1. Emerging business models: technology innovations and their regulatory implications JACKY HUMA 41st AIO CONFERENCE 2 JUNE 2014, Kigali

2. Outline • Trends from a regional perspective • Overview of technologies in mobile insurance (m-insurance) • Highlights of the m-insurance business in Africa • Examples of ‘sprinter’ schemes • Situation in South Africa • Regulatory challenges • Overviewofchallenges • Consumer protectionrisks • What can go wrong in technical innovations? • How to regulate m-insurance? • Conclusion

3. I - The m-insurance business in Africa –a regional perspective Insurance that relies on the mobile phone becoming a dominant technology as opposed to others technologies (Point of Sale, Internet sales etc.) • MNOs and special intermediaries driving this • "Freemium" products on the rise • Involvement of mobile phone in insurance value chain allows insurers to • Leverage on large customer bases • Piggy back on a trusted brand • Use mobile for various services (enrolment, payments, claims settlement) • Achieve massive scale • 1 million clients of schemes in Ghana and Tanzania, 80% of which had never had insurance coverage before

4. African ‘sprinter’ schemes The potential for scale of m-insurance brings significant opportunity to increase financial inclusion as demonstrated by the m-insurance ‘sprinters’: • EcoLifeZimbabwe reached 20% of the adult population in 7 months • TigoGhana reached almost 1m lives in 12 months • Leo Namibia reached 15% of the adult population • Airtel Zambia reached an estimated 2m at launch • Robi Bangladesh has reportedly hit 4m clients • MTN Nigeria sign up 100,000 clients a month in Nigeria Source: Leach 2014

5. Situation in South Africa • Vodacom MPesa Funeral Cover (paid through airtime) • Cover2Go accidental death & funeral cover – Metropolitan Life Insurance • Take It Eezi My Funeral Card – Hollard Life (Paid through Cash) • Clicks offers a ‘free’ funeral insurance product (Loyalty) – Regent Life

6. II - Challenges for insurance supervisors With regard to mobile phone based channels, insurance supervisors need to be concerned with: • defining the relationships/responsibilities of multiple parties: • disclosure requirements: the client needs to -: • know that they have insurance; • know who the insurer is; • know their obligations under the product; • know how to access the services under the product; • know when the insurance ceases. • Regulatory coordination necessary between • Telecommunication Regulator • Banking/Payments Regulators • Insurance Regulator

7. Challenges for insurance supervisors: consumer protection risks Nine concrete consumer protection risks associated to m-insurance business: • prudential risk • aggregator risk • sales risk • policy awareness risk • payment risk • post sales risk • data risk • regulatory backlash risk • systemic risk Source: A2ii Synthesis and Leach/FinMark Trust (upcoming 2014)

8. What can go wrong? Lessons learned from an m-insurance failure • Yet Ecolife Zimbabwe shows risks m-insurance brings • EcoLife launched in October 2010 as a partnership between First Mutual Life, Econet and Trustco, an (unlicensed) technical service provider. • Scheme was cancelled in 2011 due to a dispute between Econet and Trustco over royalties, the scheme was cancelledwith following impact: • 20% of the adult population (1,6m) lost their cover overnight • 62% not notified about discontinuation of EcoLife • 63% Ruled out use of similar products in future • 42% Dissatisfied with insurance • 30% Better ways to protect against future problems than insurance Source: Leach 2014

9. What can go wrong? Lessons learned from an m-insurance failure • At this level of exponential growth, some m-insurance schemes can have market wide impact and may require more regulation • For m-insurance, the business risk framework needs to be extended to include data risk, systemic risk and regulatory backlash risk. How best can regulators manage the potential risks arising from m-insurance products?

10. III - Conclusions for industry • Know your partner very well • Be persistent to sell value for money insurance products • Learn from pitfalls of other schemes and identify them early • Take care of the precious consumer • Start with a predefined exit strategy • Contribute to a real success in the insurance sector

11. III - Conclusions for regulators • Understand the business • Collaborate • Make sure that consumer recourse options are available • Monitor differently • Consider the business exit and intervene early

12. THANK YOU