Insurance-as-a-Service with Lami's Jihan Abass
In this episode, we speak to Jihan Abass, the Founder and CEO of Lami, an insurance-as-a-service startup based in Nairobi, Kenya. Lami's platform enables insurers, banks, and other partners to offer digital and flexible insurance to African consumers.
[04:12] – First question: formal insurance penetration in Africa is 3%. What's the problem and how is Lami trying to solve it?
[06:45] – What does flexible, digital, B2B2C insurance actually look like in practice?
[09:32] - Lami's origin story.
[10:48] - A discussion about Griffin Motor Insurance, Lami's B2C motor insurance app used to test and showcase their product to prospective partners and customers.
[15:10] - How can - and will - embedded, digital insurance increase insurance penetration on the continent?
This episode is part of our conversational series sponsored by MFS Africa. MFS Africa’s competition is with cash, and throughout this series, we’ll feature other startups and entrepreneurs who are digitizing, better organizing, and aggregating analog and fragmented industries.
Jihan [00:11]: When you look at the problem, it's such a vast and huge problem, a B2C approach wouldn't really work.
Justin [00:16]: That's Jihan Abass, the co-founder and CEO of Lami, an insurance-as-a-service platform based in Nairobi. Lami's Insurance API enables insurers banks and other B2C companies to offer more flexible digital insurance to consumers. Formal insurance penetration in Africa is staggeringly low, only 3%, and a major reason why is because of the rigidity of the existing insurance products and the analog nature of how incumbent insurance companies issue policies and claims.
Jihan [00:41]: Sometimes people are insured and they don't know they are insured and the underwriter doesn't even know that they've been insured. So what we have done to curb that as we do end join integrations with the insurance companies. So once a policy is underwritten, immediately the underwriter is notified and they able to have this information in their databases.
Justin [00:57]: In this episode, the second of our conversation of series exploring the entrepreneurs and startups digitizing analog and fragmented industries, we explore the insurance industry, how Lami is attempting to get more African consumers insured, and their strategy to leverage their consumer app, to sell to more B2B customers.
Justin [01:12]: Before we start, we'd like to thank MFS Africa, our sponsor for the entirety of this conversational series of episodes. If MFS Africa, which is making digital payments interoperable, if their competition is with cash, insurtech startups competition is not only with pen and paper, but with consumer behavior and perhaps even with fate. One of MFS Africa's investees is the South African insurtech Inclusivity Solutions. I spoke to their founder and CEO, Jeremy Leach on their approach to tackling low insurance penetration on the continent.
Jeremy [01:41]: These insurance markets are structured around the, pretty much the colonial, post-colonial infrastructure and those markets focused on the businesses and the high net worth individuals. So they really aren't relevant for the mass market, which is what insurance was always designed about. We basically first need to understand the needs of the customer. We invest quite a lot of our treasure in human-centered design research and market research to understand the needs of the customers and design products to fit their needs. On one hand, we basically have loyalty products. So we have Equity Bank in Kenya and Orange in Côte d'Ivoire and Airtel in Rwanda, we've launched loyalty products that basically are designed to incentivize positive behavior. And if you think that in developed countries, the old practice of embedding insurance into a product. For example, your credit card, you get free travel insurance. The more you transact, the more you spend and more positive behavior you are engaging and the more insurance you get through rewarding based on your leveraging behavioral economics.
Jeremy [02:36]: The second category we called bundled cover. And that's often where a client makes a decision once and then basically agrees to take up insurance along with another product or service. So for example, remittances and insurance. So began with MFS Africa looking to see how we can give clients the opportunity to opt in for insurance so that every time they make a remittance to another country, insurance is included. The premise is around trying to drive frictionless payments. People don't want to be able to have the hassle of paying $1 or $2 a month when it's harder to drive that behavior. And the third category is around these voluntary recurring payments. And that can be paid via airtime, via debit order or some facility could be daily payments weekly, monthly, and that's very much your voluntary type models paid for by the customer. And certainly from what we're seeing on the insurance side is you want to strategically position insurance in such a way that it's seamless, it's frictionless.
