Managing the complexities of insurance partnerships
A case study on Turaco and Fenix International in Uganda
Generally, health insurance has a very low uptake across Africa. According to Finscope, 53% of Ugandan adults report experiencing a health risk in the last year but only 1.4% of adults have any kind of formal insurance. Ugandan insurtech Turaco created a hospital cash product to help close this gap and decrease funds being diverted away from loan payments, to their partner Fenix, to deal with unexpected health costs. This pilot was a part of the Microinsurance Challenge Fund by FSD Uganda.
To sustainably sell microinsurance products insurers need to partner with aggregators. Microinsurance products aim to provide insurance cover for low-income individuals and so, to be effective, the costs need to be kept very low. One way to keep the cost of distribution low is to work with partners that already have large customer bases that can be distributed to. In this case study, Turaco partnered with Fenix International, a company that builds and sells solar home systems that allow customers to purchase home electrification kits on credit. This partnership allowed Turaco access to Fenix’s customer base of over a million customers in Uganda.
Although there is a lot of potential in these types of partnerships, they sometimes fail due to a lack of alignment in the objectives of the partners. This is illustrated in the failure in many of the partnerships where MNOs saw insurance as a short-term customer loyalty programme or even as competing with the MNO’s core business. In the case of Turaco’s partnership with Fenix, loan repayments improved but the number of non-performing loans did not decrease as initially anticipated. This was in part because the agents selling the solar home kits and explaining the insurance product were incentivised (through commission) to emphasise full loan repayment. This meant that the agents did not sufficiently highlight that the customer only needed to make half of their payments to access health coverage. This all–or–nothing approach meant that at the end of the pilot, 82% of customers were still unwilling to pay for insurance as they could not afford additional payments at the time.
This case study emphasised the importance of microinsurance products needing to be very simple and easy to understand, for both customers and distribution agents. Many microinsurance customers have never had insurance before; in the pilot, 92% of customers surveyed indicated this was the only insurance cover they had ever had. These customers need to have the full process and benefits of the insurance explained in a way they can understand. This also means that when partners’ sales agents are used to distribute microinsurance, they need to understand the product well enough to inform customers of the product’s functions and value. In the case study, the customers might have had trouble understanding the way the health insurance product worked and therefore did not utilise the partial cover from meeting at least half the repayments.
For more detail on the pilot and the other lessons learned, please see the full report
- Resource type Case Study
- OrganisationCenfri, Financial Sector Deepening (FSD) Uganda
- Year of Publication2021
- Keywords Microinsurance