Fintech ventures: Disrupting the norm

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Kudzanai Sharara
Real disruption!” Is how a senior executive in the short-term insurance sector responded to the coming in of Econet’s mobile based insurance product into the short-term insurance space.“(It) throws out risk assessment, which is fundamental to our business,” said the expert who requested anonymity for professional reasons.

By just paying for a third party vehicle licence through EcoSure Moovah, the company offers a value proposition (read freebies) which many players in the vehicle insurance licence space will find it hard to match and will have to dig deep to defend a business class that is giving the market 43,6 percent of gross premiums.

Adding freebies to the primary product is a concept which is not entirely new.

Residential stand developers have been adding life cover to stand buyers.

Fidelity Life Assurance used the same concept when it sold its residential stands in South View Park — a stand purchase included a life cover that ensured that the stand is fully paid for at the death of the primary buyer.

But unlike in the sale of residential stands where prices vary, EcoSure Moovah is coming into a market where the licence fee has been uniform across the board at approximately $36 with nothing much to differentiate players in the eyes of consumers.

It’s a volumes game and taking a haircut on margins could be a game changer that will draw volumes away from competitors.

Seeding the future

Econet’s hallmark is innovation. Nine years ago, 2009 to be precise, voice accounted for 94,7 percent of Econet’s revenue (50 percent if we exclude interconnection fees which accounted for 47,3 percent.

Today voice only accounts for 42,7 percent while the balance of 46,8 percent is derived from data and Fintech businesses — growing from a contribution of 37,6 percent in 2017.

While the portion from data decreased, that of Fintech businesses grew by 11,5 percentage points to 29,4 percent (17,9 percent in FY2017).

As we head into the future, Fintech businesses are set to continue growing. This will come with the continued investment into technology based businesses and other ventures into the digital media terrain.

We often hear that technology evolves so rapidly and we have seen how fast it can be through Econet. In less than a decade, Econet has transformed itself from a traditional telecoms company into a digital giant leveraging on technology to deliver innovative solutions to relevant problems.

The company continues to invest heavily in businesses across sectors but all leveraging on its expansive network and huge subscriber base of 11,4 million as at FY2018.

EcoCash has been the stand-out performer, but there have also been investments in other “techsmart” businesses “EcoFarmer, EcoSchool and EcoHealth” among others.

The company through its EcoSure brand recently got a short term insurance licence venturing into a sector that could fuel its next wave of growth.

The company has since taken steps to take a bigger chunk of the short term insurance market starting with vehicle insurance in a market with an estimated 1,2 million cars on the road and Gross Premium Written of $103,3 million as at December 31, 2017.

According to the Insurance Pensions Commission (Ipec) Zimbabwe has an insurance penetration rate of just 4,7 percent and Ipec targets to increase penetration to 20 percent by 2020 and EcoSure Moovah hopes to capitalise.

 

Why penetration is low

According to Ipec, one of the reasons why there is low insurance penetration is lack of awareness.

Most Zimbabweans simply do not have an appreciation of what it takes to have or not to have an insurance policy/contract.

Some people may not be buying insurance because they do not have an appreciation of its importance.

The other reason often given as much as it is just a mere excuse is that of low disposable income.

“Given the economic challenges we are facing as a country, insurance may be at the bottom of people’s priorities, with the priorities predominantly food, shelter, paying school fees for their children,” said Ipec spokesperson Lloyd Gumbo in response to Business Weekly.

However, the fact that the market offers some products with premiums as low as 50 cents, means the reasons go beyond issues of affordability.

Ipec also talks of negative legacy issues as a reason for low uptake of insurance products.

“The other reason could be because of legacy issues after the conversion of the Zim dollar to the USD era. Some people feel they lost out because of the conversion rates that were used by insurance companies particularly on life policies.”

But Econet is optimistic about the future believing that leveraging on its technology and subscriber base could work in its favour as it launches vehicle insurance cover.

There is potential for more disruptive products to be introduced in that short term insurance space, an industry that generated $236 million in gross premiums in 2017.

The added convenience that mobile based platforms bring is also set to attract those that viewed the process of getting ensured cumbersome.

Econet has already done that with Ecocash which now has 8 million subscribers and a 97 percent market share.

Phones now act as banks for millions of Zimbabweans who could not even dream of opening a traditional bank account.

With EcoSure Funeral cover the boundaries have also been pushed too and the service now has more than 2 million subscribers.

An offering that comes through mobile phones will bring with it a much richer and more user-friendly and intuitive access to insurance.

What is clear is that digitisation and technology offer opportunities to overcome many traditional barriers to entry.

The success of EcoCash and EcoSure Funeral cover shows that new technologies can rapidly foster greater inclusion.

Wake up call

In recent past, players in the telecoms sector have been morphing into a service with no discernable boundaries; shaping the development of the vast majority of industries present and yet-to-be created.

While it’s unclear whether EcoSure Moovah will reach the critical mass necessary to dislodge incumbents, disruption is a clear threat.

Traditional insurers must look for ways to “disrupt” back to reduce customer churn. A recent study by one of the world’s leading management consulting firms Bain & Company, revealed that in some markets, insurers have made strides in delighting their customers through digital channels, particularly mobile.

In China, Malaysia and South Korea, for example, insurance customers who use mobile channels are more delighted than customers using other channels.

“Let’s see what happens with claims but you can only ignore (the new player) at your peril,” said the senior executive.

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