Operational excellence

for insurers focusing on

emerging consumers
Contents
Introduction 1
Executive summary 3
The opportunity: insurance for
the emerging consumer 5
Effectively targeting emerging consumers 9
Operational excellence: a holistic business
transformation approach 13
Investor’s take — why operational
efficiency is critical for insurance
investment 17
Conclusion 19
Express Life — making a difference
in Ghana 20
Investor’s take — profile of LeapFrog 21
EY: helping to transform the insurance
business in emerging markets 22
Introduction
We are pleased to present this report which explores the opportunities
and challenges of selling and providing insurance to low-income
customers, and shows how an organization can use an operational
excellence approach to operate efficiently and, thus, sustain profitability.
The report is a collaborative effort between EY and LeapFrog Investments,
a profit-with-purpose private equity fund and the world’s largest dedicated
investor in insurance and related financial services to low-income
consumers in Africa and Asia. LeapFrog is successfully tapping this market
by investing in companies that offer financial products, and providing
valuable safety nets and springboards to the next billion low-income
emerging consumers.
We have incorporated our perspectives and those of LeapFrog to drill
down on operational improvement activities that will play a dominant role
in future investment in this emerging consumer market. We encourage
you to use this report to create forums for discussion among insurance
companies, intermediaries, regulators, investors and other stakeholders.
Identifying the operational levers that are critical for success in these
markets will ensure that business model paradigms evolve to effectively
service this large and important customer segment.

Shaun Crawford Rajiv Memani

Global Insurance Leader Global Emerging Markets Leader
2   Operational excellence for insurers focusing on emerging consumers
Executive summary
The middle class has played a special role in economic With growth expected to come from emerging markets
thought for centuries, and has been the primary in Asia and Africa, insurers are looking to invest in
segment responsible for the growth of consumption- these markets to achieve their growth targets. The
driven economies. In Asia alone, 525 million people critical challenge will be to access and service these
can count themselves as middle class — more than the customers in the most cost-efficient and sustainable
total population of the European Union. We are now manner while building long-term relationships. As we
seeing the rise of a large low-income segment that is will discuss, the challenges in these markets are unique
predicted to become a major market influence over as local constraints affect business and operating
the next 10 to 20 years: the “emerging consumer.” model designs. No cookie-cutter models will work.
Today, these consumers typically lack the basic
This market also presents a need for greater
financial services that are critical to fuel savings and
financial, operational and technical investment.
investment. Greater financial inclusion will play an
A differentiated operational strategy backed by
important role in the transformational journey from
a dedicated organization, skilled manpower and
the low-income segment to the global middle class.
robust performance management systems is
Beyond just a safety net, insurance is an enabler for critical for insurers to succeed. These pillars of the
such consumers, allowing them to take risks and invest operational excellence framework are defined in
in business opportunities without worries of losing this report. It is important for insurers, investors
their earnings to an unforeseen event. Insurance and other stakeholders to invest in building this
for such emerging consumers is growing in global framework in their organizations to support the
importance as various entities from state-backed business transformations required to reach emerging
public sectors and mutual companies to large-scale consumers and achieve sustainable value.
commercial insurers focus on this market. While this
business segment is often termed “microinsurance”
by regulatory regimes, our broader definition of
“insurance for the emerging consumer” is more
aligned to the theme of this report.

