How to open up a market of millions of underserved customers
Create Impact is the core message of the DIA Impact Series. The DIA Impact Series are editorials focused on worldwide impact of insurtech, and will be presented to the DIA audience over the course of the next few months. Erlijn Sie recently launched Reimagining Financial Inclusion. A book that features breakthrough innovations, courageous entrepreneurs on a mission, about immaculate execution and success at scale. Time to ask her more about why she wrote the book and what especially insurers can learn from reading it. (Photo credits: BIMA, one of the companies mentioned in the book)
Erlijn, why did you decide to write this book?
Erlijn: “Having worked as a business consultant for large corporates (many of them in the financial service sector), I was triggered by the wave of a ‘new’ type of organisation at the start of this century: the microfinance institutions. They put all good business practices in place to serve the low-income people. They learned how to organise differently, in such a way that they could offer savings and/or loans to families with small pockets, at scale.
This first wave brought me to co-found Microcredits for Mothers, providing small loans (on average 90 euro) to the most excluded people in South- & Southeast Asia, reaching over 25,000 households. The ‘only’ innovation Microcredits for Mothers brought to the world was that we worked with a blended finance model: providing loans, with no-risk capital (donations). This is how I learned banking and financial services can be done different, in such a way that it IS actually possible to support the most volnurable, low-income families in the world. In hindsight, this was perhaps part of the 2nd wave.
Many others made this second wave, where financial services at large, from proper/fair wage, savings and loans, but mortgage, insurances and pensions too, were made available to the poor. I wondered, why the ‘larger’ corporations are waiting and holding back, as it’s not a matter of not knowing how-to. We know how. We just need more large banks, insurers and other financial service providers that WANT to go there. That want to put their weight and power behind this 2nd wave. If you see that you can make a difference -seeing is believing, I hope- it makes you WANT to make a difference. That’s why I wrote the book.”
Why is financial inclusion not only beneficial for the poor, but also for insurers?
Erlijn: “The base of the pyramid, the low-income people, is where half of the world population resides. The core issue why those in dire need of financial services are underserved is that it is too expensive to reach them. However, in the recent decade, the game changers I feature in the book have demonstrated, that with technology and new ways of organising, it is becoming possible to serve them, at scale. Which basically opens up a huge market of multimillions of customers to financial institutions such as insurers. Giving access to financial services supports these people to make something out of their lives, and grow their wellbeing and welfare, contributes to building a huge and potential market out of this ‘other half of the world’. Which is as a long-term investment of your business.
On the shorter term, you also make the work at your company more meaningful and satisfying for your employees. One of the major challenges of the insurance sector is company pride and positive (young) employee branding. Committing to grow financial inclusion for all will bump up employee branding.
There are new markets out there, and there’s a lot to learn when it comes to new ways of organizing and developing new business models when teaming up with game changers as described in the book.”
What could be the role for insurers in particular?
Erlijn: “The role for insurers is particularly relevant, in these un(der)insured parts of the population. The global insurance gaps are hardly closing: many people around the world still don’t have access to insurance. We find most underinsured live, eat, pray and work in countries ‘at the base of the pyramid’ of our global value chain, like Bangladesh, Indonesia, Philippines, Nigeria, Vietnam, Egypt, India, Turkey, China.
These areas are typically prone to natural catastrophe, but also where we manufacture and source a lot. If you look at it from a system’s level, with a bird’s eye view; if you look at ‘risks’ and how to prepare for them, where are the biggest risks? And how do you solve them? Selling more of the same to the same client base? Are you choosing the short term, or the long term solutions? If there’s water on the floor of a building, will you sell a solution for a leaking water tap, or will you invest in building a roof over that building. In the longer run, there is a lot to gain: from the environmental perspective, from the human perspective – and subsequently also from the insurer’s perspective. That is, for insurers who want to stay relevant for society.”
You say that we know how to untap these new markets – how then?
Erlijn: “We need insurers to make our world more resilient. With their capital, their knowledge and their global presence, they can make a difference for ‘the other half of the world population’ that is currently un-insured. This is not by selling more of the same insurances to the same people. This is by discovering and building new markets.
For this, insurers need to acknowledge that insurance-as-usual does not work in those new markets and new insurances for first-time-buyers are by default different. But there are game changers out there, who’ve done it, reaching millions of low-income people in developing and emerging countries who are buying insurances for the 1st time. So, we know how it can be done, also at scale.”
What’s the recipe for impact?
Erlijn: “What these game changers are showing us: there are five levers that insurers can use to reach, include and be of service to low-income people. Next to that, the levers combine unique new ways of organizing to build inclusive insurance models. What the beauty of it is: these game changers do not do it alone in isolation, they team up with insurers and other strategic partners, and operate in eco-systems. So, you are invited to join. There’s an opportunity not to miss.”
Final question: in one sentence, what do you hope to achieve with this book?
Erlijn: “I want insurers to see the powerful role they can play, and the huge difference they can make, not just for the other half of the world population, also for themselves, their companies, their employees.”
This editorial is part of The DIA Impact Series. Interested in learning more about this subject? Click here to read the book Reimagining Financial Inclusion or check out the panel discussion Financial Inclusion For All presented by Erlijn Sie on DIA TV.