Go mobile, get insured!

Choosing the right time and place, they say, is of essence in politics, war and business. At a time when Pakistanis are feeling more and more insecure about safety of their lives, belongings and near & dear ones, somebody has shrewdly carved a legitimate and attractive business proposition out of the situation.
China Mobile Pakistan (CMPak), in partnership with Adamjee Life, has recently launched an accidental insurance service, ong Insurance - a first by a mobile network operator (MNO) in Pakistan. The service provides accidental death and accidental disability insurance coverage, including coverage against mishaps occurring due to terrorism or other disasters.
Every valid Zong subscriber between the age of 18 and 59 is eligible to subscribe for this service which deducts a daily insurance premium of Rs2, Rs4 or Rs5 depending on the insurance benefit. Only one adult, blood relative can be nominated as a beneficiary. The policy term is one year and it automatically rolls over unless the subscriber opts out.
According to CMPak, the future claims will be settled in 3 to 5 working days after the completion of required documents.
The insurance service offers something to all the stakeholders. Customers can subscribe to a paperless, seemingly simple, hassle-free and easily accessible insurance policy.
Adamjee Life would capitalise on Zongs nearly 10 million strong subscriber base. The insurer has effectively widened its outreach through Zongs distribution platform, with negligible cost of new customer acquisitions.
While it still has the lowest ARPU among its peers, Zong has been the fastest growing MNO lately. With this service, Zong will have a much-needed additional and stable source of revenue.
The foray into the insurance territory is, however, bound to have some issues. In addition to the tax-exempt daily premium, Zong will also deduct its own service charges, over which an FED of 19.5 percent will be levied. The insurance benefits look very modest vis-à-vis the total daily deductions.
The single biggest deterrent is that there are no claims on surrender or maturity of the policy. Inclusion of investment or savings option could possibly lure reluctant subscribers. Creating awareness, especially on the policys terms and conditions, would be crucial. While the customer acquisition process is entirely paperless, the claims handling is certainly not.
Then there is the issue of moral hazard. The insured persons (i.e. mobile subscribers) could be exposed because one party (MNO) is taking their money (as premium) and is not responsible for it (insurance claims). The claims handling process is tricky and can erode any goodwill built over the years in no time.
Nevertheless, the launch of insurance service with an MNO is a testament to the fact that value-added services are the way to go, and that the opportunities for growth are certainly out there.
There are several exciting examples of mobile insurance services across the world. In Ghana, MTN mobile and Hollard insurance joined hands earlier in March this year to offer "mi-life" - a life insurance product. In the Philippines, Globe telecom has experimented with a hospitalization assistance insurance product that was linked to their international remittance service, GCash.
To protect the Kenyan farmers from unforeseen climatic disasters, Safaricom and UAP insurance in 2010 developed "Kilimo Salama" (means safe farming) - an index-based weather insurance product. Mobile operator Tigo has also partnered with MicroEnsure and Vanguard Life to offer "Family Care Insurance" to their Ghanaian customers based on their usage of airtime.
Although these services haven yet achieved any significant scale, their innovative approach is remarkable. The international success stories are mostly in developing countries because a majority of the unbanked and uninsured people there happen to be mobile users.
This is where the opportunity lies. According to a global market survey by McKinsey & Company, opportunities in the global mobile healthcare market were estimated to be worth between $50bn and $60bn in 2010. MNOs and insurance companies can have a hefty crack at this.
The future of insurance in Pakistan under the aegis of mobile financial services is very promising. According to a recent study by the Boston Consulting Group for Telenor, the number of adult Pakistanis insured could be increased to 4 million by 2020, compared to the abysmal figure of 2 million adults insured in Pakistan in 2011 - if mobile insurance is broadly introduced by several telecom operators from 2012 and onwards.
Such value-added services are the key to financial inclusion and unlocking the door of sustained growth. MNOs are in a unique position to cash in on opportunities like this.