Unlocking the benefits of embedded insurance for micro and small businesses – Insights from Mozambique

January 30, 2023
March 13, 2024
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In Mozambique — as in other parts of the world — microentrepreneurship is an especially risky endeavor. It is fraught with high-impact, disruptive economic events, with few mitigation or management tools available to those affected. Income is often unstable, making it challenging for entrepreneurs to save much money. Normal life events — from births to weddings to funerals — can have major implications for the microentrepreneur. For example, when a family member dies, the family is required to cover the costs of the funeral and hosting the extended family. As a result, many people get into significant debt and become unable to continue with their businesses.

Without adequate savings, access to capital, or other financial means to absorb these costs, many microentrepreneurs find themselves sinking deeper into a financial crisis. While many insurance companies have introduced voluntary products in the Mozambique market, the uptake has been low and many clients have missed payments, resulting in lapsed policies. Culturally, insurance policies are also viewed as a product for the elite among low-income earners and microentrepreneurs, who do not see it as a suitable product for them.

To address some of the gaps in existing offerings, the new product must offer customers significant coverage, convenience, and other benefits, all while incentivizing savings behavior for the long-term. Bundled or composite products afford an organization the opportunity to offer convenience and cost savings to low-income customers. Having identified funeral coverage as a key need of its customers, Socremo, a leading microfinance bank based in Maputo, Mozambique, first partnered with Hollard Insurance to provide funeral benefits to existing customers of its loan products. With time, Socremo partnered with Hollard again to extend this benefit to its savings account holders. The funeral benefit attached to the savings product features a “balance multiplier,” which credits customers double the amount of their latest savings account balance in the event of death of the customer.

Over a two-year period and with support from the Swiss Capacity Building Facility, Accion used human-centered design to help Socremo improve its savings product to include this savings account balance multiplier benefit, which is paid out by the insurer. During the project, there were several iterations to cater to the needs of customers, increase uptake, and incentivize staff to sell the product. These iterations helped define a value proposition that aligns with customer needs and expands product delivery channels.

Ultimately, the various iterations and improvements resulted in a 60 percent increase in the savings product’s uptake and usage; however, the undertaking did not come without challenges. Read the report to understand the outcomes, challenges, learnings and the key-takeaways.

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