Segmenting an inclusive insurance client base in Kenya
Based in a small town in Western Kenya, Aaron has been a potato farmer all his life. Married with five children, Aaron’s life revolves around his kids and his farm. Currently, his main ambition is to own a small truck so he can transport his produce and farm inputs, and therefore avoid high transportation costs.
Far from Aaron’s town, 23 year-old Esther lives in Nairobi and works in one of the many beauty parlors in the city’s central business district. She wants to save money and move to her home town in central Kenya, where she hopes to start her own beauty parlor. Despite their very different lives, Aaron and Esther have at least one thing in common: neither of them have ever bought an insurance product. In fact, neither of them have even heard of any insurance product that met their needs. This was a common response during interviews I conducted as part of a market research exercise with my host organization, Britam, in Kenya.
I am based as an Impact Insurance Fellow at Britam’s microinsurance business unit. The objective of my fellowship project is to support the unit in expanding its portfolio by designing client-centric products and leveraging digital innovation. Digital innovation includes partnerships with digital distribution channels, such as mobile network operators, and automating business operations. Our market research was an important first step in informing both process and product design.
Reflecting on the research, we realized that while Britam had set up a microinsurance unit to serve those excluded from traditional insurance, our understanding of this population was very limited. The lack of tailored insurance solutions for the low-income market in Kenya’s wider insurance industry suggests that other insurers also fail to fully understand this segment. When the concept of serving customers at the bottom of the pyramid was first introduced in the market, businesses — including insurers — became aware of the potential of this market segment and microinsurance and mobile-based insurance products were introduced. However, insurers thought about the low-income segment as a uniform customer base, and few attempts were made to understand the reality of this heterogeneous group.
To improve our understanding of the target market, Britam decided to conduct market research to identify various customer sub-segments, their needs, and possible ways to reach them. We built profiles of customers based on their behaviours, attitudes, beliefs, values, perceptions and motivations. To inform product design, customers’ current use of financial services and institutions were studied. Findings from this exercise were eye opening for us. Our research showed that this target population is far from uniform; it is in fact made up of a wide range of customer personas with different needs and attitudes towards insurance.
In our above example, Esther felt that an insurance product that protects her against theft of her belongings (such as her mobile phone) would be most valuable as she lives in a Nairobi neighborhood that is prone to petty crimes and chain snatchings. Aaron, on the other hand, wanted an insurance product that would cover his children’s school and college fees in case something happened to him. Those interviewed for our market research not only wanted different products, but also had very different preferences for how they wanted to purchase insurance. With her fast-paced life in Nairobi, Esther has no time to visit an insurance office or sit down with an agent. She wanted an easy-to-understand product that she could purchase directly from her mobile phone and pay for using mobile money. Aaron, on the other hand, wanted to purchase an insurance product after a discussion with an insurance agent who could explain the product offering in detail.
These findings helped us identify and group customers into sub-segments that can be targeted by specific products and distribution channels. One example of such a product is a mobile-based insurance product distributed through a leading mobile network operator for urban and peri-urban Kenyans. Britam Microinsurance has overhauled its product design and distribution approach based on its market research findings in order to make its offerings more client-centric. In the next blog, I will share the implementation and early results of this approach at Britam.