Operational excellence for insurers focusing on emerging consumers 3

4   Operational excellence for insurers focusing on emerging consumers
 The opportunity: insurance for
the emerging consumer
There is growing evidence that changing global While the remarkable growth of emerging market
economic trends will transform the customer base for economies has brought millions out of poverty, fewer
most industries across the world. Rising per capita people have moved into the global middle class. Over
incomes, favorable demographics and continuing the next two decades, we estimate that the middle class
economic growth are leading to a massive expansion of will expand by another 3 billion people, coming almost
the emerging middle class. exclusively from the current low-income segment (see
Table 1).
The World Bank defines the middle class in two
brackets based on earnings per day: US$2–US$9 and Financial inclusion will be important to aid this
US$9–US$13. According to the World Bank, 10 times expansion. The significance of insurance for this
as many people entered the lower versus the higher low-income customer segment cannot be overstated,
income bracket between 1990 and 20051 — highlighting particularly given the lack of social health care in these
the success of countries such as India and China that countries. Life insurance supports a family when the
have invested millions in the middle class over the breadwinner dies; in-patient hospitalization costs are
past two decades. For this report, our focus is on generally paid for through out-of-pocket expenses
those earning US$2–US$9 per day, or the “emerging and can deplete existing savings. As climate change
consumer.” We define the “global middle class” as and natural disasters such as Cyclone Phailin in the
earning an average of US$10–US$100 per day.2 This Philippines become more prevalent, the importance of
level of consumer has more disposable income to buy asset-backed insurance (e.g., for weather, cattle and
consumable goods and invest in financial and non- livestock) continues to grow.
financial assets.

Table 1. Forecasting a surge in the global middle class Table 2. Defining customer segments2
(thousands of people)
Forecasting a surge in the global middle class
(thousands of people)
9,000

8,000
Upper middle
class and above
7,000

6,000 Global middle class

USD 10 – USD 100 per day
5,000

4,000
Emerging consumer
(low income sector)
3,000 USD 2 – USD 9 per day

2,000

Below poverty line (BPL) segment

1,000
Less than USD 2 per day

0
2000 2005 2010 2015 2020 2025 2030

Rich Middle class

Source: The World Poor
Bank; Kharas and Gertz, 2010
Source: The World Bank; Kharas and Gertz, 2010

1. Innovating for the next three billion, EY, 2011, p.1.

2. Hitting the sweet spot: the growth of the middle class in emerging markets, EY, 2013.

Operational excellence for insurers focusing on emerging consumers 5

 Dependencies
Inconsistent on single source
cash flows of income

The importance of insurance

Insurance has clear social value for the emerging Common
consumer. Low-income consumers need to be insulated challenges
from risk since they lack the accumulated capital to
Lack of Mobile
withstand adverse events. Apart from its advantages as trust segment
a risk management tool, insurance enables low-income
consumers to take calculated risks to emerge from
poverty, make wise investments or assure their families
will be provided for in case of an unforeseen event.
Unawareness
As economists Abhijit Banerjee and Esther Duflo point of insurance
out in their book, Poor Economics, the poor are not concept
irrational in their spending behavior, but rather hyper-
rational, because the value of each money unit is higher
than for other consumer segments. Thus, insurers Common Challenges
should understand some of the key challenges facing Table 3. Common challenges faced by emerging consumers
these consumers and align their operating models to
service them better:
• Inconsistent cash flows — These consumers often
have irregular pay cycles, making premium payments
difficult. How big is this market?
• Significant dependency on a single source of In 2009, there were approximately 1.5 billion–3 billion
income — Dependence on one main breadwinner may people with minimal access to formal insurance services
create a financial burden. globally, as highlighted by Lloyd’s of London.3 Today’s
• A mobile segment — Many jobs require long audience has not changed significantly, but consumers
commutes from rural areas and constant mobility; face different risks — related to life, health and assets.
lack of portability and accessibility may hinder the ILO’s Microinsurance Innovation Facility believes that
purchase of insurance. insurance for low-income consumers has evolved
differently across geographies — from 200% growth
• Lack of awareness of the concept of insurance —
Risk pooling or premium payment benefits that may between 2008 and 2012 in Africa to a steady evolution
not accrue to the customer may be difficult concepts in India and other Asian economies.
to understand. India has the largest share of low-income consumers
• Lack of trust — For some industries, this may lead to with insurance — the result of strong regulation and
reputational issues; these can be more extreme when government schemes, especially in health insurance.
purchasing an intangible product like insurance. South Africa, Kenya, Ghana and Tanzania have
Despite these challenges, customers spend sleepless been rapidly increasing coverage and developing
nights worrying about various risks. The vulnerability microinsurance-focused regulations. Asian economies
is much greater for this segment than for others with such as Indonesia, the Philippines, Bangladesh and
higher disposable income. Pakistan continue to grow in this space as well.
Emerging markets are unique in terms of demographic
and economic segmentation. Countries such as India
have a more standard income-based segmentation

3. 360 Risk Insight — Insurance in Developing Countries, Lloyd’s of London, 2009.

