When you contract an unexpected illness or are laid up with an injury, you’re likely already feeling some stress. When will you recover, are you contagious, will there be long-term consequences? But for billions around the world, that stress is magnified by an additional set of questions including: do they have the cash upfront to pay for treatment?
Peter Gross was on the ground with individuals who had to contend with this in their day-to-day lives. During his eight years working in financial services in sub-Saharan Africa, Gross saw time and time again how individuals with health issues would simply avoid going to the doctor for as long as possible, growing sicker and sicker.
Because of the widespread income volatility in this area of the world, doctors and hospitals commonly request payment upfront when seeing patients. If you don’t have the cash on hand, you’re out of luck. The World Bank estimates that out-of-pocket payments in sub-Saharan Africa rose from 40 percent of all healthcare payments in 2000 to over 60 percent in 2014.
To counter this, some private companies have come into the region with affordable prepaid insurance plans geared toward low-income families. According to McKinsey, the market for health care insurance in Africa is about $35 billion.
Gross was an early pioneer in the field. As a director at MicroEnsure, an emerging markets-focused insurance company, he helped take the insured population in Ghana from 3 percent to 29 percent during the time he was with the company.
By using innovative methods to distribute their plans, such as adding insurance services to telecom packages, Gross helped take the product from four to 10 countries and saw the company’s regional revenue increase by 10X. But he wasn’t satisfied with his work and had an idea for an even more disruptive insurance tool for those with unstable incomes.
The idea is based around the concept of a “nano-loan” — a tiny, short-term loan of hard cash. Customers would be pre-approved for nano-loans of $10-$25, accessible when they are sick or injured and need to pay for a medical service. The money is sent to them, often in the form of mobile money, so they can immediately seek care.
The customer then pays back the loan, plus $5-$8, over a period of four weeks. While they’re paying back the loan they also receive access to telemedicine services and hospital insurance.
“We learned how to design a product that is good for the customer without costing them an arm and a leg,” says Gross. The concept became the startup Turaco, currently based both in Atlanta and Africa. Gross, now Head of Product, runs operations here and travels regularly to Africa, while his co-founder and CEO Ted Pantone is permanently based in Nairobi, Kenya.
The team ran a pilot with the World Bank, then developed the platform with capital from angel funders. They expected a 40-50 percent repayment of the loans, which Gross says would have been “pretty solid” early statistics for nano-loan repayments.
Instead, 87 percent of the loans were repaid on time.
Gross says that the feedback from customers was that the product was just too valuable to risk losing, and people really appreciated and used the added benefits like telemedicine, leading to the high repayment rates.
The company has decided to pursue a B2B model first, citing a lower barrier of entry and higher margins, as well as a real need. Gross explains how employers in emerging markets often want to provide their employees with full health insurance, but can’t afford the plans.
Turaco would offer an in-between stop-gap that would help them minimize sick days, maximize productivity and costs, and retain the best employees. Employees whose companies enroll are automatically approved in the system. Since the insurance is distributed through a loan, they can seek care anywhere they choose.
The team is already in talks with employers about the B2B solution. A B2C rollout is also planned for Q4 of this year.
Once they’ve saturated Kenya, Turaco plans to balloon out across East Africa, with Uganda and Tanzania on the shortlist in the near future. From there, West Africa, South America and more are all possible. The team is currently seeking a seed funding round to accomplish these next steps.
“This is a durable problem that isn’t going away,” says Gross. “We see it as our challenge to open investors’ eyes.”
Photos courtesy of Turaco