A farmer carries grass to feed water buffaloes in Sapa, northwest Vietnam. CARLOS BARRIA/REUTERSCARLOS BARRIA/REUTERS/Reuters
In the most far-flung stretches of rural Vietnam, people who only a year ago did not know what insurance was are now paying their monthly premiums by text message.
Manulife Financial Corp. has been quietly experimenting with text message payments in remote parts of the country, where for a little more than a year it has been offering life insurance policies with premiums of roughly $1 a month.
It is the Canadian insurance company's first foray into so-called microinsurance, a tool that it hopes will build brand recognition and goodwill in Asia, the most important geographical area for Manulife's future growth. With microinsurance sales now exceeding the company's expectations, Manulife plans to keep forging down this path, likely bringing the product to the Philippines in the near future. And, ironically, this effort has spurred the insurer to develop some new high-tech tools that it has never made available to its traditional, more profitable, customers.
It has already sold about 80,000 microinsurance policies in Vietnam, the only country that Manulife is selling the policies in so far. Microinsurance made up 6 per cent of Manulife's sales in Vietnam last year.
"The microinsurance sales actually made a significant contribution to our top line, which was a surprise because we didn't go into this for top-line at all, we went into it not expecting to make any significant money on this," said Carl Gustini, chief executive officer of Manulife Vietnam. "We really just expected to break even and spread the word."
Manulife is banking on Asia as a key source of future profit growth, as a number of challenges confront its business in the U.S. There are currently 11 life insurers tussling for customers in Vietnam, but four new players have been granted permission to enter the market this year and the government has indicated that it will let more in.
Manulife, whose market share increased to 12.4 per cent in 2010 from 11.4 per cent in 2009, originally conceived of the microinsurance offering as a way of raising awareness of its brand amongst an upwardly mobile population and a way of generating positive word-of-mouth publicity.
With the help of its partner, the Vietnamese Women's Union, the company began offering microinsurance in nine provinces last year, and this year it intends to roll the product out in another 12. It's considering new products, such as policies that cover a whole family. And, in addition to text messages, it's looking at allowing customers to pay their microinsurance premiums over the Internet.
At first glance, it might appear odd that Manulife is experimenting with technology in remote jungle locations rather than in Asia's major cities - or North America, for that matter. But the company found itself looking for a reliable and easy method of collecting premiums and, at the same time, hoped that the cellphone gimmick might bolster sales. When it began selling microinsurance last year, it relied on what Mr. Gustini characterizes as a "modest" system organized by the women's union in which cash premium payments changed hands until they reached the company.
"The cellphone penetration in the rural areas is very high, upwards of 70 per cent in some provinces," Mr. Gustini said. And while most families can't afford computers, Internet cafés are popular.
He wants to continue testing the cellphone payments, which have been available for two months, before potentially rolling them out more broadly to regular (non-microinsurance) customers in Vietnam, who on average pay about $400 a year in premiums. Right now, roughly one-quarter of the company's microinsurance customers are making their payments by text message.
"The question for us is will people continue to be happy to pay their premiums through SMS, or are they doing it because it's gimmicky?" he said.