Africa’s Legacy Insurance Market Disrupted by Digital-First Players

In many African countries, huge uninsured populations have been underserved by the traditional model for medical coverage, excluding all but the wealthiest individuals.

For example, in the markets where Nairobi-based InsurTech firm Turaco operates — Kenya, Uganda and Nigeria — “the vast majority of the population doesn’t have insurance,” Turaco CEO and Co-founder Ted Pantone told PYMNTS in an interview.

The reason for this is not a lack of insurers, he explained, but rather that traditional insurance companies are “focused on the top five, 10% of the market.” And because the legacy approach is built around agents selling individual policies, they have to sell expensive products in order to earn enough commission, he said.

Read more: Tech Makes Health Insurance Affordable, More Accessible in Emerging Markets

To rectify this problem, Turaco has set about transforming the way insurance is distributed by doing away with the old agent-driven sales model. Instead, the company employs a digital-first approach built around partnerships to market, sell, and deliver insurance policies.

Explaining Turaco’s partnership model, Pantone said the firm partners with other businesses that have a large user base, whether that be customers or employees, and then offers insurance plans on a business-to-business-to-customer (B2B2C) basis.

Through these partnerships, Turaco is able to leverage the work its partners have already done to pick up users, decreasing the cost of customer acquisition. “It works really well because it’s a nice new revenue stream for all the partners that we work with without them having to do a whole lot of work for it. And it’s a very effective model for us because it enables us to achieve a lot of scale very quickly,” he said.

The firm’s partners include banks, mobile network operators, telecommunications companies, microfinance institutions and gig economy providers, but as Pantone noted, the basic business model could theoretically be extended to “any user base of any business that has an ongoing financial transaction with their users.”

Related: Healthcare-as-a-Subscription Breaks Down Payer-Provider Pain Points

These partners can create “multiple layers of value” by packaging together insurance with existing services, he continued, including generating additional revenue, increasing customer loyalty and the overall resilience of their customer base.

To emphasize the additional value that Turaco creates for businesses, Pantone pointed to the firm’s above-50% conversion rate among eligible customer pools and “very close to 0%” rate of policy cancellations.

These numbers, he further explained, have been sustained by high demand for insurance across the countries and sectors that Turaco operates in. As Pantone puts it, huge markets are opened up “when people realize that they can actually afford an insurance product for $1, $2, $3 a month.”

Growing Digital Payments

Pantone has big ambitions for Turaco, which is already live in three countries, and would eventually like to see the company insure up to 1 billion people. He acknowledged, however, that this is an “audacious goal,” but considering that in Nigeria alone there is an estimated 140 million people without any health coverage, there’s certainly scope for the right solution to kickstart an insurance revolution.

And despite the uniqueness of the Nigeria market and its view on insurance, Pantone insisted that Turaco will leverage two factors that exist in all the markets it does business in: low insurance penetration and a “dramatically increasing number of people transacting digitally.”

So, while the company’s expansion into the Nigerian market is “still early days there,” the significant traction they have already experienced in the West African country could lead to the country being the same size or larger than the rest of the business in the next 12 months, he added.

To further tap into Africa’s growing digital payment systems, the firm works with local FinTechs, specifically mobile money operators, across markets, including in countries such as Nigeria or Uganda, where the market for mobile money payments is more fragmented.

As well as accepting payments, Turaco also pays out claims via mobile money, helping to reduce the time between making a claim and receiving the subsequent payment, which often happens on the same day.

This digital-first approach is carried all the way through the claims process, with most of the reporting and documenting being carried out via WhatsApp, because “that’s what people like to use to communicate,” Pantone said.

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