Justin [03:33]: Later in the episode, we'll hear a bit more about the bundled insurance product launched by Inclusivity and MFS Africa together with MTN in Rwanda. One more thing before we start. Every Sunday, we publish a weekly newsletter, the Flip Notes, in which we share bite-size, contextually relevant thoughts and insights from the ecosystem. It's read by founders and operators at companies like Paystack, Yoco, Chipper Cash, Stripe, Branch, Uber, and many more. Visit the flip.africa/newsletter to subscribe. With that, here is Lami's Jihan Abass.
VO [04:02]: You're listening to The Flip, the podcast exploring contextually relevant stories from around Africa.
Justin [04:12]: So I'd like to talk first about the state of the insurance industry in Kenya and beyond, and then how Lami is going about solving this problem and making it easier for insurance to be bought and sold and all the rest.
Jihan [04:26]: I think one of the main issues with insurance is the fact that it doesn't reach a lot of people. So across Africa and also in Kenya, the insurance penetration level is incredibly low. It's less than 3%. And when you look at the example of Kenya, for instance, there's about 52 insurance companies that operate in the market. But the level of reach that they have is so small. And when we were looking at this problem which is replicated across the continent, it seemed like the problem was twofold. The first is a problem of distribution. So the products were not really distributed in the right way. And secondly, the fact that there's no technological infrastructure to facilitate the easy distribution of these insurance products. And Lami actually addresses those two problems with our insurance API.
Justin [05:06]: Let's talk about the approach that you're taking to solve this problem. You just said 3% insurance penetration. So what is the approach you're taking and why is this the approach that you chose to take and how will it help solve the problem that the incumbent insurers haven't been able to solve?
Jihan [05:20]: So what we're doing is we're helping underwriters reach markets that they never reached before, or they were not able to access because they don't have the technological systems to be able to access these markets and reach these people who they were not able to reach in the past. So we work with about 20 underwriters that are integrated into our platform. And what we do for them is, allow them to connect to distribution partners. So when you look at the problem that's it's such a vast and huge problem, a B2C approach wouldn't really work.
Jihan [05:46]: So going B2C, targeting individual people to sell them insurance, it'll take a really long time to actually have significant impact. So with an API, we're able to leverage on the trust and the relationships that these online platforms have already built with their customers and give them a way to streamline insurance and also add additional revenue stream and at the same time be able to offer insurance as a compliment to say, for example, services that they have or products that they sell. So for us, our API is a one-stop-shop for the whole insurance ecosystem. So we've tried our best to accommodate the entire insurance value chain to make the process of purchasing any kind of insurance product seamless.
Justin [06:22]: So if I'm one of your partners and I don't have currently an insurance offering but I'm thinking I want to leverage the trust and I already offer credit and other financial services to the last mile customers. How exactly does it work with me trying to offer an insurance product to the last mile and plugging into Lami's platform to be able to offer that?
Jihan [06:45]: The main problems here is that insurance companies are not able to break down the insurance products. So they'll offer you a standardized product that you either take or not take. There's no flexibility for the customer, whether it's payments, whether it's the benefits that are included. So what we've done is the platform allows for every single part of the insurance proposition to be split up. So for example, with a ride-hailing app, you'd be able to tailor the product so that it fits their schedule. For example, if the drivers are paid on a weekly basis, you're able to make the product more flexible so that every week, there's deductions for their insurance. And because we're able to issue as certificates documents in real-time, there's no additional process. So the reason why underwriters don't have more flexible products in our markets is because they're not able to actually deliver the information or the products or the certification needed, for example, with car insurance. So we bridge that gap.