6 Operational excellence for insurers focusing on emerging consumers

 • India — largest microinsurance
market

• One of the fastest growing

• 174 million covered via a
government-backed insurance
markets
scheme
• Over 44 million low-income
lives and properties covered
• Over 60% of total microinsurance
customers are in India
• South Africa, Kenya, Ghana,
Zambia, Ethiopia, Nigeria are
developing microinsurance
regulations
America

India
Africa
Asia
Pacific
Latin
America

• Primary countries focusing

• 45 million people (and on microinsurance include
property) covered Philippines, Indonesia,
• Concentrated in 5 countries Bangladesh, Pakistan, etc.
• >55% in Mexico and Brazil • Still in the nascent stage

Table 4: Size of the market

Source: Microinsurance Innovation Facility — Annual Report, International Labor Organization, 2012

pyramid (as shown in Table 2), whereas other But is it profitable?

developing countries such as Ghana and Nigeria have
a flatter pyramid, with most potential customers in the The foremost challenge for insurers in this market
low-income segment. is the lack of systems and dedicated performance
management tools to track profitability. These are
Globally, we observe many insurers and intermediaries often missing because of a lack of investment or simply
expanding their sales focus down the pyramid to reach lack of focus by senior management. The industry
the emerging consumer. Depending on the specific segment is young and lacks tracking tools. Insurers
market, some players are servicing the low-income usually do not separate performance reporting
customer segment through simple insurance offerings between traditional and emerging consumer insurance.
and third-party distribution. Nevertheless, the vast Future performance management tools need to capture
majority are conventional insurers targeting the current metrics for both revenue and cost to determine the
“top” of the pyramid. profitability trends for this segment.
Irrespective of the geography, insurers recognize that Typically, there is a lack of historical risk data for low-
today’s low-income customers are tomorrow’s middle income consumers. Thus, pricing is not very scientific
class. However, winning this customer segment is not and uses proxies with a constant iterative feedback
just about creating lower-priced products or selling loop. As historical data quality improves, we expect
existing products using a third-party distributor such as risk-based pricing for this segment will lead to better-
a micro-finance institution. Insurers will have to learn priced products.
from the dynamics of their respective markets and
drive innovation by transforming their strategies and Insurers are leveraging various technology-enabled
operating models to grow with emerging consumers channels, such as mobile phones in Africa, to sell
and their developing needs. these insurance services, thereby reducing distributor
and operating expenses. They are also selling life
insurance through retailers reusing rechargeable
vouchers, thus eliminating the distributor layer and

Operational excellence for insurers focusing on emerging consumers 7

 trimming costs significantly. Various government- have been part of corporate social responsibility or
sponsored insurance schemes have standardized philanthropic programs. Often these projects target
processes for enrollment of new beneficiaries, post-sale specific concerns related to product development,
servicing and claims management. However, there are distribution or customer awareness. Such forms of
no universal measures to reduce market costs — an funding do not appear sustainable or scalable for the
important objective since insurers need to demonstrate long term.
profitability. Those insurers who can redefine their
Transformational programs are required to achieve
operating models and generate high operational
operational excellence. This is where investment from
efficiency will reap the benefits of serving this large,
insurers or private equity investors (more specifically,
untapped and developing customer segment.
impact investors) can bring true value — not just in
the form of capital, but also technical knowledge and
Need for greater investment expertise to develop cost-efficient distribution channels
and well-designed products, and to drive organizational
Insurance companies in emerging markets have
change for profitability.
typically found it expensive to cater to the emerging
consumer. The high cost of acquisition, lack of trust and As insurers rapidly expand in emerging markets, we
inaccessibility make outreach difficult. Moreover, many see opportunities to help them with specific geographic
insurers have failed to develop a sound business case, issues in impact investing, measurement and value
with a low-cost and differentiated operational strategy, generation. We are working together with LeapFrog
to enter these markets. Investments to reach this virtually untapped market.
Their approach is a compelling complement to our
Insurance for the emerging consumer is still in a nascent
broad service lines and global competence.
stage. While large insurers may be deploying significant
capital to penetrate this market, other initiatives

