Three Lessons from Mobile Microinsurance in Bangladesh

Bima, the leader in mobile-delivered insurance in emerging markets, has been working closely with Robi Axiata, the second largest mobile network operator in Bangladesh in terms of revenue, to offer a micro-life product, Bima Life Insurance, over mobile handsets since July 2012. 

Bima Life Insurance is a free-of-charge term life insurance policy offered to Robi prepaid mobile customers who stay loyal and spend a minimum level on airtime on Robi’s network. By simply spending at least $3.20 on airtime each month, a customer can earn and accumulate up to $650 worth of life insurance benefits, completely free. 

This initiative by Bima and Robi has since attained almost 4.5 million registered customers in just over 20 months of operations, and continues to grow. 

Bima recently commissioned a telephone survey of 446 active Bima Life Insurance customers in order to better understand the profile and behavioral patterns of mobile microinsurance customers in Bangladesh. The study uncovered three important insights about the use of mobile microinsurance in Bangladesh:

1. Demand for microinsurance products delivered via mobile extends beyond rural areas;
2. Demand is driven by preference for mobile, not by a lack of access to other channels;
3. Customers like the use of mobile for insurance, but still seek face-to-face interactions.

Demand for microinsurance products delivered via mobile extends beyond rural areas

The Bima Life Insurance product appears to be reaching our target segment of low-income, uninsured individuals. Using a profiling method based on the Grameen Foundation’s Progress out of Poverty Index (PPI), the recent survey indicated that 72% of Bima Life Insurance customers are living below the $2.50 per day poverty line. Seventy-eight percent of customers were not insured in any way prior to taking up Bima Life Insurance. 

A common assumption driving the deployment of microinsurance is that mobile is the only viable means of addressing underserved segments in rural areas, while urban areas are sufficiently reached by traditional distribution. Our survey gave us a better understanding of Bima Life Insurance customers and called into question this conventional wisdom. Bima customers are nearly evenly split between urban areas (49% of customers) and rural areas (51% of customers). Considering that only around 27% of Bangaldesh’s population is considered “urban,” there is a substantial over-representation of demand from urban areas.

This has implications for Bima and other microinsurance providers in assessing market potential and designing a product strategy for Bangladesh. The key takeaways are that the scope for microinsurance demand may extend to a far more substantial segment than typically assumed, and that product portfolios may need to address a wider range of needs and requirements, as befitting both urban and rural customers.

Demand is driven by preference for mobile, not by a lack of access to other channels

Another interesting finding from the study was that the average Bima Life Insurance customer is actually more likely to have a bank account than not. Our study revealed that 64% of customers actually possessed at least one bank account. The bank account could either be a traditional bank account or a mobile bank account, such as bKash. Even if we consider only the proportion of customers who are below the $2.50 per day poverty line, the percentage of customers with at least one bank account remains high at 63%. This suggests a relatively high level of access to banking services within our target segment.

The general perception is that the uninsured customer is typically one and the same as the unbanked customer. But Bima’s experience in Bangladesh suggests that the truth is more nuanced than this assumption.

In this market, several insurance companies offer microinsurance products via bank partnerships, yet the take-up of formal insurance remains staggeringly low. The results of our study indicated that even when customers are banked, they do not necessarily choose to purchase microinsurance from the banks. They prefer instead to obtain microinsurance via mobile. It is therefore a preference for mobile as a channel, and not a default choice, and our experience is that this is largely due to the convenience provided by mobile phone services. 

This suggests that, at least in Bangladesh, mobile can be a powerful channel to capture not only the customer segments conventionally defined as underserved or financially excluded, but also segments already within reach of traditional channels.

Customers like the use of mobile for insurance, but still seek face-to-face interactions

In our study, we surveyed Bima Life Insurance customers on their channel preference across a variety of interactions with an insurance company, including payments, customer service, and claims. Where payments are concerned, 55% of customers preferred mobile-based methods of payment over all other channels. However, when asked about their preferred channel for making a claim or performing a customer service request, between 52% and 66% chose face-to-face interactions at a physical branch as their preferred method. 

This is telling of how customer preferences differ, depending on the nature of the interaction. When considering payments, customers seem to value most the convenience of paying via mobile, so mobile is the best channel. When considering claims or customer service requests, customers still seek interactions where they can better establish a relationship of trust, so face-to-face interactions are preferred.

This finding is important for Bima and other microinsurance providers seeking to understand how to optimize the deployment of mobile microinsurance in Bangladesh. While the evidence points increasingly towards the efficacy of mobile as a distribution channel of choice, the application of mobile technology must still be balanced with a human touch, for specific interactions related to insurance. 

There is no “one size fits all” approach across markets, and microinsurance providers should try their best to understand specific consumer needs for each market, while remaining flexible and adaptable to respond to these needs at the point of deployment.