EY Operational Excellence for Insurers

8/12/2019 EY Operational Excellence for Insurers

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Operational excellencefor insurers focusing on

emerging consumers


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ContentsIntroduction 1

Executive summary 3

The opportunity: insurance forthe emerging consumer 5

Effectively targeting emerging consumers 9

Operational excellence: a holistic businesstransformation approach 13

Investors take why operationalef ciency is critical for insuranceinvestment 17

Conclusion 19

Express Life making a differencein Ghana 20

Investors take pro le of LeapFrog 21

EY: helping to transform the insurancebusiness in emerging markets 22


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IntroductionWe are pleased to present this report which explores the opportunitiesand challenges of selling and providing insurance to low-incomecustomers, and shows how an organization can use an operationalexcellence approach to operate ef ciently and, thus, sustain pro tability.

The report is a collaborative effort between EY and LeapFrog Investments,a pro t-with-purpose private equity fund and the worlds largest dedicatedinvestor in insurance and related nancial services to low-incomeconsumers in Africa and Asia. LeapFrog is successfully tapping this marketby investing in companies that offer nancial products, and providingvaluable safety nets and springboards to the next billion low-incomeemerging consumers.

We have incorporated our perspectives and those of LeapFrog to drilldown on operational improvement activities that will play a dominant rolein future investment in this emerging consumer market. We encourageyou to use this report to create forums for discussion among insurancecompanies, intermediaries, regulators, investors and other stakeholders.Identifying the operational levers that are critical for success in thesemarkets will ensure that business model paradigms evolve to effectivelyservice this large and important customer segment.

Shaun Crawford Rajiv MemaniGlobal Insurance Leader Global Emerging Markets Leader


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Operational excellence for insurers focusing on emerging consumers


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The middle class has played a special role in economicthought for centuries, and has been the primarysegment responsible for the growth of consumption-driven economies. In Asia alone, 525 million peoplecan count themselves as middle class more than thetotal population of the European Union. We are nowseeing the rise of a large low-income segment that ispredicted to become a major market in uence overthe next 10 to 20 years: the emerging consumer.Today, these consumers typically lack the basic

nancial services that are critical to fuel savings andinvestment. Greater nancial inclusion will play animportant role in the transformational journey from

the low-income segment to the global middle class.Beyond just a safety net, insurance is an enabler forsuch consumers, allowing them to take risks and investin business opportunities without worries of losingtheir earnings to an unforeseen event. Insurancefor such emerging consumers is growing in globalimportance as various entities from state-backedpublic sectors and mutual companies to large-scalecommercial insurers focus on this market. While thisbusiness segment is often termed microinsuranceby regulatory regimes, our broader de nition ofinsurance for the emerging consumer is morealigned to the theme of this report.

With growth expected to come from emerging marketsin Asia and Africa, insurers are looking to invest inthese markets to achieve their growth targets. Thecritical challenge will be to access and service thesecustomers in the most cost-ef cient and sustainablemanner while building long-term relationships. As wewill discuss, the challenges in these markets are uniqueas local constraints affect business and operatingmodel designs. No cookie-cutter models will work.

This market also presents a need for greaternancial, operational and technical investment.

A differentiated operational strategy backed bya dedicated organization, skilled manpower and

robust performance management systems iscritical for insurers to succeed. These pillars of theoperational excellence framework are de ned inthis report. It is important for insurers, investorsand other stakeholders to invest in building thisframework in their organizations to support thebusiness transformations required to reach emergingconsumers and achieve sustainable value.

Executive summary

Operational excellence for insurers focusing on emerging consumers 3


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While the remarkable growth of emerging marketeconomies has brought millions out of poverty, fewerpeople have moved into the global middle class. Overthe next two decades, we estimate that the middle classwill expand by another 3 billion people, coming almostexclusively from the current low-income segment (seeTable 1).

Financial inclusion will be important to aid thisexpansion. The signi cance of insurance for thislow-income customer segment cannot be overstated,particularly given the lack of social health care in these

countries. Life insurance supports a family when thebreadwinner dies; in-patient hospitalization costs aregenerally paid for through out-of-pocket expensesand can deplete existing savings. As climate changeand natural disasters such as Cyclone Phailin in thePhilippines become more prevalent, the importance ofasset-backed insurance (e.g., for weather, cattle andlivestock) continues to grow.

