There are many ways private companies can serve base of the pyramid (BOP) populations. These underserved communities represent a large untapped market and, as such, offer a number of opportunities to organizations willing to address their basic needs in a responsible and profitable way. One of these companies is the SINAF Group, a Brazilian insurance company based in Rio de Janeiro, which has been successful in identifying and creating a unique market niche: life insurance for the poor. Since BOP families typically live day-to-day and rarely have much in the way of savings, the sudden death of a breadwinner can plunge a family deeper into poverty. With an affordable insurance policy that could cover funeral expenses and provide some income for a time, the family has a chance to get back on its feet.
Pedro Bulcão is the company’s executive director and the mastermind behind SINAF’s model for insuring the poor majority in Brazil. With an aggressive communication strategy that includes printed media and television commercials, he has managed to position the company as the leading provider of insurance solutions targeted at low-income markets. Recently, we spoke with him in his office in Rio, where since 2002 he has been reshaping the country’s insurance business.
Majority Markets: One of the main challenges for microinsurance companies is achieving the right balance between value proposition and cost. How did you manage this situation in the Brazilian market?
Bulcão: For us the challenges extended beyond offering the right value proposition. The culture of insurance is almost nonexistent in Brazil. Even rich people need to be talked into buying insurance, so you can imagine that it’s even harder to sell it to poor people, who already have little or no spare money after paying their bills. Even though we were convinced we had a great product to market, we knew that it was just as important to have the right people to sell it. For this reason, SINAF’s sales force is comprised of agents who understand the financial difficulties their customers face, and can relate to the concerns they may have. This is a win-win situation for us; they not only succeed in conveying SINAF’s message to our target market, but also can help us refine that message and better explain the benefits of life insurance to potential clients. Our goal is to make clients think: "This guy is like me and is happy and comfortable about being insured, so I can and should also purchase it."
Majority Markets: You might say that SINAF sees the BOP not only as consumers but also as active participants in your business process.
Bulcão: That is right, and I would like to think that is a cornerstone of our marketing strategy and our commitment as a company to the development of Brazil. Hiring sales agents from the very communities SINAF is targeting has an important secondary effect for the BOP, job creation. Unemployment rates among young Brazilians are very high, and a position as a SINAF sales agent brings a steady paycheck and other benefits. SINAF offers its staff an entry point to a professional career. As a company we are proud of this business model, a job at SINAF is the first job for the majority of this agents, which means we provide many low-income families an entry point into the formal economy that in the long run has the potential to lift them out of poverty.
Majority Markets: This isn't just about selling insurance, is it?
Bulcão: I would like to think so! [Laughs] Our mandate is simple: We want to sell dignity. The current socioeconomic landscape in Brazil allows for a low-income family to have a very simple but comfortable quality of life. If, for example, the woman works as a housemaid, the man works as a janitor, and they have two children, they can manage to cover their basic needs and a bit more, however their situation is still fragile. What happens if one of them dies unexpectedly? The family’s life standard will drastically change. By offering life and funeral insurance, we help to lift some of this burden by providing an immediate response to help these families cope until they get back on their feet. It is expensive to die with dignity... The ability to provide a family member a decent funeral is also giving dignity.
Majority Markets: What advice do you have for our readers about making BOP business models successful enterprises?
Bulcão: I would stress the importance of truly understanding the needs and challenges of the base of the pyramid when developing products and services. The main reason behind our success is our commitment and focus on our target clients: the BOP. Most company managers have prejudices against selling to and working with low income communities, there are a lot of misconceptions that we know well are not true. At SINAF we have always focused on this target market, they are our clients, so we need to internalize their needs and serve them the best we know how. SINAF was born under this proposition. I am not going to lie, this requires an enormous will and effort, and it redefines the idea of “Know Your Customer.” It means not only addressing their needs, but doing so in a way that fits their expectations and can reach them effectively.
Pedro Bulcão will join Luiz Ros, Manager of Opportunities for the Majority, on April 13th at the annual conference of the Brazilian Private Equity and Venture Capital Association for a panel discussion on Investment Strategies for the Majority.
