Insurtech Shakes Up Emerging Markets

As incomes rise and demographic shifts occur, emerging markets present the largest growth opportunity for insurance in this century.

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The world of insurance is being shaken up by technology startups targeting major emerging markets such as Latin America, Africa, and the Middle East. These insurtech ventures are using mobile apps, digital platforms and data analytics to provide insurance to millions of underserved people in developing economies.

After taking root in the U.S. over the past two decades, insurtech is now rapidly expanding across emerging markets that have large, underinsured populations, rising middle classes and widespread smartphone usage. Powered by mobile technology, insurtechs are delivering customized insurance solutions tailored to local needs and customs.

Insurance is often overlooked as a driver of economic growth in emerging markets, but it's a key behind-the-scenes factor. Technology is providing a path to bring affordable insurance as a financial safety net to the masses.

Insurtech's Latin America Surge

Latin America has emerged as a hot insurtech market, fueled by a growing middle class, low insurance penetration rates and high digital adoption. The region's insurance market hit $174 billion in 2022 and is expanding at an 11% annual clip, outpacing global growth.

Latin American insurers have higher expense ratios than their European counterparts, pointing to massive opportunities for insurtechs to support and enable the current market players, while expanding product portfolios, digitalizing customer interactions, creating new business models and contributing to closing inequality gaps.

Brazil has taken the lead, accounting for nearly half of Latin American insurtech investment. Its insurance regulator is implementing an "open insurance" system that advocates sharing data across industries to create innovative cross-sector products and services at lower costs.

One insurtech cashing in is Olé Life, a digital life insurer offering instant approval for up to $1 million in coverage across 30 countries. The Miami-based startup uses artificial intelligence and decades of underwriting data to rapidly assess applicants via mobile apps and web platforms.

Life insurance protection gaps totaling $162 billion remain in Latin America, underscoring the opportunities.

See also: Insurtech Startups Are Doing It Again!

Africa's Daunting but Promising Market

Africa represents the most underinsured region globally. Despite a $70 billion market, 97% of Africans lack insurance coverage. Technology can help bridge this vast protection gap.

South Africa accounts for 65% of African premiums, with life insurance representing 80% of that market. Microinsurance for low-income populations is an area of focus for insurtechs across the continent.

Companies such as Pula Advisors are using digital platforms to sell affordable crop, life and health policies tailored to smallholder farmers and informal workers. In just a few years, Pula has amassed over 15 million microinsurance customers.

Cultural barriers such as lack of awareness, religious objections and distrust of conventional insurance hinder adoption, however. And regulatory hurdles, uneven mobile penetration and lack of underwriting data pose challenges.

In the realms of healthcare and insurance, insiders in the industry suggest that many individuals still prefer to rely on God as the ultimate — or only — physician or allocate their financial resources to address other needs first. The tendency among Africans is to neglect their health until it becomes an emergency.

Middle East's Islamic Insurance Drive

With the lowest global insurance penetration, at under 1%, the Middle East is a tough nut to crack for insurtechs. But respecting Islamic financial principles, insurtechs are gaining ground with innovative "Takaful" insurance policies based on concepts like mutual protection and risk-sharing.

The global Takaful insurance market hit $31.7 billion in 2022 and is projected to reach $126.8 billion by 2032, with Saudi Arabia the largest market. Takaful policies, while open to all faiths, align with cultural values across the Muslim world. 

The United Arab Emirates and Saudi Arabia have emerged as Middle Eastern insurtech hubs, nurturing startups through regulation, sandboxes and partnerships with conventional insurers. UAE's Sukoon Insurance recently partnered with startup WAX to launch the country's first insurance product for digital collectibles.

See also: The Next Wave of Insurtechs

Hurdles and Necessity

While insurtech companies face challenges navigating complex regulations, underdeveloped insurance ecosystems and a lack of underwriting data in emerging markets, the primary objective remains clear: providing affordable insurance and risk protection to billions of underserved individuals.

Insurance plays a pivotal role in financial stability and inclusion, yet its penetration in emerging economies has been hindered by accessibility barriers. Insurtechs have the potential to overcome these obstacles through technology, customized products and innovative business models.

As incomes rise and demographic shifts occur, emerging markets present the largest growth opportunity for the insurance industry in this century. Insurtech holds tremendous potential to enhance financial resilience and inclusion. By harnessing the combined power of technology and local market knowledge, start-ups can create new avenues to protect the underserved.

As insurtech ecosystems mature in emerging markets, their impact is expected to extend beyond insurance alone. Analysts predict that they will expand access to financial services, contribute to economic development and improve society's ability to manage risks.

This article is adapted from a longer version on LinkedIn.

Amir Kabir

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Amir Kabir

Amir Kabir is a general partner at AV8 Ventures, where he leads the fintech and insurtech practice and has been one of the earliest investors in the insurtech space.

Kabir has been an entrepreneur, operator and investor with over 15 years of experience, working with early and mid-stage companies on financing, partnerships and strategic growth initiatives. Prior to AV8, Kabir was an investment director and founding team member at Munich Re Ventures, where he led and managed investment efforts for two of the funds and made early bets in insurtech, mobility and digital health in companies such as Next Insurance, Inshur, HDVI, Spruce, Ridecell and Babylon Health.

Earlier, Kabir worked for several venture funds, including Route 66 Ventures, focusing on fintech and insurtech and investing in companies such as Simplesurance and DriveWealth. He began his career in Germany as a network engineer.

Kabir holds an MS in law from Northwestern Pritzker School of Law, an MBA from Georgetown McDonough School of Business and a BS in business informatics from RFH Cologne and the University of Cologne in Germany.


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