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Microinsurance: A Huge Opportunity

Having worked in and around Asia for the past few years, I have seen microinsurance be a constant topic.

I always found the concept of microinsurance (and microfinance) very interesting. However, I didn’t fully understand it.

Fortunately, Peter Gross from MicroEnsure helped to give me more insights into this fascinating and extremely important concept.

The following article is based on my conversation with Peter.

Who Is Peter Gross?

Peter is currently the director of strategy with MicroEnsure. Peter started with MicroEnsure in 2010 as the general manager in Ghana. Previously, Peter had a variety of management roles in McMaster-Carr.

When I asked Peter about why he moved from a company like McMaster-Carr to MicroEnsure, his answer was simple: “I wanted to work in a social enterprise and use my business skills in a developing context.”

Peter’s wife is also in public health, working for the Centers for Disease Control and Prevention (CDC).

Having an alignment of interests and values is important for any partnership, personal ones included. Hence, moving to Ghana to help with both the protection and providing of care was an easy decision for the couple.

What Is Microinsurance?

One of the comments that stuck with me most during my conversation with Peter is on the definition of microinsurance. He explained that he is trying to get away from that term and refer to it more as “insurance for emerging customers.” The main reason is a desire to get away from the perception of “micro-price vs. micro-value.”

These types of products are specifically designed for an underserved population that typically can’t get access. That is the core of microinsurance.

For people in these markets, Peter said, “Good-quality insurance is very important because they face more day-to-day risks than you and I.…. They get really excited about insurance and the role it plays to protect them.”

Microinsurance is primarily bought in some of the fastest-growing areas of the world, including these six countries from Africa and four from Asia:

Source: https://www.theatlas.com/charts/BJOKD67VG

The blend of under-penetration plus fast growth shows a lot of opportunity for microinsurance in these areas, one which MicroEnsure is very aware of.

See also: A ‘Nudge’ Toward Microinsurance  

What Is MicroEnsure?

MicroEnsure is a specialist provider of insurance for customers in emerging markets and has registered more than 55 million customers in 10 different countries in Asia and Africa.

MicroEnsure designs, builds and operates their business by having products that are simple to understand and with distribution partners that can help to reach the masses. They don’t carry the risk themselves and partner with more than 70 different insurers. Their biggest shareholder is AXA, alongside Omidyar Network, IFC and South Africa’s Sanlam.

Because the majority of the consumers in these markets do not have any insurance, Peter indicated to me that the marketing strategies that they deploy help them to introduce an insurance solution and meet an untapped need.

An example of this was when Peter first moved to Ghana. The company partnered with Tigo Telecom to offer free life insurance. The process worked like this:

  1. Customer dials *123 to sign up
  2. The more the customer spends on telecom services, the more insurance the customer receives (up to a maximum of $500)

Simple, right?

Peter told me that they started seeing customer behavior changing, especially when customers started seeing claims paid. This caused these consumers to not only want to spend more on airtime with the telecom to get more life insurance, but to get coverage for other risks.

This helps to show what has made MicroEnsure so successful:

  • Identify a need
  • Introduce a solution
  • Make that solution readily available and accessible
  • Introduce more solutions
  • Make those solutions readily available and accessible
  • Repeat

What Else Does MicroEnsure Offer?

As with any market, the range of products available to consumers can vary.

Product development typically starts with life, personal accident and hospital. Policies to pay for funeral expenses and protection of property and crops are quite popular, too. Coverage for other risks, such as political violence, can also be marketed, depending on the country.

As more consumers have mobile phones, mobile device cover is trending upward, too.

If the product fulfills the need to the consumer and is simple to understand and easy to market/get access to, then it will be considered.

At the same time, Peter made clear to me that MicroEnsure needs to be extra careful in building its products. Because the risks their consumers face are higher, the risk exposure for them and their insurance partners are also higher. The company needs to ensure that they build in features that are both easy to understand and tougher to game. This can be a tough balance to meet, but one that needs to happen to ensure that they can continue to provide this valuable solution for their consumers.

