Can Sachet Insurance Improve Insurance Uptake in Africa?

sachet insurance

Several sectors, services or products in emerging markets have or will witness the phenomenon of a sachet economy. Take a look at India’s financial services; they are making a significant advancement and boosting last-mile financial inclusivity to its financial products with sachetisation as a core concept across lending, banking, pension and insurance products. 

Several reports in Africa identify poverty, illiteracy and religion as some of the top reasons for the low uptake of insurance. The popularity of sachetisation in some African countries means it could help increase insurance uptake, onboarding new consumers to experience the importance of owning a policy and turning them into raving fans for products in the sector.

Sachet insurance policy, also known as small or bite-sized, is a non-comprehensive insurance plan. This type of insurance policy addresses consumer needs and allows for easier onboarding of new consumers. The concept of sachet insurance comes from “the sachetisation of products”, a business strategy organisations adopt to introduce their brand to the market or service customers during trying economic times.

Sachetising often gets bad press from scholars who believe it is not a lasting innovative solution around poverty. We would like to believe sachetisation is not only applicable for emerging or poor economies. Trends in the United States financial sector supports this claim because not long ago, investment organisations like Robinhood changed investing by introducing sachetisied investment plans. It allowed users that opt-in for the fractional shares stock trading product to own a small percentage of shares of organisations like Apple. 

Robinhood’s co-CEO Vladimir Tenev confirmed to CNBC in a 2019 interview that over 200,000 Robinhood users were “already in line” for fractional stock feature trading before launch. The Robinhood makes us believe sachetisation can help consumers weigh risks or introduce them to a new experience at a minimal cost.

If you are from Nigeria, an example that typically comes to mind is the sachetisation of milk in Nigeria by Promasidor’s Cowbell Milk. The brand did not only gain market share in Nigeria; more low-income families could afford milk they needed it. It eventually led to many competing and industry-leading brands adopting the same strategy.

Some other examples across several sectors in Africa validate that sachetised products or services can help insurance and non-insurance businesses reach a larger audience and create niche consumers that never would have existed. Let’s look at ways sachet insurance can improve insurance uptake in Africa.

Ways Sachet Insurance Can Improve Insurance Uptake In Africa

1. Enable Financial Inclusivity: Sachet insurance products will enable the inclusion of low-income earners to be protected from financial loss. Lower premiums and short-termed covers will provide the soft landing that such members of society would need to navigate through life’s unforeseen circumstances.

2. Opportunity to Customise Insurance Products: Sachet insurance provides an opportunity for incumbent and challenger insurance organisations to customise insurance products according to the specific needs of consumers. Customisation of insurance products will also address the needs of consumers who currently consume insurance but need more tailored options beyond what police covers offer. 

3. Makes Premiums Simply to Buy: Cost-conscious consumers will find sachet insurance covers more simple and easy to purchase. With new trends in digital insurance like embedded insurance covers, consumers will have access to more premiums that fit in within their purchase habits. 

4. Targeted Marketing and Sales: One of the many challenges facing marketing and sales of insurance products is the lack of tailored solutions, making it difficult for salespeople to achieve higher conversion rates. 

Sachetisation would lead to more customised products; because of customer data points available to insurers by existing purchase behaviours. 

With such customised insurance products, marketing and sales of insurance products will be more fit for purpose. Sales and marketing campaigns will cost less and be more suited for the target demographic and meet them at the point of need, while sales will be more direct in selling to the right audience.

See How We Automated Claims Processing for AXA Mansard

5.  Create Opportunity to Bust Myths: Insurance gets a lot of bad press and age-old misconceptions and is mostly untrue. For example, the reason claims are slow is not necessarily because an insurer does not want to pay claims. Currently, the processes and technology are old to meet recent customer demands and behaviour for swift service. 

Access to new technology and data for fast-tracking claims by Octamile’s Insurtech Solutions can help insurers deliver these new experiences for consumers. Sachet insurance can also help onboard new users who will become influencers to challenge and correct these misconceptions or myths held about insurance.

6. Creates Opportunities For More Industries to Offer Insurance Easily: Sachetising insurance will enable more non-insurance sectors to offer insurance through embedded insurance API’s. The consumer flow is seamless and not disruptive. Covers on offer customers fit their needs, and the premiums are more affordable because of the lower administrative cost of embedding insurance.

In conclusion, we believe sachetising insurance will help deepen insurance penetration for low-income earners across Africa. It will allow insurers to provide more win-win policy options for new or current consumers.

Are you a non-insurance business looking to offer insurance as a product or feature to your existing business? Let’s talk; schedule a conversation here.

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