Jihan [07:33]: And also, secondly, they have issues reconciling. So if they were to take payments daily, which is something that we're able to do, there would be no way for them to actually reconcile this information. So it becomes a huge problem for back office and it takes a lot more effort. So what we're able to offer is not only... First of all, we actually tailor the products to fit the distribution partner that we're working with. So sometimes it means actually developing a new product with a re-insurer or with an underwriter and we also make sure that the process fits the digital experience. So the product can actually fit with the day-to-day life of this person or this individual.
Justin [08:07]: Yeah. That's maybe a point that's worth highlighting is embedded finance in this way, or embedded insurance in this way is not you just taking a one size fits all insurance product and then leveraging somebody else's distribution channels to sell through. It's completely integrated bespoke in the way that works best for the last mile consumer, as well as those who are your partners helping you distribute.
Jihan [08:30]: Yeah, I would say that's true. So what we're trying to do is we're working on certain segments which we think would have the most impact in terms of the products that we can create and then replicating that. The problem is the products are very rigid. So if you're going to just stick to the products that already exist, it really doesn't fit with the distribution channel, for example, because yeah, it's just generally too rigid to be able to fit this new way of selling the products.
Justin [08:53]: And I guess just the fact that there's only 3% insurance penetration is proof enough that it hasn't been working.
Jihan [09:00]: Yeah, for a long time, the products have just been one size fits all. If you're going to get a medical policy, you have three options. If you're going to buy your car insurance, you just have a percentage rate and everybody undercuts each other. Like for the example of motor insurance, it's a very big market because it's a mandatory policy, but at the same time, it's the biggest loss-maker because the data isn't really used. As you mentioned, even if we're giving the underwriters all this information, they're not really using the data, they collect so much information, but they're not able to utilize it to make sure that they're underwriting everything in the best possible way.
Justin [09:31]: Yeah. Interesting. How did you choose to go down this path of creating an insurance-as-a-service platform and specifically to go down the embedded finance route? What's the backstory?
Jihan [09:44]: Actually, when I first start out, I got a license to become an insurance company, so an underwriter. We were the first company to be licensed under 15 years because of the way we were approaching the insurance ecosystem and the problems that the insurance industry were facing at the time. And we were building this platform to be the first digital underwriter in Africa, basically. So we spent a lot of time working around that, building the platform. And then later on, we quickly realized that actually in terms of scaling, it wouldn't really make sense to go into new markets as an insurance company, because it would be very difficult in terms of regulation and all these different things.
Jihan [10:16]: And secondly, the paid-up capital to actually capitalize the licenses is one of the highest in the world, that's $6 million. So it didn't really make sense financially as well. So what we decided to do was we decided to use our platform, make it available for anybody. But in order to do that, we said, let's start with a B2C product, which is the Griffin app. And we chose motor insurance because it's mandatory in most of Africa and East Africa. So we thought it was a good way to showcase with a product that everybody's familiar with. So that's how we started out and that's how we are now providing insurance API, basically.
Justin [10:48]: Yeah. Can we talk about Griffin? I'd love to get perspective on... So you first launched this B2C app, you realized after doing something B2C, that you're like, this isn't going to work and we have to take one step back. Can you talk a little bit about that approach of doing something direct-to-consumer first and then take a step back and saying, actually there's a whole infrastructure and platform play for us to go after here?
Jihan [11:11]: Yeah. So we launched the Griffin app in January of this year. It was really, really important for us to understand what the customers were looking for, whether it's the B2B partners, also B2C customers who we would be selling to ultimately with the B2B partners. So from that, we actually learned so much in terms of what we needed to have on our platform, how the system should look, what the processes should look like as well in terms of the dashboards, the monitoring, all these different things. And it was a really interesting learning experience for us. I think one of the main things that we noticed is that previously underwriters have tried to launch products, digital products, however, they all were not really successful. So it was really important for us to successfully launch a B2C product so that we could actually showcase how flexible and how useful our API is as well to other partners.
Justin [11:57]: And is it the case that other partners and current partners needed to see this successful implementation of a B2C app leveraging your technology in order to be even interested in the first place?
