Mary is the owner of a small business in Blantyre, Malawi, and the main breadwinner for her family. To support her family in the event that something happens to her, she has a funeral policy that she contributes to monthly in cash at the local insurance branch. The process is time-consuming and inconvenient, as she must be away from her business to do this.

One especially busy day, Mary hears from a friend that she can pay her premium using mobile money. Triggered by the potential to save time, she tries it. The next month, she returns to the branch to find out that the payment was never reflected in the insurer’s books and that her policy had lapsed. The branch is unable to assist her, and the branch officer informs her that they are limited to executing the decisions made by the head office.

Mary doesn’t know who to approach or how to resolve the issue. Driven by the bad experience, she decides to contribute her money to a local savings group where her friends and family also contribute.

Mary’s story is not unique. Insurers are increasingly applying new technologies or partnering with insurtech companies to address key challenges in delivering insurance in emerging markets. They see the potential to bring down costs and offer greater convenience for their products, but they often overlook one of the most important drivers of usage – trust. Like Mary, consumers are not only driven to use products that offer them better value and lower costs, but also by other emotional or relational considerations that build trust.

A scan of more than 150 insurtech models across developing countries shows that the majority are currently focused on solving business model challenges that improve the efficiency of insurers’ operations or provide access to new consumers. For example, Dotxml, a South African technical service provider (TSP), offers a cloud-based, end-to-end policy management solution for insurance companies – starting from policy initiation, through premium collection to claims processing – bringing down the cost of servicing emerging market consumers.

Few of these insurtechs attempt to use technology to build trust. However, the few that do, offer important insights into the potential of technology in this regard.

For example, index-based insurance and smart contracts offer predictability by automating claims pay-outs for customers, thereby helping to build trust among consumers. Index-based insurance is often used in emerging markets to protect against shared rather than individual risks, such as weather fluctuations, disease outbreaks or price loss. However, this type of technology also introduces risks if the parameters set are not appropriate for the market or the underlying data is poor. This can lead to a risk event occurring without a pay-out, which can have the adverse effect on consumers.

Communication channels, coupled with consumer data, offer opportunities to interact with consumers and strengthen consumer relationships if managed appropriately. For example, Juntos (a tech firm based in Silicon Valley) offers FSPs a low-cost, interactive SMS platform to access and engage new and existing customers. Juntos carefully crafts and refines its SMS communication to relate as much as possible to the specific consumers they are targeting. Juntos also uses artificial intelligence (AI) to enable two-way communication with consumers, offering them guidance and support with any product-related questions they have. The ongoing, tailored interaction helps to build strong customer relationships and loyalty.

When not managed appropriately, new communication channels can be a liability for providers. For example, many financial service providers (FSPs) have embraced social media as a direct communication channel to their consumers, which also has the advantage of being associated with a trusted brand like Facebook. But when social media content is not appropriately curated or Facebook pages become a repository for unanswered complaints, it undermines the trust that consumers have in that provider. Similarly, insurers that send out generic SMS communications may be viewed by customers as spam and can further undermine trust.

Layering technology and human interaction has been shown to be effective in building trust and loyalty with consumers. For example,  Smart Business Intelligence, a Ugandan tech start-up, offers app-based accounting services to micro-, small and medium-sized enterprises (MSMEs). The app is then able to produce reports on their business on an ongoing basis. These reports enable MSMEs to better track their business and they create a digital history that can be used as collateral to access finance in the future. However, Smart Business Intelligence found that while MSMEs were downloading and paying the first month’s subscription for the service, many would stop paying soon thereafter. The company integrated human interaction into the approach by sending out accountants to visit subscribers on a weekly or biweekly basis. They found that this helped to build much stronger client relationships and has substantially increased client longevity and the use of the app. They now have 3,500 MSMEs that use their product on an ongoing basis.

The key point is that technology can play a critical role in enabling adults in emerging markets to have access to financial instruments that help them better manage their risk. But it should not be the starting point. Providers need to first understand what their consumers value and how they make decisions. They can then identify where the pain points are for consumers, how technology can address these and what the risks are. This can help to mitigate the experience of adults like Mary and other small business owners who can benefit from these valuable insurance products.