Insurtech seems to be an obvious instrument for helping the developing-country population to mitigate their risk, as it promises to reach more individuals cost-effectively and in a way that delivers more customer value. Even so, we are not seeing the expected microinsurance industry boom. The recent venture capital boom for Insurtech initiatives has not materialised on the same scale in developing countries.
A recent scoping exercise of over 160 Insurtech initiatives in developing markets (Africa, Asia, Latin America and the Caribbean – publicly available at www.cenfri.org/insurtech) revealed that Africa is at the forefront of innovation, with almost 100 initiatives. Within Africa, especially South Africa stands out as a market leader. Yet, when analysing the types of Insurtech used in microinsurance delivery, it becomes apparent that most insurtech schemes improve existing insurance business models rather than transforming market thus far.
Digital platforms help consumers to access insurance policy comparison websites online, and they make the sign-up process easier. Partnerships between mobile network operators and insurers make policies more accessible via USSD and smartphone sign-up processes, with policies often even embedded in airtime purchases. Health devices and car sensors incentivise policyholders to improve their behaviour, which ultimately decreases risk and enables lower premiums.
Little progress has been made in covering differing consumer needs. A limited number of schemes are offering new types of cover with flexible premium payments and limited cover periods. There are still few peer-to-peer and demand-based initiatives that could make the market more accessible and affordable for the uninsured and underinsured. Due to illiteracy, unfamiliarity and perceived admin workload experienced by many, a big gap remains in bringing new customers on board. We would especially like to see more initiatives that focus on resolving consumers’ lack of experience to leverage as a gateway into insurance education.
To keep the exciting momentum going, especially in Africa, it is vital to put the uninsured and underinsured consumer at the centre and design products that meet their needs. Making existing business models more efficient will not translate into reaching the millions that are unable to mitigate their risks.
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Herman Smit is a technical director at Cenfri.