Jihan [12:09]: I think so. It was a real big help, especially with banking partners. For them, it's really important for them to be able to see an application that works for B2C. So it was really critical for that and it really did help us with the B2B sales. And actually out of that, we were able to get four B2B partnerships just from the launch of that product, because they were seeing the product in the market, they were hearing about it and they got really excited. And I thought it was pretty exciting to see positive reaction as well. So yeah, all in all, I would say that it was of huge help.
Justin [12:38]: Awesome. I'd love to get a little bit more nuanced into what does the consumer product look like in terms of offerings or options for me as a consumer if I need car insurance versus, you mentioned the 52 other insurers, why it's a better consumer app than what existed previous?
Jihan [12:59]: Yeah. So generally prior to our product being in the market, it took about two days to get a quote for your car insurance. So you'd probably fill out a form and they'd send you an email with a quote, and then you can sign up for the insurance product. So with our app, it takes less than two minutes to buy your policy. And I think one of the main things we were working on throughout was flexibility of the product. For example, in the Griffin app, you can pause your insurance if you're traveling. You can upgrade and downgrade whenever you want. There's so many other services available, whether it's garages, whether it's glass. We Just wanted it to be a one-stop-shop so that anything that you need for your car is catered for there. And also, for example, if you have an accident, there's emergency services, that's a network already embedded in there. So the idea was to transform the experience. And also on the claims side, all our claims are processed in seven days when the industry average is about 60 to 90 days.
Justin [13:50]: This all raises a question to me. The challenges and barriers to your company's growth. I'm curious to get your perspective, or if you can riff a little bit on market risk versus product risk. What are the barriers to this growing knowing that this is just such a better experience and better consumer product that you've proved out? Is it corporates adopting that is the challenge. Is it just product risk from a tech perspective or other things? What needs to go well for Lami to grow into the big business that it ought to grow into?
Jihan [14:21]: Yeah. I think that's a huge question. I think one of the main barriers is the fact that there's only 3% insurance penetration, which means that 97% of people maybe don't understand what insurance is, how insurance can help them. I think that's one of the big barriers. How are we going to change the mentalities of people? Or how are we going to make them adopt insurance and understand that there is a risk that they're exposed. Especially in Africa where a lot of people rely on single sources of income. So if they own trucks or if they own a farm, but they don't really protecting those sources of income. So I think that's one of the main challenges is converting and making sure that people are aware that they need insurance products, whether that's through education or through embedding of products in things that they're already purchasing. I think that's one of the key things that we have to work on and we need to change in Africa and also in developing countries as well.
Justin [15:10]: Yeah. And you mentioned the embedding of products and you mentioned education. What is your take on how that problem gets solved? How do you look at how you move the needle from 3% to something more meaningful?
Jihan [15:24]: Yeah, I would say one of the things is, I think that all insurance is going to go digital eventually, whether it's in the next three to five years. So there's always that part of the market, which is substantial. Even though it's 3%, it's about 60 billion in gross written premiums per year. So it's still a substantial part of the market. But I think for us, it's more about innovating with the distribution partner. So one of the new products that we're testing right now is a one Kenyan Shilling nano policy that's embedded per trip. So when somebody is paying for their public transport, that trip is insured for certain kinds of risks. And I think that is ensuring a segment that was never insured before with a new kind of product. So I think for us, it's about how can we innovate within the product side and also on the distribution side to be able to educate people so that they're able to know that insurance is meaningful for their lives.
Justin [16:13]: In that instance, is it an opt-in policy, or is it just an automatic policy that comes with the price of a purchase of a ticket?
Jihan [16:21]: So that's actually an automatic policy that's embedded in your ticket. One of the key things is that a lot of the public transport vehicles here have a lot of accidents, or they're not really driving very safely. And when the customer comes to claim from the driver or from the owner of the vehicle, they never get paid anything. So what we're trying to do is remove that element completely and make it safer for them.