There is growing evidence that changing globaleconomic trends will transform the customer base formost industries across the world. Rising per capitaincomes, favorable demographics and continuingeconomic growth are leading to a massive expansion ofthe emerging middle class.

The World Bank de nes the middle class in twobrackets based on earnings per day: US$2US$9 andUS$9US$13. According to the World Bank, 10 timesas many people entered the lower versus the higherincome bracket between 1990 and 2005 1 highlighting

the success of countries such as India and China thathave invested millions in the middle class over thepast two decades. For this report, our focus is onthose earning US$2US$9 per day, or the emergingconsumer. We de ne the global middle class asearning an average of US$10US$100 per day. 2 Thislevel of consumer has more disposable income to buyconsumable goods and invest in nancial and non-

nancial assets.

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.

The opportunity: insurance forthe emerging consumer

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

i i l l

: l

2000 2005 2010 2015 2020 2025 2030

Global middle classUSD 10 USD 100 per day

Emerging consumer(low income sector)USD 2 USD 9 per day

Below poverty line (BPL) segmentLess than USD 2 per day

Upper middleclass and above

Table 2. De ning customer segments 2Table 1. Forecasting a surge in the global middle class(thousands of people)

Source: The World Bank; Kharas and Gertz, 2010



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How big is this market?In 2009, there were approximately 1.5 billion3 billionpeople with minimal access to formal insurance servicesglobally, as highlighted by Lloyds of London. 3 Todaysaudience has not changed signi cantly, but consumersface different risks related to life, health and assets.ILOs Microinsurance Innovation Facility believes thatinsurance for low-income consumers has evolveddifferently across geographies from 200% growthbetween 2008 and 2012 in Africa to a steady evolutionin India and other Asian economies.

India has the largest share of low-income consumerswith insurance the result of strong regulation andgovernment schemes, especially in health insurance.South Africa, Kenya, Ghana and Tanzania have

been rapidly increasing coverage and developingmicroinsurance-focused regulations. Asian economiessuch as Indonesia, the Philippines, Bangladesh andPakistan continue to grow in this space as well.

Emerging markets are unique in terms of demographicand economic segmentation. Countries such as Indiahave a more standard income-based segmentation

The importance of insuranceInsurance has clear social value for the emergingconsumer. Low-income consumers need to be insulatedfrom risk since they lack the accumulated capital towithstand adverse events. Apart from its advantages asa risk management tool, insurance enables low-incomeconsumers to take calculated risks to emerge frompoverty, make wise investments or assure their familieswill be provided for in case of an unforeseen event.

As economists Abhijit Banerjee and Esther Du o pointout in their book, Poor Economics , the poor are notirrational in their spending behavior, but rather hyper-rational, because the value of each money unit is higherthan for other consumer segments. Thus, insurersshould understand some of the key challenges facingthese consumers and align their operating models toservice them better:

Inconsistent cash ows These consumers oftenhave irregular pay cycles, making premium paymentsdif cult.

Signi cant dependency on a single source ofincome Dependence on one main breadwinner maycreate a nancial burden.

A mobile segment Many jobs require longcommutes from rural areas and constant mobility;lack of portability and accessibility may hinder thepurchase of insurance.

Lack of awareness of the concept of insurance Risk pooling or premium payment bene ts that maynot accrue to the customer may be dif cult conceptsto understand.

Lack of trust For some industries, this may lead toreputational issues; these can be more extreme whenpurchasing an intangible product like insurance.

Despite these challenges, customers spend sleeplessnights worrying about various risks. The vulnerabilityis much greater for this segment than for others withhigher disposable income.

Inconsistentcash flows

Commonchallenges

Dependencieson single source

of income

Unawarenessof insuranceconcept

Lack oftrust

Mobilesegment

Table 3. Common challenges faced by emerging consumers

3. 360 Risk Insight Insurance in Developing Countries , Lloyds of London, 2009.



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But is it pro table?The foremost challenge for insurers in this marketis the lack of systems and dedicated performancemanagement tools to track pro tability. These areoften missing because of a lack of investment or simplylack of focus by senior management. The industrysegment is young and lacks tracking tools. Insurersusually do not separate performance reportingbetween traditional and emerging consumer insurance.Future performance management tools need to capturemetrics for both revenue and cost to determine thepro tability trends for this segment.

