Microinsurance: safety nets and springboards for the emerging consumer
Launched in 2008 to provide financial safety nets and springboards to emerging consumers in Africa and Asia, LeapFrog Investments today reaches over 21 million people in 13 countries.
The EIB was an early investor in LeapFrog’s first “financial inclusion” fund – a $135m private equity fund – alongside some of the world’s leading development finance institutions, insurers and banks. Since then, LeapFrog has launched a second financial inclusion fund, again with EIB as a significant backer, announcing a first closing of $204m in September 2013.
LeapFrog founder and CEO Andrew Kuper's experience in Rajasthan 16 years ago planted the seed for the idea to replicate in insurance what Muhammad Yunus did for microcredit. LeapFrog was launched at the 2008 Clinton Global Initiative with the objective to provide protection for millions of people who “lie awake at night fearing they will lose everything in the event of a fire or flood or other adverse event.” This is done through LeapFrog investing in financial services companies in local markets. The scale is significant and emerging consumers are the ones to benefit from this support. The concept proved compelling: while LeapFrog had sought USD100 million for its first fund, it instead raised USD 135 million.
Today, LeapFrog is the largest investor worldwide in insurance and related financial services for emerging consumers. For his work as a pioneer of ‘Profit with Purpose’ business, Kuper is a recent recipient of the Ernst & Young National Entrepreneur of the Year award. He has also been hailed by President Clinton and Richard Branson, founder of the Virgin Group, in addition to many global leaders, for opening up new frontiers in alternative investment.
Insuring the uninsurableLeapFrog’s first investment was into AllLife, a world-leading South African provider of insurance to those with HIV/AIDS and diabetes. The company deploys innovative technology to offer ground-breaking life and disability insurance to those who would struggle to obtain cover from traditional providers and as a result are financially excluded. With insurance, they are able to access capital, such as home loans, and re-enter the formal economy. AllLife uses a unique ‘continuous underwriting’ process that links insurance coverage to an appropriate health monitoring and treatment program. By March 2014, AllLife covered over 85 000 policyholders, more than double the number a year before, and the company employs over 230 staff.
New technologies to reach the unreachableBima, operating in parts of Africa, South Asia and Latin America, is one of the world’s leading mobile insurance platforms. It is a young company that is already profitable in three of its nine markets, and has plans to expand into another dozen. It provides an example of using technology to reach the unreachable, connecting insurers with mobile phone providers. The mobile phone networks benefit from increased customer loyalty through the addition of insurance as a value-added service. The insurers, challenged by underdeveloped distribution systems, in turn benefit from the vast distribution networks of mobile phone operators. By March 2014, Bima had almost seven million active subscribers across the various markets.
Nine investments in five countriesSo far, LeapFrog has invested in insurance and savings providers in Ghana, Kenya, Nigeria, South Africa and India, with operations spanning some 13 countries. This footprint is expected to grow, as the second fund is invested.
Building a much needed industry
The EIB Group has a longstanding record in microfinance
. Since 2000, it has supported microfinance institutions, fund providers and other industry stakeholders in addressing specific market failures and promoting financing solutions for Micro, Small and Medium Enterprises and low income self-employed. The Bank is to date active in microfinance in three regions: in Sub-Saharan African, Caribbean and Pacific countries, the Mediterranean partner countries and in Europe.