Seven fintechs that are making insurance for the poor a reality
From setting premiums to managing claims, insurance is one of the most complex consumer-facing financial products. As a result, there is a high barrier of entry for fintechs eager to disrupt and improve traditional business models for insurance. Yet, as the results from the 2019 Inclusive Fintech 50 demonstrate, ambitious early-stage fintechs are making strides toward providing insurance products that benefit underserved people worldwide.
Still, the data shows that the number of fintechs providing insurance solutions is smaller than, say, credit or payments. From the pool of 400 eligible applicants, just 24 provide an insurance solution. This reflects some of the complexities around designing, developing, and deploying insurance products.
Customer acquisition can be especially challenging in the insurance field, so fintechs that intend to scale must communicate a meaningful value proposition to end-users. This likely explains the heavy concentration of category winners that operate in the agriculture space – GramCover, Pula, and ACRE Africa. The cyclical nature of the business, and the high costs associated with crop loss or failure, imparts to farmers a tangibility of the value-add of the product.
In the context of rural farmers – or rural customers in general – last mile reach is often as important as the product itself. In the case of GramCover, agricultural, health and motor insurance policies are originated by local merchants at point-of-sale. Investment in agent intermediaries not only facilitates expansion into more remote markets, but also the bundling of features to improve the product offering. Pula, in partnership with trusted local agro-dealers, directly insures agricultural inputs while simultaneously advising farmers on a range of best practices via mobile phone. The partnership with local dealers is critical to product adoption and engagement with the value-add advisory components. Common among these approaches, too, is the incorporation of alternative data sources – from mobile money transactions to satellites – to better set pricing or expedite electronic claims processing. For example, ACRE Africa has fashioned crop, livestock and index insurance policies that have allowed more than 1.7 million farmers across Kenya, Rwanda, and Tanzania to cumulatively insure USD $181 million worth of assets against a variety of weather risks.
Perhaps because of the complexity involved in the insurance space, our analysis of winners highlights the value of industry experience: founders with extensive industry experience lead five of the seven winners. This firsthand knowledge seems to contribute to stronger products, processes, and business models, along with a deeper understanding of the status quo. However, other experience is still valuable in the insurance industry: the folks behind GramCover, a digital-first insurance platform targeting rural populations, are expert with weather forecasting technology, a critical input that informs their crop and livestock insurance products. Meanwhile, the founders of Toffee Insurance have backgrounds in both product development and growth strategy, enabling them to deconstruct and repackage micro-insurance products for previously uninsured people in India.
Still, low- and middle-income households are price-sensitive, particularly so for items with delayed benefits, like insurance. The key to scale, then, boils down to offering relevant products and features at the right price. Toffee Insurance introduced ‘bite-size’ coverage for not uncommon incidents – like daily commute accidents or dengue fever - at an accessible price point. Part of their early success is due to plug-and-play technology that makes it possible for customers to purchase coverage at convenient locations and times. Integrating insurance products at point-of-sale is not new and, in fact, a few of the Inclusive Fintech 50 winners are working to expand the infrastructure available so providers can tap into new distribution partners.
Click2Sure, Inclusivity Solutions and Stonestep are each partnering with enterprise clients historically outside the realm of insurance, such as mobile network operators and microfinance institutions. Stonestep has operationalized ‘microinsurance-as-a-service’ through a proprietary platform to make it easier for new channel partners – like retailers and merchants – to offer insurance products to customers and generate additional revenue for their businesses. Inclusivity Solutions, which just closed a USD $1.5 million round led by Goodwell Investments, makes its products accessible on basic feature phones and through partnerships with Orange, Tigo Airtel, and Equitel. Meanwhile, Click2Sure uses a platform architecture that simplifies the task of distributing insurance digitally for brokers, retailers, wholesales, and financial service providers. The inclusion of new channel partners is a critical step if microinsurance for the poor is ever going to become a mass-market product.
Inclusive Fintech 50 is funded by MetLife Foundation and Visa Inc. with support from Accion and IFC. Click here to see the full list of winners across categories.