Typically, there is a lack of historical risk data for low-income consumers. Thus, pricing is not very scienti cand uses proxies with a constant iterative feedback

loop. As historical data quality improves, we expectrisk-based pricing for this segment will lead to better-priced products.

Insurers are leveraging various technology-enabledchannels, such as mobile phones in Africa, to sellthese insurance services, thereby reducing distributorand operating expenses. They are also selling lifeinsurance through retailers reusing rechargeablevouchers, thus eliminating the distributor layer and

pyramid (as shown in Table 2), whereas otherdeveloping countries such as Ghana and Nigeria havea atter pyramid, with most potential customers in thelow-income segment.

Globally, we observe many insurers and intermediariesexpanding their sales focus down the pyramid to reachthe emerging consumer. Depending on the speci cmarket, some players are servicing the low-incomecustomer segment through simple insurance offeringsand third-party distribution. Nevertheless, the vastmajority are conventional insurers targeting the currenttop of the pyramid.

Irrespective of the geography, insurers recognize thattodays low-income customers are tomorrows middleclass. However, winning this customer segment is not

just about creating lower-priced products or sellingexisting products using a third-party distributor such asa micro- nance institution. Insurers will have to learnfrom the dynamics of their respective markets anddrive innovation by transforming their strategies andoperating models to grow with emerging consumersand their developing needs.

Table 4: Size of the market

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

LatinAmerica

America

Africa

India

AsiaPaci c

One of the fastest growingmarkets

Over 44 million low-incomelives and properties covered

South Africa, Kenya, Ghana,

Zambia, Ethiopia, Nigeria aredeveloping microinsuranceregulations

45 million people (andproperty) covered

Concentrated in 5 countries

>55% in Mexico and Brazil

Primary countries focusingon microinsurance includePhilippines, Indonesia,Bangladesh, Pakistan , etc.

Still in the nascent stage

India largest microinsurancemarket

174 million covered via agovernment-backed insurancescheme

Over 60% of total microinsurancecustomers are in India



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have been part of corporate social responsibility orphilanthropic programs. Often these projects targetspeci c concerns related to product development,distribution or customer awareness. Such forms offunding do not appear sustainable or scalable for thelong term.

Transformational programs are required to achieve

operational excellence . This is where investment frominsurers or private equity investors (more speci cally,impact investors) can bring true value not just inthe form of capital, but also technical knowledge andexpertise to develop cost-ef cient distribution channelsand well-designed products, and to drive organizationalchange for pro tability.

As insurers rapidly expand in emerging markets, wesee opportunities to help them with speci c geographicissues in impact investing, measurement and valuegeneration. We are working together with LeapFrogInvestments to reach this virtually untapped market.Their approach is a compelling complement to ourbroad service lines and global competence.

trimming costs signi cantly. Various government-sponsored insurance schemes have standardizedprocesses for enrollment of new bene ciaries, post-saleservicing and claims management. However, there areno universal measures to reduce market costs animportant objective since insurers need to demonstratepro tability. Those insurers who can rede ne theiroperating models and generate high operationalef ciency will reap the bene ts of serving this large,untapped and developing customer segment.

Need for greater investmentInsurance companies in emerging markets havetypically found it expensive to cater to the emergingconsumer. The high cost of acquisition, lack of trust andinaccessibility make outreach dif cult. Moreover, manyinsurers have failed to develop a sound business case,with a low-cost and differentiated operational strategy,to enter these markets.

Insurance for the emerging consumer is still in a nascentstage. While large insurers may be deploying signi cantcapital to penetrate this market, other initiatives



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Awareness Building customer trust througheducational and marketing initiatives; the mostconvincing way for insurers to build awareness is todeliver on their claims promises

Affordability Providing insurance at an affordableprice and bene ts that the end customer values; thisplaces high importance on product design

Accessibility Ensuring ease in purchasinginsurance, servicing and claims handling

These three challenges can be mapped to the followingexternal and internal success factors that will play animportant role in developing this market.

Many insurers have used existing operating models ininnovative ways to reach the low-income consumer.A large private sector life insurer in India, for example,created a top-up life insurance product in 2008,offering low-income consumers pay-as-you-go options.This eliminated scheduled premiums for consumersthat typically do not have a steady stream of income.