What Role Does Technology Play?

Good technology is part of the key to MicroEnsure’s success. Peter shared that this is both from a distribution and operational perspective.

For distribution, products need to be able to be offered and distributed through the masses. Making an easy-to-purchase process over mobile or other e-platforms is critical. An application has to be not only simple to fill out but also easy to understand.

From an operational perspective, Peter explained that MicroEnsure needs to assume a lot of mistakes on the data input from the consumer. As such, they need to build in certain tolerances on imperfect data to make it clean. This is crucial, especially for the payment of claims.

Peter said MicroEnsure’s technology is fully API-enabled and can be easily plugged into their distribution partners, whether it be banks, telecoms or others. Their systems are modular, meaning partners can use various components, such as the policy administration system, claims system or messaging system, only as needed.

See also: Big New Role for Microinsurance  

Other Insurtechs to Watch in Microinsurance

I asked Peter who some of the other insurtechs in the space are to take a look at. He gave me three:

  1. BIMA, which just had an investment of $100 million from Allianz
  2. Ayo
  3. Acre Africa

Summary

This was a fascinating conversation with Peter, and I learned a lot from it.

I have a ton of admiration for the work Peter and MicroEnsure are doing. I’ve worked in mature markets as well as emerging ones (I would say Malaysia is right in the middle).

There are complexities in both types of markets.

What interested me the most from my conversation is the combination of being able to provide coverage for the un/underinsured, focusing on their specific needs and making them excited to be getting insurance.

I feel that insurance is a very important product, for all people. In places like the U.S., insurance can often be looked at by consumers as boring and an unnecessary evil (until they need it, of course).

Insurtech is helping to change that perception in the Western world and mature economies.

For those in emerging markets, insurtech helps with access and a level of coverage that many have never experienced before in their lives. Now that is something exciting and meaningful.

This article first appeared at Daily Fintech.

How to Create a Blue Ocean in Insurance

In the last few years, insurers have raced to capture the massive opportunities created by new technologies and have learned to turn the threat of insurtech startups into smart collaborations. The result has been the avoidance – so far – of any significant loss in revenue and profitability.

Nevertheless, not only does technology continue to progress rapidly, but the American and Chinese tech giants, with their global ambitions, pose new challenges to the industry. Policyholders have come to expect the same level of convenience and engagement from their insurers, and some observers even start to fear that, in their ruthless march to global domination, those giants may encroach into insurers’ territory.

Insurers have a window of opportunity to leverage their consolidated customer base, deep industry knowhow and solid balance sheets to strengthen their competitive position. Look at what happened to Google Compare, an auto insurance aggregator launched in U.S. and U.K. that has been far from successful.

To pursue long-term profitable growth, insurers should start focusing on opportunities for non-disruptive market creation, as well. Most of us, including insurers and insurtech startups, have come to equate technology with disruption, where a market is created by a new solution that displaces an existing one. Look at the KYC technologies that are replacing the need for face-to-face interactions.

In reality, as pointed out by Professors Kim and Mauborgne in “Blue Ocean Shift,” the sequel to their global best seller “Blue Ocean Strategy,” a focus on disruption is limiting and leaves half the opportunities to create growth and markets off the table. The key is to realize that we do not necessarily need to destroy an existing market to create a new one. While disruption sets out to better solve an existing problem faced by current customers, non-disruptive innovation creates “blue oceans” by targeting noncustomers of the industry or solving “brand new” problems.

See also: On-Demand Insurance: Ultimately a Bust?  

Take BIMA, which is creating a blue ocean by offering affordable microinsurance products to the “bottom of the pyramid.” BIMA, which was established in 2010 in Ghana, has rapidly gained scale and is now bringing microinsurance to 24 million customers across Asia, Latin America and Africa. More than 90% of its customers live on less than $10 per day, and three-quarters are accessing insurance for the first time.

