The role of InsurTech in microinsurance: How is InsurTech addressing 5 challenges in microinsurance?

The business of insurance is hard. Microinsurance has proven to be nearly impossible. Whilst promising examples have been documented of insurers achieving the impossible, sometimes even at scale, insurance cover for billions of excluded adults appears to be a long way down the road.

 

The challenges in microinsurance are many, but there are five key challenges for providers for doing business in this space and include: (1) lack of information on consumers; (2) consumers beyond current reach; (3) different and new consumer needs; (4) customers inexperienced with formal financial services; and (5) constrained business models. 

This focus note explores how the latest wave of InsurTech is addressing these 5 challenges and identifies six new trends that will improve the way insurance is done and enable new, valuable types of covers in the microinsurance space. It is based on a scan of more than 160 microinsurance initiatives in developing countries and emerging markets.

 The scan identified the following six trends emerging in microinsurance from the latest wave of InsurTech: 

  • New data and analytics: Digital data generation, communication and analytics are used to inform insurers about customer needs and behaviour patterns in the form of new data and analytics.
  • Peer2Peer: Peer groups, such as owners of houses, cars and household items, team up to absorb each other’s risks, with everyone contributing money to cover the group members’ losses.
  • Digital platforms: Insurers or third-party service providers use digital technology to offer insurance products or services online on digital platforms that take face-to-face or pen-to-paper elements out of the insurance provision and bring down delivery costs.
  • Demand-based insurance: Demand-based insurance is triggered by an action of the consumer and relies on sophisticated risk modelling technology. It covers asset insurance products, which would not be possible to cover individually under traditional microinsurance
  • Technology-enabled partnerships: Insurance providers, mobile network operators (MNOs) or other aggregators and TSPs enter into strategic technology-enabled partnerships to take advantage of marketing, client acquisition and premium payments through an established brand.
  • Index-based insurance: Index-based insurance (IBI) is used to protect against shared rather than individual risks, such as weather fluctuations, disease outbreaks or price loss.

Please note that a report on this will become available at a later stage and that we are constantly updating the InsurTech tracker. The current number only includes the initiatives identified through this scan to date and does not reflect the full universe of InsurTech initiatives. If you are aware of any initiatives that should also be included in the scan please email This email address is being protected from spambots. You need JavaScript enabled to view it.

Additional Info

  • Country: Sub-Saharan Africa (SSA)
  • Institution: Cenfri, FSDA
  • Date Published: 2017
  • Document Type: Focus Notes
  • Author/s: Herman Smit, Catherine Denoon-Stevens, Antonia Esser

Search news, publications and events

 

The role of InsurTech in microinsurance: How is InsurTech addressing 5 challenges in microinsurance?

The business of insurance is hard. Microinsurance has proven to be nearly impossible. Whilst promising examples have been documented of insurers achieving the impossible, sometimes even at scale, insurance cover for billions of excluded adults appears to be a long way down the road.

 

The challenges in microinsurance are many, but there are five key challenges for providers for doing business in this space and include: (1) lack of information on consumers; (2) consumers beyond current reach; (3) different and new consumer needs; (4) customers inexperienced with formal financial services; and (5) constrained business models. 

This focus note explores how the latest wave of InsurTech is addressing these 5 challenges and identifies six new trends that will improve the way insurance is done and enable new, valuable types of covers in the microinsurance space. It is based on a scan of more than 160 microinsurance initiatives in developing countries and emerging markets.

 The scan identified the following six trends emerging in microinsurance from the latest wave of InsurTech: 

  • New data and analytics: Digital data generation, communication and analytics are used to inform insurers about customer needs and behaviour patterns in the form of new data and analytics.
  • Peer2Peer: Peer groups, such as owners of houses, cars and household items, team up to absorb each other’s risks, with everyone contributing money to cover the group members’ losses.
  • Digital platforms: Insurers or third-party service providers use digital technology to offer insurance products or services online on digital platforms that take face-to-face or pen-to-paper elements out of the insurance provision and bring down delivery costs.
  • Demand-based insurance: Demand-based insurance is triggered by an action of the consumer and relies on sophisticated risk modelling technology. It covers asset insurance products, which would not be possible to cover individually under traditional microinsurance
  • Technology-enabled partnerships: Insurance providers, mobile network operators (MNOs) or other aggregators and TSPs enter into strategic technology-enabled partnerships to take advantage of marketing, client acquisition and premium payments through an established brand.
  • Index-based insurance: Index-based insurance (IBI) is used to protect against shared rather than individual risks, such as weather fluctuations, disease outbreaks or price loss.

Please note that a report on this will become available at a later stage and that we are constantly updating the InsurTech tracker. The current number only includes the initiatives identified through this scan to date and does not reflect the full universe of InsurTech initiatives. If you are aware of any initiatives that should also be included in the scan please email This email address is being protected from spambots. You need JavaScript enabled to view it.

Additional Info

  • Country: Sub-Saharan Africa (SSA)
  • Institution: Cenfri, FSDA
  • Date Published: 2017
  • Document Type: Focus Notes
  • Author/s: Herman Smit, Catherine Denoon-Stevens, Antonia Esser

Search news, publications and events