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Beware of that call that sells attractive insurance scheme by leading mobile operators
Per-day insurance is sold by leading mobile phone operators in Sri Lanka. Network users are directly canvassed via mobile connection. Thirty-year-old Kumara (not his real name), a computer salesman from Nilpanagoda in Minuwangoda, also received a call.
‘Free insurance’
“They said I was entitled to ‘free’ insurance as I had been a long-time subscriber of their mobile phone service,” he recalled. “They said they will deduct a daily premium, which is very small, and quoted a payout sum. They also offered daily hospital cover and asked whether to activate it. It was all very attractive but I declined.”
Globally, this is known as mobile-enabled insurance or MEI. It is practised in 27 other countries, particularly emerging markets. In Sri Lanka, however, it is completely unregulated. And, under the provisions of the Regulation of Insurance Industry Act, it is also illegal.
Section 12(1) of the law states that “no person shall carry on insurance business in Sri Lanka unless such person is for the time being registered or deemed to be registered under this Act to carry on such business.”
Mobile service providers are not registered to hawk insurance. Neither are any third parties they outsource the process to. One operator has hired Milvik Lanka (Pvt) Ltd, the local branch of an international company which “uses mobile technology to deliver affordable insurance and health products to underserved consumers and their families in emerging markets who cannot access these vital products through traditional channels”.
The only players in this equation authorized to market insurance in Sri Lanka are the insurance brokers, agents and insurance companies. But, as Kumara and others have discovered, interactions with them can be minimal.
While insurance selling requires trained agents to explain policies in some detail to potential customers, MEI is carried out in Sri Lanka through short telephone calls (usually under five minutes) during which the prospect is made to sound as attractive as possible. There is no contract for a customer to examine, no clarification about exclusions. It is packaged as a low-cost privilege delivered by mobile phone companies to their loyal subscribers. And it is quick.
With mobile phone penetration at around 130 percent, this is a captive market from which insurance companies also benefit. Owing to concerns about the unchecked nature of the business, however, the Insurance Regulatory Commission of Sri Lanka (IRCSL)–which has long turned a blind eye–appointed a Subcommittee on Mobile Insurance.
Earnings of Rs 14bn, payouts of Rs 1.2bn
In a letter sent last year to the subcommittee, seen by the Sunday Times, a mobile network operator reveals that insurance has mostly been sold to customers “who are at the bottom of the socio-economic pyramid with a focus on daily-wage earners”.
How much this market understands of insurance–the concept, how it works,the claims processes, benefits and exclusions–was not immediately clear. It is not known how many of the insured inform their next of kin about these policies which are doled out weso informally.
There is little public awareness of what happens to these policies if a SIM changes hands. Additionally, claims are required to be made via WhatsApp. And the absence of a regulator for MEI means there is no independent oversight or mechanism to handle complaints related to insurance sold this way.
The network operator maintains that, since 2013, it has facilitated the settlement of insurance claims amounting to Rs 1.2bn (around Rs 171mn per year over seven years) to over 65,000 “rural and underserved citizens”.
As at September 2020, the company had gained 2.4mn new customers for insurance companies. The monthly premium for personal accident cover and for life cover is Rs 40 per month and for hospitalization cover, Rs 129 per month. If monthly premiums are averaged at Rs 70, earnings per year are Rs 2bn. In seven years, that is Rs 14bn while claims during the same period were Rs. 1.2bn or 8.5 percent of premiums earned.
Kumara’s father had consented to insurance. When he died last June after falling off a rambutan tree, his son set out to claim the Rs 1.2mn he was told beneficiaries were entitled to. And the only information he had was that a mobile phone operator had insured his father.
A woman on the mobile operator’s insurance hotline expressed condolences and said they would process the claim. But Kumara was perturbed that no insurance agent turned up to examine the site of the accident, to view the body or to meet the police and judicial medical officer (JMO).
“I kept calling and they said documentation was sufficient and to send these through WhatsApp,” he said. “I thought I was talking to an insurance agent. It was much later that I knew it was the employee of another company.”
Kumara forwarded the certificate issued by the inquirer into sudden deaths, his father’s identification and other relevant paperwork. These were confirmed as received. No insurance agent came even after his father’s funeral rites were over. The hotline had said the claim would take 21 days. He waited to hear back.