8 Operational excellence for insurers focusing on emerging consumers

Effectively targeting emerging
consumers
Many insurers have used existing operating models in • Awareness — Building customer trust through
innovative ways to reach the low-income consumer. educational and marketing initiatives; the most
A large private sector life insurer in India, for example, convincing way for insurers to build awareness is to
created a “top-up” life insurance product in 2008, deliver on their claims’ promises
offering low-income consumers pay-as-you-go options. • Affordability — Providing insurance at an affordable
This eliminated scheduled premiums for consumers price and benefits that the end customer values; this
that typically do not have a steady stream of income. places high importance on product design

In addition to our earlier discussion of issues facing • Accessibility — Ensuring ease in purchasing
consumers, there are three dominant challenges insurance, servicing and claims handling
for insurers to consider in developing the emerging These three challenges can be mapped to the following
consumer market. external and internal success factors that will play an
important role in developing this market.

Operational excellence for insurers focusing on emerging consumers 9

 Awareness

Insurance for the

emerging consumer

Affordability Accessibility

Table 5. Key focus areas for insurance

Internal forfactors
success emerging consumers

External success factors that insurance sales, post-sale servicing and claims
management are quick and efficient.
Regulatory framework
Intermediaries and partnerships
A strong regulatory framework is required to support
the industry, and emerging markets have benefited Distribution is one of the most important concerns.
from the regulatory push. India’s insurance regulator Last-mile connectivity with customers is a challenge
was among the world’s first to have quota-based due to a large segment living in inaccessible areas,
mandates for licensed insurers (requiring them to their constant mobility, or simply a lack of access to the
source a percentage of their business from rural same touch points more affluent segments have (e.g.,
and unorganized markets) and to develop specific bank branches, financial advisors). Use of traditional
regulations for products and distribution. Despite the distribution channels, such as agents or advisors, can
surge in insurance penetration, many insurers still view be an expensive proposition due to high commissions
this as a cost of doing business and not a sustainable and the need to adapt specific requirements for this
proposition. A more principle-based approach is segment. Furthermore, existing channels are typically
being taken by The National Insurance Commission in not trained to deal with the lower-income consumer.
Ghana in drafting microinsurance regulations.4 These Along with traditional channels that are managed
enable insurers to innovate with product definitions in a lean and cost-efficient manner, there are other
and distribution tie-ups as they develop affordable and successful distribution alternatives in this market that
accessible products for the lower-income segment. include partner-agent models (e.g., using business
correspondents), as well as those created by piggy-
Technical and logistical infrastructure backing on existing distribution channels (e.g., mobile
network operators, retailers).
Insurers in emerging markets also face infrastructure-
related challenges, requiring local and highly pragmatic
business solutions. Typical issues include a lack of Internal success factors
options to communicate or interact with customers,
no “know your customer” processes, and limited Low-cost and efficient operating model
payment infrastructure. Leveraging on the high mobile Insurance for low-income consumers is a low-margin
penetration, various technology-based solutions business due to lower average premiums per customer
have emerged. Insurers need flexibility to ensure and relatively high fixed costs. This makes it more

4. Promoting Microinsurance in Ghana: Microinsurance as a Means of Insurance Sector Development, Microfinance Gateway, 2012.