In addition to our earlier discussion of issues facingconsumers, there are three dominant challengesfor insurers to consider in developing the emergingconsumer market.

Effectively targeting emerging

consumers



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that insurance sales, post-sale servicing and claimsmanagement are quick and ef cient.

Intermediaries and partnershipsDistribution is one of the most important concerns.Last-mile connectivity with customers is a challengedue to a large segment living in inaccessible areas,their constant mobility, or simply a lack of access to thesame touch points more af uent segments have (e.g.,

bank branches, nancial advisors). Use of traditionaldistribution channels, such as agents or advisors, canbe an expensive proposition due to high commissionsand the need to adapt speci c requirements for thissegment. Furthermore, existing channels are typicallynot trained to deal with the lower-income consumer.Along with traditional channels that are managedin a lean and cost-ef cient manner, there are othersuccessful distribution alternatives in this market thatinclude partner-agent models (e.g., using businesscorrespondents), as well as those created by piggy-backing on existing distribution channels (e.g., mobilenetwork operators, retailers).

Internal success factors

Low-cost and ef cient operating modelInsurance for low-income consumers is a low-marginbusiness due to lower average premiums per customerand relatively high xed costs. This makes it more

External success factors

Regulatory frameworkA strong regulatory framework is required to supportthe industry, and emerging markets have bene tedfrom the regulatory push. Indias insurance regulatorwas among the worlds rst to have quota-basedmandates for licensed insurers (requiring them tosource a percentage of their business from rural

and unorganized markets) and to develop speci cregulations for products and distribution. Despite thesurge in insurance penetration, many insurers still viewthis as a cost of doing business and not a sustainableproposition. A more principle-based approach isbeing taken by The National Insurance Commission inGhana in drafting microinsurance regulations. 4 Theseenable insurers to innovate with product de nitionsand distribution tie-ups as they develop affordable andaccessible products for the lower-income segment.

Technical and logistical infrastructureInsurers in emerging markets also face infrastructure-related challenges, requiring local and highly pragmaticbusiness solutions. Typical issues include a lack ofoptions to communicate or interact with customers,no know your customer processes, and limitedpayment infrastructure. Leveraging on the high mobilepenetration, various technology-based solutionshave emerged. Insurers need exibility to ensure

Affordability

Awareness

Accessibility

Insurance for theemerging consumer

Table 5. Key focus areas for insurance for emerging consumers

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

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operational quality and ef ciency, which is critical torunning a pro table business in a low-margin segment.

In the next few years, innovative solutions that provideinsurance to emerging consumers will include:

Selling insurance through a utility company (e.g.,Mapfre and Codensa in Colombia)

Reaching small businesses for agriculture insurancevia mobile phone technology (e.g., Kilimo Salama inEast Africa)

Integrated products with a telecom provider;outsourcing customer service and premiumcollection to intermediaries or facilitators (e.g.,Bima in Asia and Africa)

Many of these solutions will be independent orintegrated services. But insurance companies willdrive these innovations, and only those players thatare able to develop pro table operating models willsucceed. While leveraging third-party providers forvarious services will be important, insurers still need tofocus on their customer relationships and operationsto generate maximum value from these third-party

relationships.Customer-centricity, operational ef ciency, riskmanagement and performance management will becrucial, but will not ensure sustainable success in thismarket. The most important aspects are corporateculture (change, individual involvement and leadership)and the mindset of people.

important to run an ef cient operating model withsimplicity and innovation, and ensure that internalprocesses are standardized across the organization.Customer interfaces need to be simpli ed with eachcustomer touch point for consistent communication.The need to leverage technology to achieve theseobjectives is a given.

Supporting governance structure and

performance management frameworkInstitutional and infrastructural conditions in emergingmarkets lead to speci c requirements in runningthe business, such as decentralized sales or stronginteraction with intermediaries. This requires robustgovernance and risk management structures, whichsupport management steering and enable operationalcontrol in critical areas such as quality issues or fraud.In these situations, a well-functioning performancemanagement framework, with operational KPIs andcontrols, is important to identify issues and reactto deviations. This should be embedded across theorganizational structure.

