Guest Articles

June 10

Carlie Joselowitz

Extending Insurance in Times of Crisis: How an Innovative Partnership is Serving Low-Income Micro-Business Owners in Indonesia

Though people of disparate countries and income levels are equally susceptible to the novel coronavirus, the economic impact of the pandemic isn’t as impartial. Indeed, the lockdowns prompted by COVID-19 have highlighted the severe economic inequalities that continue to persist around the world. These measures have burdened even the hardiest of economies, but developing nations have taken a disproportionate hit. Many are experiencing health, social and economic impacts that are predicted to linger, even long after the pandemic has passed.

Many businesses in developed countries can acquire a certain level of resilience to crisis by taking advantage of insurance packages. However, there’s a lack of awareness about the value of insurance, or the existence of relevant and affordable products, among lower-income groups in developing countries. Under normal circumstances, that means low-income micro-business owners face huge financial losses if they experience an illness that prevents them from working – and this impact is far worse in a full-blown pandemic. Health emergencies of all types can have severe implications for these entrepreneurs, and the fear of the potential financial damage of illness adds further physiological stress. Health insurance can serve as a security blanket, significantly lessening this burden on lower-income individuals – and microinsurance can be an attractive option for them.

The global microinsurance market has seen significant year-on-year growth – it sat at $64.4 billion as of 2018 and is expected to reach a value of $92.1 billion by 2024. However, lower-income groups make up the estimated 1.7 billion consumers globally that are unserved by formal finance, making the potential growth in this market explosive. Although achieving this growth presents its own set of challenges, the newly formed strategic global partnership between N-Frnds’ (a technology platform company focused on last-mile distribution in emerging markets) and AXA (one of the largest insurance companies in the world, and one with a strong focus on serving the financially excluded population) has enabled the benefits of insurance to be extended to this untapped market. As part of this broader partnership, we have recently launched an initiative focusing on micro-health insurance which is particularly relevant during the current pandemic. Below, we’ll explore two of the challenges of delivering insurance to low-income customers in emerging markets, and how the partnership helps to solve them.


Problem 1: Serving the Uninsured in Indonesia

Microinsurance covers an estimated 500 million people worldwide today – a significant increase from 2009, when this value stood at 135 million people. This growth is significant, but it is still small in relation to the 1.5 – 3 billion customers currently unserved or underserved by insurance – so the potential global market for microinsurance remains largely untapped. 

Different national microinsurance markets face different challenges. But in Indonesia, inadequate market reach is one constraint stifling growth in the microinsurance industry, given the size of the country and its scattered islands. In response, insurers have begun to partner with mobile companies (telcos) to create physical distribution networks to reach lower-income groups. However, these Telco players and their sales reps often lack the trust of their communities and the knowledge of insurance to effectively sell to the low-income segment. And insurance companies themselves have been reluctant to develop physical and geographically dispersed distribution networks in the country, due to their costly nature. Even if they do try build these networks on their own, the return on investment is not sustainable – even in the long term.


N-Frnds’ and AXA’s Partnered Solution

N-Frnds and AXA’s response to this problem is part of what makes our partnership so unique. We’ve established a process that leverages N-Frnds’unique cloud-based digital distribution platform for emerging markets, which can be reached from any device, even without mobile data. The process functions by using a hybrid network (physical and digital) of pre-sellers (young sales reps) who are hired by N-Frnds and who, through the N-Frnds’ technology platform, are able to offer multiple physical and digital products to their customers. The pre-sellers are assigned to pre-selected wholesalers in different geographic locations, and are responsible for signing up outlets (small street stalls) and collecting orders (e.g. snacks, beverages, household products, etc.) from each outlet through the platform. These digital orders are then fulfilled by their wholesalers. At the same time, these pre-sellers also offer digital financial products (such as loans/credit and insurance) to these outlet customers. In this way, the platform consolidates fast-moving consumer goods (FMCG) companies and other value chains (e.g. banking and finance) into a unified digital distribution platform.