10 Operational excellence for insurers focusing on emerging consumers

 External success factors
• Regulatory framework
• Technical and logistical infrastructure
• Intermediaries and partnerships

Internal success factors

• Efficient operating model
• Supporting governance structure
• Simple and innovative
product design

Table 6. External and internal success factors

important to run an efficient operating model with operational quality and efficiency, which is critical to
simplicity and innovation, and ensure that internal running a profitable business in a low-margin segment.
processes are standardized across the organization.
In the next few years, innovative solutions that provide
Customer interfaces need to be simplified with each
insurance to emerging consumers will include:
customer touch point for consistent communication.
The need to leverage technology to achieve these • Selling insurance through a utility company (e.g.,
objectives is a given. Mapfre and Codensa in Colombia)
• Reaching small businesses for agriculture insurance
Supporting governance structure and via mobile phone technology (e.g., Kilimo Salama in
performance management framework East Africa)
Institutional and infrastructural conditions in emerging • Integrated products with a telecom provider;
markets lead to specific requirements in running outsourcing customer service and premium
the business, such as decentralized sales or strong collection to intermediaries or facilitators (e.g.,
Bima in Asia and Africa)
interaction with intermediaries. This requires robust
governance and risk management structures, which Many of these solutions will be independent or
support management steering and enable operational integrated services. But insurance companies will
control in critical areas such as quality issues or fraud. drive these innovations, and only those players that
In these situations, a well-functioning performance are able to develop profitable operating models will
management framework, with operational KPIs and succeed. While leveraging third-party providers for
controls, is important to identify issues and react various services will be important, insurers still need to
to deviations. This should be embedded across the focus on their customer relationships and operations
organizational structure. to generate maximum value from these third-party
relationships.
Simple and innovative product design Customer-centricity, operational efficiency, risk
Simple yet innovative product design is critical to management and performance management will be
increase penetration in this market. Products need to crucial, but will not ensure sustainable success in this
be easily understood by customers, easy for agents or market. The most important aspects are corporate
intermediaries to sell, and provide real value for the culture (change, individual involvement and leadership)
client. Additionally, standardized products will improve and the mindset of people.

Operational excellence for insurers focusing on emerging consumers 11

12   Operational excellence for insurers focusing on emerging consumers
 Operational excellence: a holistic
business transformation approach
Operational excellence has its origins in markets
such as the automotive industry where price and cost Streamlining operations in India
competition have led to greater customer-centricity,
process efficiency and innovation — and to various A government backed insurance scheme
process improvement approaches such as Six Sigma in India is the world’s largest micro-health
and Lean Management. These are extremely critical insurance program and is a public-private
in low-margin businesses. Insurers have used smart partnership (PPP) effort with the government
cards for enrollments, paperless insurance policies and and various traditional insurance companies
straight-through underwriting processes to streamline that act as risk carriers. The scheme caters
their operations to serve low-income customers. to below poverty line (BPL) families. A family
floater health insurance policy provides
Emerging markets require holistic and sustainable standard inpatient hospitalization coverage
solutions which are customer-driven, end-to-end worth INR 30,000 (USD 500), with an average
focused and support innovation. Operational excellence premium of INR 500 (USD8–USD10). Typical
is a market-leading approach which has a perfect fit margins for traditional insurers are 5%–6%
in this situation. Considering the dynamics of this (depending on claims ratios, payments to third-
market, it is critical to regularly update the operational party administrators and operating expenses).5
excellence framework — i.e., processes and technology, While it is difficult to limit claims and TPA
skills and capabilities, performance management, fees, insurers with robust operating models
operating model, mindset and behavior. have reduced their operating expenses and
Operational excellence approaches were invented increased their margins.
to implement a culture of continuous improvement.
The underlying concept is that employees who face
operational issues initiate regular changes and
improvement steps, such as:
• Reducing work that is not adding value
• Removing obstacles and establishing best working
In addition to creating a culture of continuous
practices
improvement, which might take years or even a
• Building skills and capabilities to create the best decade, the underlying ideas and working methods
coverage and flexibility in the organization of the operational excellence approach can also be
• Realizing efficiency potential by operational and used for focused improvement, design or required
structural changes change projects. Instead of focusing on only one
These continuous activities are supported by proven dimension — e.g., improving processes — the operational
analytical tools and working methods that enable excellence framework includes all major dimensions
measurable and significant improvement by increasing and dependencies that influence the organization’s
efficiency, quality and customer satisfaction. activities.

