Africa remains grossly underinsured despite increasing economic activity and much wider prosperity. According to Swiss Re sigma, the continent accounted for just 1% of global non-life premium in 2016. Non-life insurance spending was 0.9% of continental GDP. When South Africa, which accounts for almost 70% of continental premium income, is stripped away, the rate is even lower

There are many reasons for this not least insurance education, very low income and other more pressing things to spend income on. However, there is also underlying difficulties in selling or making available and transacting insurance. This where micro insurance comes in.

So, where do you start from to tackle these many challenges and build a successful insurance sales process in a country like Tanzania?

This where Tanzania based TanManagement Insurance Brokers Limited steps in. They have been working with the Tanzania regulators, TIRA,and have developed and recently launched a new solution based on Vouchers to sell insurance. The initiative called “Bima Time/ Bima Vocha” aims at establishing over 50,000 distribution points over a 3 year period in Tanzania.

Today there are many vendors selling phone top-up vouchers, these are sold in many towns and cities, by many Kiosk/ Shop/ Supermarket or Street Vendors, throughout Tanzania. These vendors provide an established method to make insurance reach the uninsured masses.

TanManagment came up with the idea to use this network to sell insurance via a new insurance voucher. This required various regulatory changes and support from TIRA as well as he Jubilee Insurance Company of Tanzania Limited.

This process uses micro insurance which when coupled with a new distribution model forms a very effective way to sell and distribute insurance. The target market for these new micro insurance policies are the Low Income Earner, typically a family member who is in regular employment and want to ensure that their family is safe if something happens like death or illness.

Typically these families are also the ones that cannot access insurance services through traditional methods or phone APPs (Which require internet). The difficulty has always been how to sell them an insurance policy.

With TAM, they have now the voucher ready and a distribution in place and it is starting to be a success. They have started with Travel Insurance (whether by road, rail, air or sea) within Tanzania. Allowing people to take out cover for a particular trip or for a few months or a year.

Cover is under 3 categories.

a. TZS 200/- for a 3 days Cover of TZS 1,000,000/- cover for Death (25% for Permanent Disability)

b. TZS 15,000/- for a 6 months Cover of TZS 2,500,000/- cover for Death (25% for Permanent Disability)

c. TZS 25,000/- for a 12 months Cover for TZS 3,000,000/- cover for Death (25% for Permanent Disability)

The benefits of a micro insurance policy are massive of course. Insurance cover enables people to recover quicker when something unfortunate strikes. Allowing it to be sold via voucher system takes away many of the payment issues and also allows for much wider distribution.

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TanManagement Group CEO, Mohammed Jaffer, says “We have always been a Corporate and SME Broker but in 2017 we decided to branch-out into Micro-Insurance. We looked at various models and after 16 months of research, back and forth with our Regulator and IT specialists, we zeroed in on this Platform.” He continues, “Give it 12 to 16 months and this will cover the entire Country as we are targeting over 50,000 distribution points over 3 years which means 15,000 per year. That itself would be the largest network ever in East and Central Africa or perhaps even Africa as a whole.”

When asked about the foreseeable challenges, Mohammed responded, “The 2 biggest challenges we foresee are, firstly Educating the Masses, this is more difficult than it may seem because Insurance has always been seen as a very tedious task, with long standing queues, paperwork and etc – with this Voucher based platform, a policy is issued within 60 seconds, that paradigm shift is what We will require to educate the masses on.”

“The second challenge is establishing the distribution network Country-Wide. The Kiosks themselves are run by fellow Tanzanians who themselves have very little or no knowledge of Insurance, thus establishing the distribution network itself requires us to train these Vendors. We have trained over 200 Kiosks as at date and are aiming at 2,000 by the end of January 2019. This may seem like a large number but our target is 15,000 per year which means every month we have to train atleast another 1,500 and that requires a sizeable funding too.”

Insurance penetration should increase with this type of policy and the distribution model allows for education that is needed to explain the benefits of insurance in general and for this type of policy in particular.

With sales already starting to be achieved, 2,500 since its launch in November, TAM are now thinking of other products

  • Medical Insurance

  • Life Insurance (Adults)

  • Life Insurance (Children)

  • Agriculture Insurance

Further Reading

why microinsurance

why disasters need insurance

africa insurance potential

At Microinsurance we are focused on changing the way business insurance is developed and processed. We are insurance with an API. We are in the forefront of that change; developing policies by the season, job, by the hour, by the day and by the Km, thus fitting our model to that of the platforms and the way small and micro businesses see risk. We are unbundling business policies so that the cover offered fits with peoples and business needs or the actual job or process being undertaken. Making Business Insurance transactional.

Posted in MicroInsurance blog on Jan 03, 2019