In this case study session, Matthew GENAZZINI, Head of the Smallholder Safety Net Upscaling Programme (SSNUP) at Appui au Développement Autonome (ADA), presented the results of a project on linking insurance products with remittances for migrants in the United Arab Emirates (UAE).
Genazzini started his presentation by highlighting the relevance of remittances in economic development. Remittances are key to economic development both in the country of origin and in the host country of migrants. This can be summed up in two key figures: 1) one in nine people in the world depends on remittances for their livelihood, 2) in 2018, close to US$ 700 billion were sent in remittances; this amount is equivalent to three times the world’s international aid that same year. For insurance providers, it is interesting to work with remittances because there is a huge market potential, since a large number of migrants send money to their families every month. Insurance providers often approach distributors like banks, MFIs or shops to promote their products to a large group of customers. The idea of this project was to experiment and use remittances providers as insurance providers. As of September 2020, the project has proven to be a success, with 13,235 migrants already benefiting from insurance products.
Genazzini structured the presentation of this case study around the five main stages of the project:
1) market understanding, 2) partner identification, 3) business model and product definition, 4) pilot launch and 5) learnings.
The first stage of the project was market understanding. According to Genazzini, to design a good insurance product, it is essential to understand the market. After the market research, the project team found that 9 out of 10 people in the UAE are migrants, which makes it an interesting market. Migrants in the UAE are under a lot of pressure to support their family, which creates additional pressure on what would happen if they cannot send the money back home. Using the insights from the market research, the project team identified the main needs of the Indian and Filipino migrant workers. Their main concerns were the risks of accidents, health and death. A key point was that migrants in the UAE are often not formally in the financial sector, and their remittances are usually cash transactions.
The second stage was the identification of partners, a key element in the project. Genazzini noted that it was very difficult to identify partners other than Democrance for this project, a Fintech company that helped with the IT infrastructure. They decided to work with AXA as the insurance partner and with two small-scale start-ups: Rise, which played the role of a digital financial services platform, and HelloPaisa, a money transfer operator. These partners were crucial to the project as they were more willing to experiment and knew the customers better. Working with small-scale start-ups has a disadvantage because the customer outreach is lower. However, they had initially worked with a large MTO that pulled out of the project and lost a year in the process. In short, for innovative projects such as this one, it is best to work with small start-ups to prove it functions before working with larger organisations.
The third stage was the business model and the product definition. In this sector, designing microinsurance products that are simple and relevant is pivotal. For the project, they designed a set of three products. The first free product for migrants was a so-called freemium product, which was fully subsidised by the distribution partners. This product covered accidental death and total permanent disability. Then came an upsell product for which customers paid a premium and obtained coverage in case of partial disability, coverage of medical expenses, repatriation and free teleconsultation. Finally, a cross-selling product designed for families and other beneficiaries at home, which unfortunately was never launched. A key aspect of making this business model work was the IT platform developed by Democrance. The Democrance platform is at the heart of the model, enabling the correct flow of data, information and marketing material between the insurer, distributors, customers and beneficiaries. To answer one of the questions from the audience, Genazzini also explained that, in order to pay for these services, the distributors would take a small fraction of the remittance money sent by the migrant.
The fourth stage of the project consisted of launching the pilot. During this stage, they discovered that marketing and communications are also key aspects of an insurance product. If the marketing isn't right, a great product can end up failing completely.
The final stage of the project involved learnings from the pilot implementation. According to Genazzini, the main lessons could be summarised in five ideas. Firstly, this project involved a lot of time dealing with regulators; it is very difficult to find solutions for beneficiary families since these financial products are in two different jurisdictions. Secondly, they learned that partnering with smaller distribution channels really pays off, as it allows you to quickly test the business case, adapt it and then scale it up. He noted that Democrance is truly a game changer in this regard. Another lesson drawn is that this is a very difficult business model to implement, because it requires a balance between many different stakeholders. In addition, and more generally, there is a low awareness of insurance in this group of customers, so it is necessary to continue communicating its relevance. Finally, COVID-19 is having a negative impact on both remittances and insurance products linked to them.