5. EY analysis

Operational excellence for insurers focusing on emerging consumers 13

 Processes and Skills and
We believe that an operational excellence approach can technology capabilities
help insurers improve levers to achieve efficiencies and
customer focus across the organization in all of these
dimensions:

Processes and technology Operational

• Identify end-to-end process optimization across the Operating excellence
Performance
most critical areas of new business processing, post- model and
sale servicing and claims management management
organization
• Be flexible in changing processes — allowing multiple
options for premium payment, modes of payment,
etc.
• Develop lean processes or working procedures and Mindset and
identify areas for improvement
behavior
• Use technology solutions to create an optimized
process flow — e.g., use of mobile, smart-card
technology for improved processing

Skills and capabilities Operational

Table dimensions
7. Operational ininOperational
dimensions Excellence
operational excellence
• Understand how sales capabilities for this market
differ from traditional insurance
• Identify skill gaps and define ways to improve the
required team skills
Operating model and organization
• Determine the appropriate operating model to ensure
• Increase team flexibility by applying substitution
lean and straight-through processing of insurance
models and working procedures
policies
• Develop platforms for sharing best practices among
• Map organization and activity of the target operating
teams to apply learning from regions to local
model and governance structure (team size,
practices
reporting, etc.)

Performance management Mindset and behavior

• Identify issues and define the future state of
• Identify cultural issues and roadblocks
information flows, reporting/measurements,
decision-making and meeting structures • Provide coaching and feedback as instruments to
(transparency, motivation, quality) develop a culture of change
• Develop governance, operational targets and KPIs, • Develop communication and motivation activities in
identifying issues in decentralized organizational the transformation process
structures • Coach the leadership and management team

14 Operational excellence for insurers focusing on emerging consumers

Operational excellence activities start with the process flow, but they incorporate dimensions such as employee
skills and enterprise performance management that are supported by other operational enablers. The corporate
culture is crucial for sustainable success with emerging consumers; activities around mindset and behavior are in
many ways the basis for a holistic operational change.
In regard to challenges in the day-to-day business in emerging markets, there is a natural fit in using the
operational excellence approach in change activities.

Requirements and success factors

Operational excellence approach
in emerging markets

Cost efficiency and high quality Standardization

Customer focus End-to-end perspective

Ability to adjust to changing business

Innovation
environment

Pragmatic solutions Hands-on and bottom-up approach

Operational excellence for insurers focusing on emerging consumers 15

 “We believe that the years of easy
wins for investors in terms of
multiple expansion or financial
engineering are over. To really
create value you need to get your
hands dirty, operate at and below
board level and have a relentless
focus on driving growth and
operational efficiency.”
Niclas Thelander,
LeapFrog Investments

16   Operational excellence for insurers focusing on emerging consumers

Investor’s take — why operational
efficiency is critical for insurance
investment
At the most fundamental level, investors take LeapFrog’s profit-with-purpose investment strategy
stakes in companies to gain a return on their makes operational efficiency especially critical in
investment. In a private equity context, a key part these areas:
of the investment decision, from our perspective at
• Affordability — LeapFrog helps its portfolio
LeapFrog Investments, is to evaluate and implement companies to reach down the socioeconomic
performance improvement levers that will translate pyramid. Product pricing must be low and deliver
into sustainable growth and efficiency improvements. meaningful value to clients; products must remain
Perhaps unsurprisingly, the ability to make operational profitable and sustainable for the provider. Efficient
improvements has increasingly proven to be the key operations are the key that enables companies
source of value creation, and a vital success factor to offer affordable products in combination with
in delivering top-tier returns in the current market innovative product design and distribution access.
environment. This is a preferred alternative to relying • Quality — Emerging consumers are, by necessity,
on financial engineering or multiple expansions. savvy and aware; in many ways, they are more
quality-focused than those in more affluent
For most businesses targeting low-income, emerging
segments. Products that do not meet quality and
consumer segments in developing markets, margins value expectations are either not bought or not
are likely to be low on a unit basis. This pressures renewed. Of particular importance are claims
cost efficiency across the value chain to service this payments. Typically, policyholders do not have large
segment profitably. The sheer size of the emerging financial buffers and claims must be paid quickly.
consumer segment is the prize that awaits those who Insurers who fail to deliver on claims’ promises may
succeed. face reputational damage.
• Scalability — LeapFrog’s ambitious goal to reduce
financial exclusion helps investees grow quickly; in
2012, the average growth rate of its investees was
24.6%. As any fast-growing company knows, such
growth rates pressure operations in different ways,
and isolated or patchwork responses are unlikely to
provide a scalable solution.