Developing countries have economies that are generally based on farming and agriculture and require a wide range of insurance products from health and life, accidental death and disability, agricultural and property insurance, to catastrophe cover. In those countries, microinsurance already covers around 135 million people,  but that represents only around 5% of the entire market potential. Growth is expected to be between 8% and 10% a year for the next years.

Similarly, microinsurance can be marketed in developed countries to reach the underserved segments of the population who struggle to afford more comprehensive products.

However, microinsurance is not just a reduced-cost coverage for low-income customer segments in both emerging and developed economies; it is an entirely new way of selling insurance and creating demand. In fact, consumers who can afford traditional covers may not perceive the need for insurance until an event occurs or an intermediary stimulates such awareness. They are often unaware of the need or just the possibility to insure against a specific risk; insurers submit complex and cryptic contracts requiring a lengthy and cumbersome purchasing process that individuals are not able or willing to follow.

Not surprisingly, recent studies report that millennials are the most underinsured generation and are the least likely to have any health, rental, life and disability insurance. Millennials are just one of the segments of the so-called “connected generation,” an immense blue ocean opportunity also including Generation Y and the Silent Generation, Baby Boomers, and Generation X, who are shifting to mobile purchase habits. Empowered by technology, all these individuals look for authentic services that they can access across multiple platforms and screens, whenever and wherever they need. Their protection gap is estimated at more than $3.5 trillion.

The key to selling insurance to the “connected generation” is to reach them with the right proposal through engaging touchpoints on a device they swipe, tap and pinch thousands of times a day: their smartphone.

Helping insurers to unlock this blue ocean opportunity with a customer-centric mobile insurance proposition is the mission of Neosurance, the start-up that we cofounded and that created the first virtual AI-based insurance engine.

Neosurance stimulates the protection need “pushing” the right cover at the right time on customers’ smartphone, thus triggering an emotional and impulse purchase for a small-ticket item. Insurance purchase becomes a “rational impulse,” and the transaction is completed at the “point of need” rather than at the traditional “point of sale.” This is possible because the customer experience is entirely paperless and takes less than 20 seconds.

See also: The Insurance Renaissance Rolls On  

Neosurance relies on a partner-friendly “plug and play” SDK easily embeddable in any app, allowing carriers not only to target their captive audience but also to tailor their insurance proposition to the front-ends and customer journeys of their community partners. In doing so, insurers (and reinsurers) can maximize customer engagement by protecting people’s common interests and passions and build a holistic ecosystem of digital communities to create a blue ocean of uncontested demand.

In the future, as insurers learn to leverage the massive amount of data they collect and to analyze it through context, psychographic and behavioral profiling, more blue ocean opportunities will be generated. In particular, carriers will be able to upgrade their role throughout the end-to end customer journey from that of a simple “payer” to that of an active “player,” multiplying customer touchpoints, boosting satisfaction and ultimately creating opportunities to cross-sell insurance and non-insurance products and services.

This article was originally published on InsurTechNews.com. It was written by Andrea Silvello and Luciano Pezzotta.

10 Insurtechs for Superb Engagement

We have written about the key challenges that insurance carriers are facing. Winning insurtechs are those that tap into these challenges to accelerate digital transformation. In this post, we’ll focus on the first of seven different flavors of winners in fintech insurance: insurtechs that drive superb customer engagement.

Customer engagement leaves much to be desired

Most insurers still have low Net Promoter Scores. In spite of all the efforts and investments in the last years, customers continue to experience a lot of friction throughout the customer journey. And what is even more challenging, rising consumer expectations are more and more difficult to meet. The frame of reference is set, not by the service offered by other insurers, but by what customers experience when they reach out to other brands, for instance when using their smart phone.