But nobody called. “I asked why there was no feedback,” Kumara recounted. “It was only then that they told me I hadn’t sent the death certificate so they couldn’t process the claim. I was never requested a death certificate which takes time to be issued.”
“Tired and frustrated”
The Covid-19 outbreak was a delaying factor. Government offices were working slower than usual. However, Kumara obtained a provisional death certificate. And now the hotline asked for a JMO report which tends to be a longer document and for which there is a more strenuous process to fulfill.
The JMO who handled the case had retired. “When I telephoned him, he said he can only give the report directly to the insurance company or to me through a court order,” he recalled. “I begged him to help me.”
Kumara suspected he was being unnecessarily inconvenienced. But he had no choice. The JMO asked him to get a request from the insurance company or to ask an agent to collect the report from him. But the hotline insisted that, as a family member, he was entitled to it. They refused to issue a letter.
“I was tired and frustrated,” he said. “It was dragging on for months but I pursued it because it was our entitlement. I all but worshipped the JMO and he made out a report addressed to me with the seal on the last page. I scanned its six sides and sent that off.”
When Kumara called the hotline again, they said it would now take another 21 days. Fortuitously, a business contact told him about the IRCSL. He narrated his case to a Board member who, along with an employee, took a personal interest in the case. The regulator did not officially get involved.
“The very next day, for the first time, the insurance company called me,” Kumara said. “An agent came from Colombo. And now, four months later, he asked to see the site of the accident.”
The ordeal wasn’t over yet. The agent also gave him the run-around, including by pointing out that the JMO report wasn’t in the required format with a seal on every page. After intervention by the IRCSL board member and employee, the insurance company obtained the JMO report directly–as it should have done. And Kumara finally received a call saying his cheque for Rs 929,000 was ready.
“I pointed out that we were entitled to Rs 1.2mn,” he said. “The caller said the full premium had not been paid during the last month my father had used his prepaid phone. And that it was this period which was used to calculate the payout. I hadn’t known this would be the case. I doubt my father had known, either.”
How could they have known when signing up for insurance had been through a single, minutes-long phone call with just the barest of details shared? On the face of it, his father’s beneficiaries would receive a hefty reward for just a few rupees of premium taken off the phone bill each day. Nothing else was explained. And a customer without the requisite knowledge wouldn’t even know what to ask.
Based on what he went through–only a summarized version is published here–Kumara is certain anyone less forceful, economically able or educated would have given up. “Think of the older population, someone who has less knowledge or who depends on daily wages so he or she cannot run around as I did,” he reflected. “Would they have pursued this?”
With the sector carrying on completely unsupervised, relevant data and information is not publicly available. There is no independent research, therefore, on how many customers give up, forget, or don’t quite realise or understand what a policy entails.
In its letter, however, the mobile phone operator claims that its MEI segment “receives a lesser number of complaints in comparison to traditional insurance (monthly average of approximately 30 deduction-related disputes and 99% of the same are resolved within 48 hours in keeping with the applicable guidelines”.
But this statement raises more questions than it answers. A lesser number of complaints could also point to a lack of awareness or ignorance. And if you are wholly dependent on an unregulated “insurance seller” for your data, that is then an entirely different problem.
| It’s a valuable service, say mobile network providers Mobile network providers maintain that they are providing a valuable service benefiting both the public and insurance industry. A mobile platform, for instance, enables customers to pay premiums with ease, a letter by one company to the Insurance Regulatory Commission’s Subcommittee on Mobile Insurance says. Mobile operators have the ability to reach the masses via SMS campaigns and existing digital channels to communicate the importance of insurance, the letter states. This will help reduce a lack of awareness regarding the importance of insurance. They can have effective customer service to explain different policies as well as streamlined human resource operations. The companies also have access to a large pool of mobile subscribers as a potential insurance customer base; the ability to reach senior citizens via special mobile packages; and the ability to create a unique channel to approach approximately 4.3mn daily-wage earner. For now, however, all this is taking place completely unsupervised. There is a lack of accountability and little effort by the insurance regulator to do anything about it. | |