A start-up microinsurer in Sweden has figured out how to sell insurance products to the very poor: Bundle it with their mobile-phone package.
In 2010, BIMA partnered with Ghanaian mobile operator, Tigo, to offer free life insurance. Using 5 cedi, or about $2, of monthly phone credit through Tigo unlocks life insurance coverage of 200 cedi through BIMA if the policyholder or a family member dies during that period, according to the April 17 edition of The Economist.
“Studies investigating the impact of microinsurance—cheap policies aimed at those earning below $4 a day—have shown they can smooth income shocks in vulnerable households, raise school attendance rates and improve health-care outcomes,” The Economist reports.
The idea is policyholders are less likely to engage in negative coping behaviors like putting children to work, eating less food or selling productive assets.
BIMA’s product range—life, personal accident, and hospital-stays—now covers 7 million people in eight countries across Africa, Asia and Latin America.
Insurance products also significantly affect how borrowers invest in their businesses, according to the March/April 2014 edition of Foreign Affairs. Ghanaian farmers with crop insurance, for example, invest more in agricultural inputs, like seeds and equipment, to expand their business than farmers without crop insurance.
The skyrocketing growth of access to mobile technology—50 percent of people own a mobile phone in the developing world—and innovative products from companies like BIMA helps families weather financial shocks and creates economic opportunities to rise out of poverty.