See also: Core Systems and Insurtech (Part 1)  

There are a bunch of reasons why customer engagement is the first flavour we are exploring in this blog series. We believe customer engagement is the key to turning digital transformation efforts into a lasting competitive advantage:

  1. Customer engagement is the key to build trust
    This is what research told us: Trust is built by excelling in the daily provision of services. Touch point performance, the perceived quality of customer-facing employees, the ease of doing day-to-day business are the most important elements in building or reinforcing trust.
  2. Customer engagement offers new points of differentiation
    Because virtually every financial institution is simplifying its product range and individual products, it will become increasingly difficult to differentiate from competitors on a product level.  Consequently, the points of differentiation of financial services will shift to the way the company engages with customers, e.g. in service and customer experience.
  3. Service is becoming a much more important purchase driver
    In the past, you shared your thoughts and experiences with your neighbors over your backyard fence. Nowadays, people exchange their thoughts and experiences also over a virtual fence powered by smart phones and social media. Peer-to-peer information sharing is almost always about the service quality. This has a huge impact on our decision-making. We are less and less choosing solely on price any more; more and more we are — within a certain price bracket — choosing on service. Service is becoming a much more important purchase driver.
  4. Lack of customer engagement results in loss of value
    Every day, thousands of insurance and financial products are purchased that do not completely match the needs of the customer. The cancellation rate in life insurance is proof of this. Sunk costs include billions of euros in intermediation costs and, even more importantly, of course, huge loss of value for customers.
  5. Customer engagement is a primary source of profit
    Ample research shows that customers who have had real positive experiences will drive revenues and profit in a variety of ways. They are more open to other products of that company. They will be less sensitive for offers from competitors. The costs to serve will decrease. And the customers are more likely to advocate your services to friends and family.
  6. New entrants set new standards to engagement
    Not all new entrants will survive, but they will definitely set new standards. Despite the fact that they differ quite a lot in nature, they have one thing in common. Every new entrant is attacking the frictions and complex processes that customers have to deal with when working with financial institutions. Incumbents need to step up to the plate to keep up.
  7. Regulators scrutinize how the industry engages with customers
    During the first couple of years “after Lehman,” the various supervisory authorities have focused on the way money was made, and the quality of financial products. We now see that that focus has widened to just about every aspect of customer engagement: sales, advice, service, even advertising. Regulators are forcing insurers to have a 360-degree view of customer engagement to treat customers fairly.

Address the pain points

The challenge is to close the gap between the insurer and the customer. Moving from transaction to interaction, from one-way communication to a dialogue and from interaction to intimacy, taking the dialogue from exchanging information to actions.

Too often, customer engagement is mistaken for creating a Disney-like experience. We think the opportunities are much closer to home. In our work for insurers, we have learned that customers across the globe more or less experience the same pain points:

  • “They do not really know me. They do not understand my situation.”
  • “I am not convinced they act in my best interest.”
  • “They do not treat me nicely. I don’t think they would walk the extra mile.”
  • “Their information confuses me.”
  • “They don’t make it easy for me.”
  • “I am not sure what I’m covered for and what the overlap with other policies is.”
  • “It is not clear what the status of my claim is.”
  • “I am not sure what I am exactly paying for; it seems very expensive.”
  • “It takes ages to get an answer. And too often I’m not getting any.”
  • “What the call agent says is different from what the broker told me.”
  • “They don’t treat me fairly.”

Just imagine what would be accomplished in terms of customer engagement if all these pain points were solved.

Furthermore, insurance is still about averages, products, one-size-fits-all, paper, brokers and agents – which is not always in sync with changing customer preferences and what technology is able to. In fact, we notice that customer engagement technologies that are widely accepted in other industries are still hardly used in insurance.

Take the use of video. Research shows that only 7% of a conversation is about words, 38% is about tone of voice and 55% is about body language. We have seen quite a few successful WebEx implementations; e.g. bank employees who assist customers in the complex process of purchasing a mortgage, with application-to-proposal conversion rates increasing from 10% to 35%, and proposal-to-signed contract from 50% to 75%.

