MR Microinsurance_2012_03_29.indd - International Labour ...

Th e technology revolution in microinsurance
Th e advent of smart card technology means that clients can pay premiums
without having a bank account. Smart card technology enables money to be
stored on an integrated circuit chip, and payments can take place without the client
having to be online or connected to a network. Th is is particularly important
if microinsurance is to function eff ectively in areas with limited connectivity. For
example, in India, customers of HDFC Ergo’s Revive personal accident policy
can pay their premiums using smart card technology provided by FINO. 1
Ordinary airtime is also being used to facilitate premium payments. Unlike
smart cards, an airtime payment requires the client to be connected to the mobile
phone network, so the client’s phone can communicate with the payment intermediary
(mobile network operator) or insurance company. A number of personal
accident products have emerged using this approach, including by Metropolitan
in South Africa (Cover2go), Kenya Orient (Safari Bima), and Philam
Life in the Philippines (AKSItext – see Box 24.2). Th ese policies can be initiated
via text message, with the premium payment taking place through a deduction
from airtime.
For both the Cover2go and Safari Bima products, a wireless access service
provider (WASP) is responsible for converting the airtime into real currency.
Th e experience of these two products indicates that the WASP takes a big bite
out of the premium, as the commission can cost up to 40 per cent. While technology
makes distribution of the product possible by enabling premiums to be
paid, in this case it has a signifi cant impact on the actual risk premium available
to provide cover for the client (Smith and Smit, 2010c).
Box 24.2 Premium payments through airtime deduction: Th e case of AKSItext
Philam Life’s AKSItext accident insurance product is purchased by sending a text
message containing the individual’s name, birthday and physical address to a
specifi ed number. Cover commences 24 hours after receipt of the confi rmation
message containing the individual’s policy number. Premiums of US$0.25 provide
cover worth approximately US$250 for 15 days, and are automatically subtracted
from available airtime if airtime billing is prepaid, or added to the policy-
holder’s postpaid bill. Claims are paid out directly from Philam Life offi ces by
cheque that can be cashed at any bank.
Source: Adapted from Smith et al., 2009.
1 Financial Information Network and Operations Ltd (FINO) is an India-based technology payments
platform provider (see Box 25.6).
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