Will mobile insurance boost inclusion in Papua New Guinea?

Since Prime Minister James Marape took office in May 2019, the government has continued to implement a number of strategies aimed at increasing the accessibility of financial services. The National Financial Inclusion Strategy 2016-20 seeks to promote digital services and more inclusive insurance, while the Financial Sector Development Strategy 2018-30 advocates the use of financial technology to advance branchless banking services in rural communities and the development of a curriculum to enhance financial literacy. Achieving these aims should be aided by recent improvements to Papua New Guinea’s ICT infrastructure. Most notably, the completion of two subsea cable links in 2020 should help to provide more stable internet service for the country’s predominantly rural population (see ICT chapter).

Increasing Exposure

About 5.8m people lack access to formal financial services in PNG, including digital finance, according to the World Bank. The bank recognises the potential for mobile networks to transform the country’s economy, and is taking steps to improve the regulatory environment and consumer protection laws as a step towards encouraging the uptake of mobile banking and other digital financial services. This is likely to have a knock-on effect on the insurance industry.“Most people in PNG have their first exposure to insurance through banks,” Jeremy Norton, regional general manager for PNG, Vanuatu and Solomon Islands at Tower Insurance, told OBG. “If banks succeed in improving financial literacy, then insurance uptake will follow.”

A June 2020 announcement by Bank South Pacific (BSP) looks set to widen the digital consumer pool further. The bank stated that it would shortly launch online payments via debit cards rather than solely credit cards, thereby raising its potential digital customer base from 60,000 to around 1.7m people. In addition to BSP, digital services are also offered by other banks, such as Westpac PNG and Kina Bank.

Mobile Micro-Insurance

Mobile micro-insurance has strong potential to serve as the vehicle to increase insurance penetration in PNG. A report submitted to the UN Development Programme Pacific Centre estimated the potential size of PNG’s micro-insurance market at 285,000 people, or 10% of the workforce. However, there has been limited success in this regard to date. Backed by the UN’s Pacific Financial Inclusion Plan, a multilateral effort to boost the uptake of financial services in the region, BIMA was launched in 2014 as a partnership between PNG-headquartered Capital Life Insurance and Jamaica-based telecoms services provider Digicel. Offering citizens the chance to sign up for life or health insurance via SMS, the insurer rapidly issued more than 500,000 policies. Despite this, BIMA collapsed in mid-2019 amid a wave of fraudulent claims. This had further ramifications for the industry, including a distrust towards insurance products and mobile channels, as premium was paid through Digicel mobile top-ups. “With the expansion of electricity and internet access, more people are being included in the financial and insurance segments,” David Lee, CEO of Capital Insurance Group, told OBG. “Although BIMA’s exit was damaging, I am optimistic that scalable, accessible and sustainable micro-insurance platforms can be developed here.”

Looking Forward

Insurers are also developing in-house apps that can bring products to rural areas. In Solomon Islands, for example, Tower Insurance is considering launching a motor insurance app to allow people living off the main island of Guadalcanal to take out a policy without having to fly to Port Moresby. Motor insurance is considered the most likely segment to pioneer such a scheme, as the rateable factors are highly specific. In order to operate this service in PNG, a number of payment issues would need to be overcome. However, a workaround through Post PNG, the country’s postal service, or a partnership with a mobile payment network may be a potential solution.