (though the business economics only works with scale)
Problem
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There are lots of bundling options
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Bundling makes insurance tangible and can improve value for all!
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BeAer outcomes for clients: access to credit, addiDonal
services, beAer price
Insurers: trust of the market, higher scale and renewals,
lower costs
Distributors: higher customer loyalty, enhanced core
business, commissions
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Why bundling is tricky?
Credit and insurance are expensive so the bundle can become unaffordable
Bundling with credit… subsidized if
possible
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VAS provided through mobile phones as farmers received: ‒ Weather forecasts and alerts
‒ Crop market prices ‒ Claims-related updates
But VAS need to be relevant and need to be used to have an impact
Bundling with value-added services
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Bundling with inputs
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Get farm location from SMS and monitor satellite imagery for that location
Insurance in the bag
Germination fails after 21 days without rain
Compensation sent to Farmer
via M-PesaFarmer can replant
and harvest the same season
SMS unique code to short code
Opens bag on planting, finds
card inside
→ → →
↓
←←
New Segment for insurer: builds trustFarmers insured grew from 200 to 350k over 4 years
Savings can be ‘tested’ by a farmer so can potenDally build trust for the enDre package
It is hard to sustain systemaDc savings behaviours
Bundling with savings
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PEPSICO MODEL IN INDIA: Disease free potato seeds, improved agriculture technology, disease management, SBI loans, improved transportaDon and cold-storage faciliDes, buy-back contract, weather insurance through ICICI Lombard and WRMS (late fungal disease; above 40% yield losses; trigger humidity and frost) Results in 45% producDvity and 100% increase in farm incomes 95% penetraDon rate among contract farmers; 75% among voluntary/
not-linked-to-credit Weather advisory messages to farmers
Bundling embedded in the value chain
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Insurer will never lead but gets scale and access to new segment
Bundling embedded in broader risk management programs
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Bundling can make incredible difference but should be applied with care!
Market research and pilot evaluaDon should focus as much on insurance as on the bundled services
Start with simpler bundles before you get to complex ones
Conclusions
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