Operational excellence for insurers focusing on emerging consumers 17

18   Operational excellence for insurers focusing on emerging consumers
Conclusion

Incomes are rising in developing economies faster and As the margins in the emerging segment are low,
on a greater scale than at any previous point in history. operational efficiency is important. Current business
The global middle class will grow rapidly over the and operating models lean toward an internal setup.
next 20 years and could constitute 50% of the world’s However, the more the market develops, the more it
population by 2030. Financial inclusion will play an will merge structurally with the traditional insurance
integral part in this development. business in emerging markets and be enriched by new
services and solutions.
For insurers and investors in emerging markets, the
future middle class is a huge business opportunity Investors with a value-based investment style, driven
based on the number of potential customers and by operational improvement activities, will play a
innovative solutions. There is also uncertainty about dominant role in developing this new market segment.
profitability and operational challenges that make Operational excellence becomes a perfect solution for
the investment a bet on the future. In the end, the investors and insurers to support this growth journey
attractiveness and development of this market will and generate sustainable value in the emerging
be driven by investors who believe that market entry consumer segment.
provides more opportunities for profit than alternative
investments. We believe that more players will start
investing in the insurance market for emerging
consumers, either through their own operations or
other vehicles or funds.

Authors

Andreas Freiling Rohan Sachdev

EMEIA Insurance Leader India InsuranceLeader
+49 (0) 6196 996 12587 +91 226 192 0470
andreas.freiling@de.ey.com rohan.sachdev@in.ey.com

Jan-Erik Behrens Pranav Nadkarni

EMEIA Financial Services — India Advisory Services — Insurance Performance
Transaction Advisory Services Improvement
+49 (0) 6196 996 29804 +91 22 6192 1417
jan-erik.behrens@de.ey.com pranav.nadkarni@in.ey.com

Operational excellence for insurers focusing on emerging consumers 19

 Express Life — making a difference in Ghana
The Ghanaian economy has been growing rapidly, with
the life insurance industry increasing 40% Y-o-Y for the
past five years. However, the majority of Ghana’s 25 “LeapFrog’s intention was to support
million people still do not have access to insurance.6 Express Life with both capital and
With an investment of USD 5.5 million, LeapFrog
entrepreneurial expertise gathered
Investments acquired a majority stake in Express Life,
which primarily offers hybrid savings and insurance from other investments and the
products to individuals. Its current business comprises
longtime experience of LeapFrog’s
employees in the public sector and other institutions
serviced by its own branch and agents’ network. To management.”
achieve its ambitious growth targets, Express Life
planned to penetrate the existing segments and push Doug Lacey,
down-market with new products and distribution
expansion.
LeapFrog Investments
EY supported LeapFrog and Express Life to design
an organization that is lean, flexible and efficient at
managing not only existing business, but also future
products and distribution channels. The strategy
The value-creation efforts were recognized
focused on the key building blocks of the operational
as LeapFrog announced the sale of its
excellence framework that would help the organization
ownership stake in Express Life to
jumpstart its next phase of growth, which includes:
Prudential PLC, a leading global insurer,
• Ensuring efficient customer data capture in December 2013.
mechanisms across the value chain
• Simplifying interfaces with the customer
• Decentralizing operations and focus on risk
management
• Developing and hone skills across levels
• Making performance management a critical
component

