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An unlikely pair: life insurance and cell phones

We're taking a brief detour from Florida's insurance woes today. We noticed a brief news article about an insurance company that's taking full advantage of new technology while offering coverage to countries that have no insurance industry to speak of. The article talked about the insurance sale, but not claims payment, though, so we'll leave that to speculation.

In developing countries, with new industries growing, life insurance has become a more important commodity. As people become more self-sufficient, it seems natural that they'd want to make sure their families would be taken care of if something were to happen to the breadwinner. One South African insurance company saw opportunity and cast about to address one important barrier: payment.

Ghana's economy has been growing steadily. The recent discovery of off-shore oil will likely increase the pace of economic expansion. But the country is still home to a largely impoverished population. Ghana is also a country with an under-developed infrastructure.

What this meant to the insurance company was that Ghanaians don't have ready access to banks. The fees are unaffordable, and the trip from village to town, where a bank is more likely to be, costs money and time.

Ghanaians do have mobile money accounts, though. One byproduct of the infrastructure issues is a prevalence of cell phones. (Land lines are just impractical.) If they can pay using their phones .... Someone at the insurance company had a "Hey, your peanut butter got in my chocolate!" moment. Life insurance sold using mobile payment accounts.

The insurance company has now teamed up with a South African mobile phone company to offer life insurance to Ghanaians. The coverage costs as little as one cedi, or 65 cents, per month. The insured pays the premium through the phone company's mobile banking system.

A representative of the insurer says that the company was pleasantly surprised at the sophistication of the Ghanaians. The insurer thought there would be a steep learning curve in the market, but the country had already rolled out a national health insurance program. Consumers were savvier than anyone expected.

The cell phone provider has 9 million Ghanaian subscribers. The mobile banking program was launched in 2009, and 2 million subscribers have signed up to date. These 2 million can use their phones to purchase the insurance policy -- all they need is a valid mobile money account to sign the application form. No medical records or other documents are needed.

The program is still in its pilot stage, but the response has been encouraging. The company expects to expand the number of service centers in the next few months.

The phone company believes this is one step along its road to helping to build the region's economy. Said the representative, "It's some kind of revolution."

Source: Boston.com, "SAfrica's MTN launches mobile insurance program," Jenny Gross, 03/23/11

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