Mobile insurance is insurance sold through and with mobile network operators, offers a strong value proposition for deepening insurance penetration. Mobile insurance from telcos has been dominated by loyalty models, in which a mobile network operator (MNO) pays an insurance company to provide free insurance to its clients in order to increase client loyalty or airtime usage. These products are dependent on the business models and marketing priorities of MNOs. As mobile markets and MNOs’ priorities evolve over time, insurers need to be able to answer two questions to remain relevant to the MNO.
What is the MNO’s current business objective?
Insurers aim to change client behavior to make them more loyal to the MNO (and therefore justify their premiums). Broadly, outreach (having more clients), increased usage (making clients use more air time) and user stickiness (making users stay in the network) are marketing priorities of MNOs. However, an MNO’s desired client behavior can evolve depending on the maturity of the mobile market in the country (see figure for examples). In a rapidly growing market, MNOs focus on aggressive client acquisition, in maturing markets they may focus on loyalty as acquiring new clients becomes more costly, and in a saturated market priorities may switch to revenue generation from existing clients through multiple services.
Therefore, to remain relevant, insurers need to align themselves with these changing business objectives. It may be flawed to assume that MNOs will always be interested in investing in only one type of client behaviour.
Whose loyalty matters?
Airtime clients differ greatly based on how long they have been using the network, as well as demographic and usage characteristics. For example, a great deal of customer churn takes place within 90 days of becoming a customer, when clients who are dissatisfied with the service leave. If a client stays beyond 180 days, on the other hand, they are unlikely to leave due to marketing campaigns of competing networks. Insurance makes little sense as an incentive for either of these groups, but can be powerful for those in the middle, who leave after 90 to 180 days for more attractive schemes.
Unless MNOs segment and target clients carefully, they will waste resources paying premium for client segments where the impact of loyalty schemes is minimal or negligible. And unless insurers can respond to different client segments, they risk bringing little value to MNOs.
To improve the performance of loyalty insurance, it is vital for insurers to consider versatile product designs that respond to market evolution, as well as a segmented approach, to deliver on the business objectives of partner MNOs.