Justin [16:43]: Is there any regulatory considerations around automatic insurance like that? How does that work?
Jihan [16:48]: Yeah. So in Kenya, you have to just notify them that they have been insured. Once somebody buys a ticket, they receive their ticket via SMS, and it says that your trip is insured and this is how you can claim. So it gives them instructions. And I think for us, it's about building the trust. So when somebody actually makes a claim then being paid out. So for this one shilling policy, the payout is about $1,000. It's a substantial amount. So if you're able to actually build that trust, payout the claims when they come in, I think that's going to be the backbone of making people trust insurance and also willingly purchasing insurance products in the future.
Justin [17:23]: Yeah. Just switching gears for a second, just zooming out and looking at where we are from an ecosystem perspective. I'm curious to get your perspective of like, are there certain things you wish to see more of or things that you wish would happen, or maybe it's a regulatory question. You mentioned consumers, but is there anything else that ought to happen or that you wish would happen so that your mission of ensuring more people on the continent becomes maybe a little bit easier than it is today?
Jihan [17:52]: Yeah. I would say that, especially on the underwriter side, for them to be more innovative and open to new kinds of products. So we've developed two new products this year, and I think it took us a really long time to even convince the insurance companies to think about those products, even though there's a huge need. So more flexibility on the underwriter side and for them to stop thinking that they can do everything themselves. Because they've been around for all these years and the impact has... Although they've insured a lot of people, I think it could be a lot more if they open to more partnerships.
Justin [18:25]: I suspect that a lot of people who are selling B2B in other sectors will say the exact same thing as you.
Jihan [18:35]: Yeah, probably.
Justin [18:36]: We wait for that day when everyone else realized, all these incumbents realized that they can't do it themselves and they ought to embrace technology and disruption and so on. Has COVID played any meaningful role, particularly from like a stickiness perspective in digital transformation or in making it easier for you to have these conversations now?
Jihan [18:55]: Yeah, we've seen a huge change even in the customer behavior. So for example, in the Griffin app, a lot more people are buying shorter term policies. So we have like a one week policy. People are buying one-week insurance policies because they didn't know about whether they could drive or not. So we've seen a lot of change in terms of customer behavior and also on the insurance company side, they're more open to listening to us now because they had a huge drop in sales because most of their sales are done in branch or by agents on the ground. So they're a lot more open to new ways of distribution. So that's been really exciting to see as well.
Justin [19:39]: Thanks as always to MFS Africa for the sponsorship of The Flip. Earlier in the show, we heard from Inclusivity Solutions’ Jeremy Leach, who talked about a remittance insurance product launch in partnership with MFS Africa and MTN in Rwanda. It's an inspiring example of the opportunities to build on top of digital payments and digital insurance in conjunction with distribution partners like telcos.
Jeremy [19:59]: In research we've done in various markets, we found that between 80% to 90%, or pretty much everybody we've interviewed, would rather buy insurance from a mobile operator or a bank than an insurer. The trust is so low, that take-up is going to be incredibly tough. So we leverage our big distribution partners with their trusted brands. We're really excited to have launched with MTN in Rwanda and MFS Africa for payment hub and Radiant Insurance, the insurer on the ground to basically launch a remittance insurance product that is designed to incentivize customers and reward customers who use the MTN and MFS Africa remittance facility.
Jeremy [20:39]: So what that means is, as clients remit or make the payments. The more they use that MTM hub, the more insurance they get. If you're just making one transaction a month, you were to get a certain level of cover, but if you do two or such. And we basically designed it around the number of transactions, but also the value. Because end of the day, the value is what's important again, for our partners. But it's also pretty critical for our end customers. We know penetration of insurance in Rwanda is around 2% of the population and to have these types of products, which basically in this case will ensure that remittance continues to get paid. If you are hospitalized and not able to earn income, it's pretty critical.
VO [21:23]: That's it for this week's episode of the Flip. Thanks so much for listening. Next week, we're back in Nigeria to explore digital savings. See you there.