Simple and innovative product designSimple yet innovative product design is critical toincrease penetration in this market. Products need tobe easily understood by customers, easy for agents orintermediaries to sell, and provide real value for theclient. Additionally, standardized products will improve

Table 6. External and internal success factors

External success factors

Regulatory framework Technical and logistical infrastructure

Intermediaries and partnerships

Internal success factors

Ef cient operating model Supporting governance structure Simple and innovativeproduct design



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In addition to creating a culture of continuousimprovement, which might take years or even adecade, the underlying ideas and working methodsof the operational excellence approach can also beused for focused improvement, design or requiredchange projects. Instead of focusing on only onedimension e.g., improving processes the operationalexcellence framework includes all major dimensionsand dependencies that in uence the organizations

activities.

Operational excellence has its origins in marketssuch as the automotive industry where price and costcompetition have led to greater customer-centricity,process ef ciency and innovation and to variousprocess improvement approaches such as Six Sigmaand Lean Management. These are extremely criticalin low-margin businesses. Insurers have used smartcards for enrollments, paperless insurance policies andstraight-through underwriting processes to streamlinetheir operations to serve low-income customers.

Emerging markets require holistic and sustainablesolutions which are customer-driven, end-to-endfocused and support innovation. Operational excellenceis a market-leading approach which has a perfect tin this situation. Considering the dynamics of thismarket, it is critical to regularly update the operationalexcellence framework i.e., processes and technology,skills and capabilities, performance management,operating model, mindset and behavior.

Operational excellence approaches were inventedto implement a culture of continuous improvement.The underlying concept is that employees who face

operational issues initiate regular changes andimprovement steps, such as:

Reducing work that is not adding value

Removing obstacles and establishing best workingpractices

Building skills and capabilities to create the bestcoverage and exibility in the organization

Realizing ef ciency potential by operational andstructural changes

These continuous activities are supported by provenanalytical tools and working methods that enablemeasurable and signi cant improvement by increasingef ciency, quality and customer satisfaction.

Operational excellence: a holisticbusiness transformation approach

Streamlining operations in India

A government backed insurance schemein India is the worlds largest micro-healthinsurance program and is a public-privatepartnership (PPP) effort with the governmentand various traditional insurance companiesthat act as risk carriers. The scheme catersto below poverty line (BPL) families. A family

oater health insurance policy providesstandard inpatient hospitalization coverageworth INR 30,000 (USD 500), with an averagepremium of INR 500 (USD8USD10). Typicalmargins for traditional insurers are 5%6%(depending on claims ratios, payments to third-party administrators and operating expenses). 5 While it is dif cult to limit claims and TPAfees, insurers with robust operating modelshave reduced their operating expenses andincreased their margins.

5. EY analysis



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Operating model and organizationDetermine the appropriate operating model to ensurelean and straight-through processing of insurancepolicies

Map organization and activity of the target operatingmodel and governance structure (team size,reporting, etc.)

Mindset and behaviorIdentify cultural issues and roadblocks

Provide coaching and feedback as instruments todevelop a culture of change

Develop communication and motivation activities in

the transformation processCoach the leadership and management team

We believe that an operational excellence approach canhelp insurers improve levers to achieve ef ciencies andcustomer focus across the organization in all of thesedimensions:

Processes and technologyIdentify end-to-end process optimization across themost critical areas of new business processing, post-sale servicing and claims management

Be exible in changing processes allowing multipleoptions for premium payment, modes of payment,etc.

Develop lean processes or working procedures andidentify areas for improvement

Use technology solutions to create an optimizedprocess ow e.g., use of mobile, smart-cardtechnology for improved processing

Skills and capabilitiesUnderstand how sales capabilities for this marketdiffer from traditional insurance

Identify skill gaps and de ne ways to improve therequired team skills

Increase team exibility by applying substitutionmodels and working procedures

Develop platforms for sharing best practices amongteams to apply learning from regions to localpractices

Performance managementIdentify issues and de ne the future state ofinformation ows, reporting/measurements,decision-making and meeting structures(transparency, motivation, quality)

Develop governance, operational targets and KPIs,

identifying issues in decentralized organizationalstructures

Processes andtechnology

Skills andcapabilities

Mindset andbehavior

Operatingmodel and

organization

Performancemanagement

Operationalexcellence

Table 7. Operational dimensions in operational excellence



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Cost efficiency and high quality

Customer focus

Requirements and success factorsin emerging markets Operational excellence approach

Ability to adjust to changing businessenvironment

Pragmatic solutions

Standardization

End-to-end perspective

Innovation

Hands-on and bottom-up approach

Operational excellence activities start with the process ow, but they incorporate dimensions such as employeeskills and enterprise performance management that are supported by other operational enablers. The corporateculture is crucial for sustainable success with emerging consumers; activities around mindset and behavior are inmany 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 t in using theoperational excellence approach in change activities.



