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Accessing the low income market

About the Project
Project start date: 
Dic 2009
3 years
País de operaciones: 
South Africa
Region of operations: 
Project Thematic Focus: 
Insitutional models and business processes


Project Basics

The history of Old Mutual South Africa (OM) dates back to 1845 when the 166-member Mutual Life Association of Cape of Good Hope was founded. In the late ‘70s and early ‘80s, Old Mutual cemented its entry into the so-called retail mass market. Thirty years later, this part of the business has grown to be one of the most significant contributors to both revenue and profit.

In 2007, Old Mutual Retail Mass Market division launched its Foundation Market strategy by setting up a distinct business unit to focus on the low-income market segment in South Africa. The unit counts 10 permanent staff at head Office and 75 agents as a sale force. The Unit shares some resources (such as actuarial, marketing, HR) with other departments of the company. The target market segment has a household/personal income of up to R3000 per month, which is also expressed as LSM 1 to 5 in the living standards measure.

The Foundation Market strategy involves a two-pronged approach: group strategy (community solution) and individuals.

Group focuses on selling formal funeral cover to groups belonging to burial societies primarily or to groups as affinities, churches, savings groups, agriculture project groupings, social development project groupings, burial society groupings, and villages linked to traditional leadership. The two products offered are the Burial Society Support Plan (BSSP) and Group Funeral Services (GFS). Old Mutual introduced BSSP in 2003 as its initial entry into the lower income market in South Africa, and GFS was introduced in 2008. Both products are group funeral covers, targeted at traditional burial societies, which are an important source of community support (financial and otherwise) when a death occurs. The level of coverage is selected by the group (burial society) and applies to all principal members. The group may also choose among providing individual coverage only, individual plus immediate family coverage, or extending coverage to adults who are dependents of principal members, but not immediate family. Coverage is mandatory for every group member. BSSP is a flat premium product, whereas GFS is an age-banded product sold to societies linked to funeral parlors. Both BSSP and GFS products are sold through a network of OM agents in 13 regions of the country.

For individual sales, the Foundation market launched the “Pay When You Can” (PWYC) funeral product, distributed by ShopRite, one of the biggest food retailers in South Africa. PWYC is an innovative product that provides flexibility and convenience to adapt to the irregular income of the target population. It is designed to be similar to cell phone retail products, where a starter pack provides the basic registration and coverage details, and top ups are purchased as necessary or desired. Registration and top-ups are done by sending an SMS with a specific PIN number to the company.

OM is also launching a bundled life and saving product (Provider Plan), to be sold by community runners (people from the community, receiving commission) in a form of a Tick-a-box product.

Together with subsidiaries Nedbank and Mutual & Federal, and in partnership with black empowerment partner Wiphold, Old Mutual is testing a one-stop-shop strategy to bring an array of financial products and services to underserved communities through one central location in four pilot sites: Centane (Eastern Cape), Kliptown (Johannesburg metro area), Idutywa (Eastern Cape) and Acornhoek (Mpumalanga Province), with four more sites planned for 2011 and 2012.

This initiative, called Imbizo, is seen by all partners as a laboratory for designing financial products that fit the rural population needs (livestock and asset products have been designed, a micro-loan product developed by the bank) and a test for a new approach for business. In each Imbizo site, the companies go beyond proposing their products and are working to improve community welfare through close partnerships with all stakeholders and investments in development activities.

The Foundation market is also in charge of the financial education module “On the Money”, in compliance with the regulatory requirement to invest 0.2 per cent of the company profits in financial education, and will conduct an impact evaluation of the module as part of the project proposed to the Facility.

Learn more about the BSSP and GFS products

Learn more about the PWYC product

Date of last Learning Journey update: January 2012