6. LeapFrog Investments Press Release — “LeapFrog expands insurance industry in West Africa via record Foreign Direct Investment,” April 2012

20 Operational excellence for insurers focusing on emerging consumers

 Investor’s take —
profile of LeapFrog
LeapFrog’s investments reach a total of 18.7 million
people in 12 countries in Africa and Asia, providing
financial tools and supporting over 48,000 jobs.
Approximately 66%, or 12.2 million, of these people
are low-income or underserved, and 12.9 million are
women and children. The portfolio is fast-growing
and profitable, with investees seeing average revenue
growth of 24.6% in 2012. Their success demonstrates a
compelling investment case for providing insurance to
the emerging consumer.
In employing a profit-with-purpose approach, LeapFrog:
• Provides capital and expertise to businesses serving
low-income consumers with insurance and related
financial services, such as savings, pension and
investment products
• Partners with successful companies in Asia and
Africa to access the high-growth emerging consumer
segment and businesses that focus on the low-
income segment
• Invests across the value insurance chain in
underwriters, risk-bearing entities, distributors,
brokers and technology platforms that provide
insurance
• Takes a significant minority or majority stake in each
business as an active, hands-on investor

Operational excellence for insurers focusing on emerging consumers    21

 EY: helping to transform the insurance
business in emerging markets
Insurance is one of EY’s largest sectors, with the breadth of our knowledge through a wide range
approximately 9,700 seasoned professionals worldwide of initiatives, tools and applications. Our in-depth
dedicated to the industry and its business issues. We and cross-border approach is supported by insurance
serve all of the Forbes Global 2000 top 10 insurance professionals from emerging markets, business
companies and audit 25% of the insurance companies transformation and local regions.
on the list — providing us with the second-largest
EY supports you in both investment and improvement
market share. Kennedy Consulting Research & Advisory
activities by offering assistance, from reviews to
recently named EY the leading provider of insurance
concept and strategy formulation to hands-on
advisory services globally.
implementation support for transformation activities.
In addition to our local presence in emerging markets, We understand your specific situation based on our
EY has established an Emerging Markets Center which extensive experience and broad local knowledge, and
connects clients quickly and effectively to the world’s we work with you to help develop solutions tailored for
fastest-growing economies. This enables us to share your organization.

22   Operational excellence for insurers focusing on emerging consumers

 If you would like to discuss any of the topics in this
report or learn more about how EY can help your
business, please contact us.

Contacts
Shaun Crawford
Global Insurance Leader
+44 (0) 207 951 2172
scrawford2@uk.ey.com
Yuji Ozawa
Japanese Insurance Leader 
+813 3503 1100
ozawa-yja@shinnihon.or.jp
David Hollander
Global Insurance Advisory Leader
+1 215 448 5756
david.hollander@ey.com
James Littlewood
Latin America Insurance
+1 305 415 1849
james.littlewood@ey.com
Andreas Freiling
EMEIA Insurance Leader
+49 (0) 6196 996 12587
andreas.freiling@de.ey.com
Jonathan Zhao
Asia-Pacific Insurance Leader
+85 2 2846 9023
jonathan.zhao@hk.ey.com

Operational excellence for insurers focusing on emerging consumers    23

EY | Assurance | Tax | Transactions | Advisory
About EY
EY is a global leader in assurance, tax, transaction and
advisory services. The insights and quality services we
deliver help build trust and confidence in the capital
markets and in economies the world over. We develop
outstanding leaders who team to deliver on our promises
to all of our stakeholders. In so doing, we play a critical
role in building a better working world for our people, for
our clients and for our communities.
EY refers to the global organization, and may refer to
one or more, of the member firms of Ernst & Young
Global Limited, each of which is a separate legal entity.
Ernst & Young Global Limited, a UK company limited by
guarantee, does not provide services to clients. For more
information about our organization, please visit ey.com.
© 2014 Ernst & Young LLP.
All Rights Reserved.
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This material has been prepared for general informational purposes only and
is not intended to be relied upon as accounting, tax or other professional
advice. Please refer to your advisors for specific advice.

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