The African insurance industry represents less than one percent of the world’s insured losses, despite being home to 17% of the world’s population. Access to affordable and flexible insurance for medium to low-income earners is even more limited. In Nigeria specifically, access to micro-insurance products is estimated to cover only 0.2% of the adult population, despite 17% of Nigerian adults being aware of insurance services, making Nigeria the African country with the lowest insurance coverage rate.
Trust, awareness, and access are all established barriers to purchasing insurance, but so too is price, particularly for low-income customers. Although premiums in Africa are 11-fold lower than the world average, they are still out of reach for most Africans.
To meet this need, Paddy Cover has built an insurtech platform that works with underwriters and other partners to enable, distribute and sell bespoke insurance products in a scalable way. One of the unique mechanisms that they’re using to sell insurance to lower-income, underserved users is to leverage a network of agents and finance their premiums so that they can be broken down into monthly installments, instead of a large annual premium collection.
Paddy Cover currently offers two core insurance products: 1) an insurer-agnostic API that allows customers to craft bespoke insurance policies, and 2) an agent financing platform that enables insurance agents/brokers to both sell and finance premiums, thus unlocking both access and affordability.
Paddy Cover attracts low-income customers with better pricing and middle-income customers with a better user experience and diverse product offerings. Paddy Cover’s health insurance policies start at NGN1,500 (USD~3.50) per month while home content insurance policies start at NGN250 (USD~0.60) per month. Not only are their prices low, but Paddy Cover also offers monthly premiums, which are more affordable relative to traditional yearly premiums. The bite-sized premium payments allow for flexibility with the customers as well as help even cash flows.
Paddy Cover works with established insurers and customer aggregators to design and offer bespoke products via a multi-channel platform that facilitates flexible and convenient insurance packages. The offerings are built into the lifestyle touchpoints of the customer, either as a convenience or as complementary value-adds.
Broadly speaking, insurance helps people rebound when things go bad. In the case of Paddy Cover, the venture offers a range of policies including health, life, comprehensive auto, and home.
Health insurance coverage has a number of benefits: people are better able to return to work after an injury, seek healthcare at higher rates, maintain investment in children’s education, and a range of other benefits. Furthermore, help with healthcare costs can prevent many from falling into poverty. UNDP reports that “prior to COVID, 11 million people in the region [Africa] – 100 million people worldwide – were pushed into financial catastrophe due to health costs every year.”
Although the benefits are clear, access to health insurance in Nigeria is minimal. Only 3% of the population has health insurance, and the state scheme covers less than 10% of Nigerians, most of whom are federal employees and their dependents. That explains why 65% of all health expenditures in Nigeria are paid out-of-pocket.
Low coverage may persist because it is not easy to buy insurance. One study found that 89% of Nigerians say they don’t know how to go about getting health insurance coverage. By enabling access to insurance Paddy Cover helps families manage and recover from health shocks.
By offering a low-priced, user-friendly insurance product, Paddy Cover is enabling previously excluded populations to access insurance through their website, their partners, and also a network of agents. This democratizes access to affordable policies, which will hopefully reduce the vulnerability of target populations.
Paddy Cover currently has over 12K active policies, including motorcycle, vehicle, personal accident, and health policies. Notably, these policies were generated without marketing spending, with acquisition driven by their B2B2C aggregator model and/or referrals.
They generated USD60K in revenue in 2021 compared to USD22K in 2020 (~200% YoY growth). They are projecting USD100-120K in revenue by 2022 EOY (~67-100% YoY growth) and aim to break even in 18 months.
They plan to work with solar home system companies to embed insurance by adding product warranties for solar devices; bundling home content insurance to insure the value of both the solar panel as well as the contents of the home either in the case of some event (fires, floods, earthquakes, etc.) or in the case that the home is damaged due to faulty solar product (e.g. the solar-linked generator blows a fuse and sparks a fire); and offering bundled credit life insurance to pay off solar PAYGo loans if the beneficiary passes away.
In addition, they are intending to expand their offering through a broker financing platform, enabling agents to deliver more insurance policies at scale. This new product can impact not just their customers, but also agents by improving their income and subsequently their financial resilience.
We also see more opportunities for Paddy Cover to increase access to insurance for vulnerable households to have health, asset, and life coverage in the case of adverse events induced by climate change such as natural hazards, but also health issues due to vector-borne diseases or extreme heat. For instance, Paddy Cover has plans to leverage their microinsurance license in order to offer bite-sized coverage on diseases like malaria and typhoid as well as partner with HMO wellness and VFD microfinance to take their products to serve more rural populations in the North/Northeast parts of Nigeria.