We’re now leveraging this approach to enable the distribution of health microinsurance. A custom-designed health insurance policy is provided by N-Frnds on behalf of AXA to small retail outlets who would otherwise have little access to, or even knowledge of, health insurance and its benefits. The pre-sellers’ duty in this case is to explain the benefits of insurance to the owners of these outlets, their customers and their families, and to sign them up through the N-Frnds app. This allows AXA to reach this untapped market through a highly personalized and innovative distribution network.


Problem 2: Lack of Affordability and Understanding of the Benefits of Insurance

Even when insurance companies are able to reach the financially excluded, lack of affordability among lower-income groups creates another major challenge in serving this untapped market. It therefore becomes vital to create a lower-cost product. In Indonesia, over 80% of the population are at the base of the economic pyramid, earning less than $4.50 a day. This group is not willing to spend their already limited budget on a costly service where the return is not clearly apparent. Typical insurance premiums can represent 8-10% of a low-income person’s income, so the majority of time they cannot afford insurance, even though many are potentially affected by floods and earthquakes. Currently, only 1.7% of the Indonesian population owns insurance of some kind. Additionally, insurance is a complex product that requires a certain level of financial, legal and health literacy to understand coverage terms and conditions, which many people lack. This makes it hard for these customers to trust in the insurers who want to reach them.


N-Frnds’ and AXAs Partnered Solution

To address these challenges, the health policy that AXA provides has a RP 50,000 yearly premium (under US $3.50 a year). This is enough for AXA to profitably serve these customers, as they do not bear any of the distribution costs. Rather, N-Frnds covers these costs and shares them among all of our partners (banking/financial, multiple FMCG companies, etc.) who each pay only for the value they derive from the network. This presents a huge opportunity for AXA and other companies that partner with N-Frnds, since there are so many low-income users (the majority of Indonesians – 203 million people). The size of the market allows such partnerships to be both profitable and sustainable in the long run – even for larger corporate partners (for example, Coca Cola is a key FMCG partner of N-Frnds). AXA’s health policy consists of a hospital cash plan where the insured party can receive cash pay-outs of RP 300,000 (about US $21) for hospitalization due to accident or illness, and RP 600,000 (about US $42) for serious illness. This is enough money to cover the customer’s lost earnings along with additional costs related to hospital care, such as transport or medication, which can be crippling for individuals with limited savings. (Basic medical expenses themselves are covered by the national government medical scheme.)

The whole process of signing up individuals for insurance schemes is done through the N-Frnds’ platform by the N-Frnds pre-seller. The personal relationships between retail outlets and pre-sellers instils a sense of trust for the outlets. This relationship, combined with the low cost of the premium, creates a good starting point to overcome the lack of insurance culture present among low-income micro-business owners. Furthermore, as N-Frnds provides these retail outlets with monetary incentives, they are then able to serve as lead generators for the insurance, referring their customers (who trust the outlet owners, as they are members of the same community) to the pre-seller.

At N-Frnds we strive to ensure that our platform is benefitting all the parties who use it, and this partnership is no exception. AXA seeks to benefit by facilitating its customers’ economic transition into the middle class, while demonstrating the benefits of insurance to protect against future national and personal crises and prevent a relapse into poverty. N-Frnds is able to leverage our network and technology platform to gain further traction in the market, while expanding our partner’s (in this case AXA’s) insurance products. And of course, the benefit to the micro-business owners and their retail outlets is immeasurable, as this opportunity enables them to gain a sense of safety and security – allowing them to grow their businesses without fear of uncontrollable circumstances.

For more information on N-Frnds visit, or watch this short video on how we are digitizing distribution networks in Indonesia.


Carlie Joselowitz is a marketing analyst at N-Frnds.


Photo courtesy of author.




Coronavirus, Finance, Investing
COVID-19, financial inclusion, insurance