Swedish startup Bima is making life, accident and health insurance accessible in emerging markets for less than $1 a month, by providing microinsurance via mobile phone technology. Techworld sat down with founder and CEO Gustaf Agartson to find out how.

Bima essentially offers a financial service solely through mobile phone technology, a technique which was pioneered by Kenyan company M-Pesa back in 2007.

© Bima
© Bima

The mobile operator discovered that it could provide people with access to a bank account simply by using their phone and a network of cash out points, allowing users to easily send money to one another for the first time.

How Bima started

While working in the telco industry in the early 2010s, Gustaf Agartson saw what M-Pesa was doing in Kenya and wondered if it was applicable to other financial services, namely, insurance.

Specifically, Bima was set up to provide microinsurance, which is designed for people with low-incomes (93 percent of Bima's customers earn less than $10 per day) against accidents or health issues in exchange for small premium payments.

"So in 2010 I started to look at that and saw there was a lot you can do with mobile technology in emerging markets when it comes to financial inclusion," Agartson told Techworld from the company's small London office on Fleet Street.

"Insurance is something we have found very interesting from the beginning because if you look at the statistics, in emerging markets you see that people have access to mobile phones, even back then it was more than 70 percent, but less than three percent typically had access to insurance," he said. "We looked at that gap as an opportunity."

So he moved to Ghana in 2010 to launch Bima, using mobile technology to sell pay-as-you-go insurance policies.

Why Ghana? "It is English speaking, fairly friendly to business from foreign companies and we had a mobile operator called Millicom's Tigo that was supportive of launching insurance products for their customers," Agartson explained. The company now has close to 30 million customers in 14 markets.

How does it work?

In practice a customer can sign up to Bima using their mobile phone, from subscribing via a phone call or SMS by answering a few questions, to paying three, six or 12 month premiums using their mobile credit. Customers can unsubscribe at any time.

Then, when a customer needs to make a claim, typically they can contact Bima through a call centre where they will be informed of the documentation they need to send off. The average payout is $1000 (£740) and payment is done through a mobile money account or by check.

Bima tends to partner with a single local insurer for underwriting. "Insurance is highly regulated so it is difficult to come up with one global solution where you can underwrite risk for all countries, you need to have local partners," Agartson said.

Now, as smartphone penetration is on the rise in emerging markets, Bima is looking to move to a mobile app model too, outsourcing its app development for the time being.

"When we launched in 2011 in Ghana you didn't have smartphones, so the customer experience was based on voice communication with us and SMS and Unstructured Supplementary Service Data (USSD) because that's what was available at the time," Agartson said.

"So going from a customer base with low-end handsets to smartphones creates an opportunity to communicate with customers in a different way."

Business model

As Bima is operating at the lower end of the market, scale becomes vital to the business model being sustainable. The key to reaching this scale is the price point, and partnering with a mobile network that has a massive captive audience.

"Our model is built on distribution and education of customers," Agartson explained. "So what we do is in each country we build our own call centres and a network of agents in the field, who are Bima employees trained to sell our product.

"Then we integrate with our mobile operating partners to get access to phone numbers to call these people and explain what insurance is."

This data sharing with the mobile operators may seem invasive but it is key to Bima's reach.

"We work with partners to look at mobile operator's customer data to identify which customers to target with what offer," he said. "They provide a rich pool of potential customers, segmented based on characteristics to target them on, such as how much credit they put on their phone a month or what type of products they take from providers... that allows us to do targeted sales."

The mobile networks in return get a direct revenue stream in the form of a small 'finders fee' for each customer signed up and a value-added service for their customers, which gives them a competitive advantage in a market where people often switch SIM cards depending on price.

Financial inclusion

Although Bima is clearly a business, and a profitable one in several territories according to Agartson, there is also a social mission here about financial inclusion. In the past, in countries where Bima operates like Bangladesh or Ghana, if a breadwinner were to die suddenly, there is a severe risk of an entire family falling back into poverty.

"We are not pretending that it's not a business proposition, but we strongly believe that to offer financial inclusion and come up with models that are sustainable and make a profit, then you will have solutions that give people access to insurance," Agartson said.

Bima has raised a lot of external financing to expand its product across markets, more than $70 million from investors like Swedish fund Kinnevik AB and telco Digicel, and Agartson doesn't plan on stopping any time soon.

"There is an aggressive growth play and we are going to continue raising money and want to grow geographically to new large markets like India and Egypt," Agartson said. "For us it is really about continuing to scale the business and really about investing in product and the customer experience."