Building disruptive business models to improve insurance penetration in Kenya
Equity Insurance Agency (EIA), a subsidiary of Equity Group, offers a wide range of insurance products to over a million customers in Kenya, in partnership with insurance companies. Initially, EIA only distributed insurance products through Equity Bank’s network of branches. However, the emergence of digital platforms and alternative banking access points (such as banking agents) has changed the way customers perform banking transactions, with very few customers now stepping into a bank branch.This shift has made it harder for EIA to reach potential customers.
Faced with this challenge, EIA re-evaluated its distribution strategy and came up with a multi-channel distribution strategy. This strategy, known by the acronym BAT, is designed to help EIA reach previously excluded customers and provide a better customer experience.
BAT stands for:
1. Branches — specialize in complex, low-volume, high-ticket products for small and medium businesses
2. Agency Network — offer simple, high-volume, micro and retail products
3. Technology (digital channels) — used for simple products and by customers who prefer self-service
Each channel will specialize in offering products to specific customer segments, depending on the channel’s capability and reach. EIA has restructured its operations, leveraged Equity Group’s successful mobile and digital distribution channels, and partnered with insurtech companies to help it along this journey.
Branches have been restructured to focus on insurance for small and medium businesses. From hiring regional managers focused on securing key accounts, to modifying incentives, structural changes have been made to support branches in selling complex, high-ticket group products.
An agency network to help reach the masses. Equity Agency banking, with its 35,000+ agents, has proved to be one of the most successful distribution models in Kenya’s financial sector. If this network can be used to deliver insurance services, they will be able to close geographical and physical barriers to insurance. The network will also be able to deliver insurance services at affordable costs to disadvantaged and low-income segments.
Technology is being used to enhance customer experience through digital sales platforms. In partnership with insurtech companies, EIA is building online sales and service platforms that can be accessed through feature phones as well as smartphones. EIA recently launched its first mobile insurance product on the Equitel mobile platform.
Lessons
1) Building an omni-channel business model facilitates a seamless customer experience. EIA recently launched a mobile health insurance product called Riziki,which has helped around 100,000 customers to buy insurance at the click of a button while conducting banking transactions on a feature phone. This allows customers to access banking and insurance solutions on the same platform. EIA is working towards allowing customers to buy insurance and make claims on its smartphone app, its website and through banking agents to provide a truly seamless experience.
2) Understanding customers and their needs and preferences is key to building a strategy to effectively serve them. EIA conducted focus group discussions with various customer segments to understand their preferences. This research revealed differences among segments on their insurance purchase decisions. EIA used the results to construct its multi-channel distribution and digital strategy for each segment.
3) Build, buy or partner: choosing the right innovation strategy is critical to success. Time-to-market is key to innovation. Equity found that partnerships are often the best and fastest way for a go-to-market strategy. EIA has formed partnerships with insurtech companies, governments and other distributors to build innovative distribution models. However, these need to be designed with care as partners’ culture and structures may differ to those of EIA.
4) Leveraging existing infrastructure allows products to be scaled more rapidly and more efficiently. Equity Group, with over 11 million customers in Kenya, has created successful mobile and digital banking distribution channels. They are leveraging these platforms and applying the lessons learnt in the process to their insurance business. As a result, EIA is segmenting customers and matching product types with distribution channels. The recently launched mobile insurance product, which has been acquired by around 100,000 bank customers in three months, is an early demonstration that scale can be achieved quickly and effectively by leveraging existing infrastructure.