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We believe that the years of easy

wins for investors in terms of

multiple expansion or nancialengineering 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 ef ciency.

Niclas Thelander,

LeapFrog Investments



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LeapFrogs pro t-with-purpose investment strategymakes operational ef ciency especially critical inthese areas:

Affordability LeapFrog helps its portfoliocompanies to reach down the socioeconomicpyramid. Product pricing must be low and delivermeaningful value to clients; products must remainpro table and sustainable for the provider. Ef cientoperations are the key that enables companiesto offer affordable products in combination withinnovative product design and distribution access.

Quality Emerging consumers are, by necessity,savvy and aware; in many ways, they are morequality-focused than those in more af uentsegments. Products that do not meet quality andvalue expectations are either not bought or notrenewed. Of particular importance are claimspayments. Typically, policyholders do not have large

nancial buffers and claims must be paid quickly.Insurers who fail to deliver on claims promises mayface reputational damage.

Scalability LeapFrogs ambitious goal to reducenancial exclusion helps investees grow quickly; in

2012, the average growth rate of its investees was24.6%. As any fast-growing company knows, suchgrowth rates pressure operations in different ways,and isolated or patchwork responses are unlikely toprovide a scalable solution.

At the most fundamental level, investors takestakes in companies to gain a return on theirinvestment. In a private equity context, a key partof the investment decision, from our perspective atLeapFrog Investments, is to evaluate and implementperformance improvement levers that will translateinto sustainable growth and ef ciency improvements.Perhaps unsurprisingly, the ability to make operationalimprovements has increasingly proven to be the keysource of value creation, and a vital success factorin delivering top-tier returns in the current marketenvironment. This is a preferred alternative to relyingon nancial engineering or multiple expansions.

For most businesses targeting low-income, emergingconsumer segments in developing markets, marginsare likely to be low on a unit basis. This pressurescost ef ciency across the value chain to service thissegment pro tably. The sheer size of the emergingconsumer segment is the prize that awaits those whosucceed.

Investors take why operationalef ciency is critical for insuranceinvestment



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As the margins in the emerging segment are low,operational ef ciency is important. Current businessand operating models lean toward an internal setup.However, the more the market develops, the more itwill merge structurally with the traditional insurancebusiness in emerging markets and be enriched by newservices and solutions.

Investors with a value-based investment style, drivenby operational improvement activities, will play adominant role in developing this new market segment.Operational excellence becomes a perfect solution forinvestors and insurers to support this growth journeyand generate sustainable value in the emergingconsumer segment.

Incomes are rising in developing economies faster andon a greater scale than at any previous point in history.The global middle class will grow rapidly over thenext 20 years and could constitute 50% of the worldspopulation by 2030. Financial inclusion will play anintegral part in this development.

For insurers and investors in emerging markets, thefuture middle class is a huge business opportunitybased on the number of potential customers andinnovative solutions. There is also uncertainty aboutpro tability and operational challenges that makethe investment a bet on the future. In the end, theattractiveness and development of this market willbe driven by investors who believe that market entryprovides more opportunities for pro t than alternativeinvestments. We believe that more players will startinvesting in the insurance market for emergingconsumers, either through their own operations orother vehicles or funds.

Conclusion

Authors

Andreas FreilingEMEIA Insurance Leader

+49 (0) 6196 996 [email protected]

Jan-Erik BehrensEMEIA Financial Services Transaction Advisory Services

+49 (0) 6196 996 29804 [email protected]

Rohan SachdevIndia InsuranceLeader

+91 226 192 [email protected]

Pranav NadkarniIndia Advisory Services Insurance PerformanceImprovement

+91 22 6192 [email protected]



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The Ghanaian economy has been growing rapidly, withthe life insurance industry increasing 40% Y-o-Y for thepast ve years. However, the majority of Ghanas 25million people still do not have access to insurance. 6

With an investment of USD 5.5 million, LeapFrogInvestments acquired a majority stake in Express Life,which primarily offers hybrid savings and insuranceproducts to individuals. Its current business comprisesemployees in the public sector and other institutionsserviced by its own branch and agents network. Toachieve its ambitious growth targets, Express Lifeplanned to penetrate the existing segments and pushdown-market with new products and distributionexpansion.

