Page 31 - The Digital Financial Services (DFS) Ecosystem

ITU-T Focus Group Digital Financial Services
Ecosystem

• lack of understanding of financial products

• over sophistication of the investment industry
• cost and fee structures in the investment industry
• rouge investment advisors

• lack of regulation in the emerging markets
• limited product offerings in the emerging markets for low value investments
• limited liquidity in emerging market stock exchanges

As the industry matures and a deeper offering develops then investments will potentially emerge as a tool to
greater financial health. In particular, the use of various crowd-funding platforms to raise funds for smaller
merchants is a topic that will be interesting to watch.

2.2.8 Insurance Services

2.2.8.1 Description

Mobile insurance is insurance whose sale and/or administration and payment is facilitated by a mobile phone.
Insurance products are aimed at protecting individuals or families from a variety of risks such as illness, death,
crop failures and accidents. The growth in mobile handsets and associated distribution benefits accompanying
them has enabled insurance firms to design applicable micro insurance products and reach customers at the
Bottom of the Pyramid.

Products currently focus on health (such as hospital plans) and life (death cover). Interesting agro-insurance
products which protect small scale farmers against drought and excessive rainfalls have also been developed.

Premium collection models vary with some MNOs using eMoney to collect premiums and others deducting
premiums from customers’ purchased airtime. In some instances insurance is provided as a reward for
purchasing a specific amount of airtime and in others insurance is being offered as part of a loyalty value
proposition.

At the end of 2014, the GSMA reported that there were 100 live mobile insurance services globally, and as of
June 2014, the industry had issued 17 million policies and was growing fast.

2.2.8.2 Attributes

Product attributes for mobile insurance include:

• Scale (or at least the potential for significant scale through mobile)
• Typically low value simple products (reflecting the low touch model)
• Convenience (access through the mobile infrastructure)

2.2.8.3 Business Model
The business model for mobile micro insurance products is similar to the traditional value chain and broken
down as follows:

• Reinsurer, Insurer (risk carrier): designs appropriate products and pricing based on market and risk
assessment, takes a share of risk and premium to cover claims as well as profit margin

• Administrator / Technical service provider: earns commission or administration fee and in some cases a
share of profit for claims processing

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