EY supported LeapFrog and Express Life to designan organization that is lean, exible and ef cient atmanaging not only existing business, but also futureproducts and distribution channels. The strategyfocused on the key building blocks of the operationalexcellence framework that would help the organization

jumpstart its next phase of growth, which includes:

Ensuring ef cient customer data capture

mechanisms across the value chain Simplifying interfaces with the customer

Decentralizing operations and focus on riskmanagement

Developing and hone skills across levels

Making performance management a criticalcomponent

The value-creation efforts were recognizedas LeapFrog announced the sale of itsownership stake in Express Life toPrudential PLC, a leading global insurer,in December 2013.

LeapFrogs intention was to support

Express Life with both capital and

entrepreneurial expertise gathered

from other investments and the

longtime experience of LeapFrogs

management.

Doug Lacey,

LeapFrog Investments

Express Life making a difference in Ghana

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



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LeapFrogs investments reach a total of 18.7 millionpeople in 12 countries in Africa and Asia, providing

nancial tools and supporting over 48,000 jobs.Approximately 66%, or 12.2 million, of these peopleare low-income or underserved, and 12.9 million arewomen and children. The portfolio is fast-growingand pro table, with investees seeing average revenuegrowth of 24.6% in 2012. Their success demonstrates acompelling investment case for providing insurance tothe emerging consumer.

In employing a pro t-with-purpose approach, LeapFrog:

Provides capital and expertise to businesses servinglow-income consumers with insurance and related

nancial services, such as savings, pension andinvestment products

Partners with successful companies in Asia andAfrica to access the high-growth emerging consumersegment and businesses that focus on the low-income segment

Invests across the value insurance chain inunderwriters, risk-bearing entities, distributors,brokers and technology platforms that provideinsurance

Takes a signi cant minority or majority stake in eachbusiness as an active, hands-on investor

Investors take pro le of LeapFrog



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EY: helping to transform the insurancebusiness in emerging marketsInsurance is one of EYs largest sectors, withapproximately 9,700 seasoned professionals worldwidededicated to the industry and its business issues. Weserve all of the Forbes Global 2000 top 10 insurancecompanies and audit 25% of the insurance companieson the list providing us with the second-largestmarket share. Kennedy Consulting Research & Advisoryrecently named EY the leading provider of insuranceadvisory services globally.

In addition to our local presence in emerging markets,EY has established an Emerging Markets Center whichconnects clients quickly and effectively to the worldsfastest-growing economies. This enables us to share

the breadth of our knowledge through a wide rangeof initiatives, tools and applications. Our in-depthand cross-border approach is supported by insuranceprofessionals from emerging markets, businesstransformation and local regions.

EY supports you in both investment and improvementactivities by offering assistance, from reviews toconcept and strategy formulation to hands-onimplementation support for transformation activities.We understand your speci c situation based on ourextensive experience and broad local knowledge, andwe work with you to help develop solutions tailored foryour organization.



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

Contacts

Shaun CrawfordGlobal Insurance Leader+44 (0) 207 951 [email protected]

Yuji OzawaJapanese Insurance Leader+813 3503 1100

[email protected] HollanderGlobal Insurance Advisory Leader+1 215 448 [email protected]

James LittlewoodLatin America Insurance+1 305 415 1849

[email protected]

Andreas FreilingEMEIA Insurance Leader+49 (0) 6196 996 [email protected]

Jonathan ZhaoAsia-Paci c Insurance Leader+85 2 2846 9023

[email protected]



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About EY

EY is a global leader in assurance, tax, transaction andadvisory services. The insights and quality services wedeliver help build trust and con dence in the capitalmarkets and in economies the world over. We developoutstanding leaders who team to deliver on our promisesto all of our stakeholders. In so doing, we play a criticalrole in building a better working world for our people, for

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2014 Ernst & Young LLP. All Rights Reserved.

EYG no: EG0169BSC No. 1401-1189464 ED 0614This material has been prepared for general informational purposes only andis not intended to be relied upon as accounting, tax or other professionaladvice. Please refer to your advisors for speci c advice.

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