Another no-brainer is the use of YouTube channels to explain what customers should do when a particular event takes place. These channels are extremely effective to explain more complex consumer electronic products but are hardly used in insurance. Think of the application of social data to simplify the underwriting and onboarding process of new customers and consequently higher conversion rates, or to login to certain information to simplify the customer experience. Or take the poor state of FAQs at many insurers’ websites, while a company such as Zendesk is able to launch a tailored state-of-the-art solution in just a few weeks and at very low costs.

The Tripolis communication platform allows companies to take personalization to a next level, deploying real-time relevant dynamic content in, for instance, email campaigns. Customers receive personalized real-time information and offerings that anticipate their context, the time of day, where they are – not when the email is sent, but at the moment the email is opened. Obviously, this improves the impression of a one-to-one intimate relationship with the brand. While the use of such solutions is increasing fast in other industries; this is hardly the case in insurance.

Fortunately, more and more insurtechs are helping insurers to make a leap in customer engagement, to become much more effective in every step of the customer journey.

And, of course, we also see new entrants that are attacking specific frictions, complex processes and product and pricing imperfections that customers have to deal with when working with insurance companies. Trendwatching.com coined the term Clean Slate Brands: a whole new breed of exceptional new brands living by the rules of business 3.0 — newer, better, faster, cleaner, more open and responsive. Brands that consumers are therefore attracted to, also because they cannot have sinned yet.

See also: Insurtech: Unstoppable Momentum  

A line-up of 10 insurtechs that drive superb customer engagement in various stages of the customer journey:

PolicyGenius addresses the uncertainty of consumers with regard to gaps and overlaps in the various policies they hava purchased over time. PolicyGenius offers a highly tailored insurance check-up platform, where consumers can discover their coverage gaps and review solutions for their exact needs. PolicyGenius’ online store includes solutions from life and long-term disability to pet insurance. Quoting engines offer side-by-side comparisons of tailored policies.

Trov offers customized home insurance by allowing coverage of individual key items rather than a one-size-fits-all coverage set with average amounts. An app-based platform allows customers to discover and track the real-time value of their belonging. They simply upload the items they own to a digital locker, by scanning a product UPC code, entering an auto VIN number or a home address or looking up individual items in an in-app database. Trov (backed by leading fintech VC Anthemis) has partnered with a wide variety of proprietary data sources like Zillow (U.S. real estate), Blackbook (U.S. autos) and Symantics3 (global consumer products).

Erste Digital taps into the fast-growing use of social media and mobile to purchase products and services – quite neglected by traditional insurance companies. Erste Digital is a B2B digital broker platform selling “add on” insurance. The Scan2Insure mobile app allows customers to scan a barcode to instantly get a quote to insure the product. To sell through social media channels, Erste Digital has integrated the platform into YouTube, Instagram, and Facebook.

BIMA offers micro-insurance in 14 emerging markets in Africa, Latam and Asia, using a mobile-delivered model. Traditional insurance companies find it difficult to service those living on less than $10 per day. And that is a shame, because insurance is a powerful tool that can prevent families from falling back into poverty in case of illness and injury. BIMA gives customers access to micro-insurance that is paid for using prepaid mobile credit or postpaid billing. Policies start from $0.23 per month, and BIMA pays out within three days of receiving a claim. Today, BIMA serves more than 18 million customers.

Recently, BIMA decided to enter the health sector. In emerging markets, people need to travel far and spend many hours in waiting rooms to see a physician. BIMA’s mobile health services make it easy, quick and affordable to access medical advice from a qualified doctor via a tele-doctor service. Memberships are available in three, six or 12 month pre-paid packages and include an unlimited number of phone consultations with a qualified doctor for the whole family.

More about BIMA’s fascinating business model in one of our next posts.

Cuvva introduced a mobile app that enables the user to sign up, get a quote and buy coverage in less than 10 minutes. Quite different than what customers have to experience when they apply at the average insurance firm. Basically, a completely digital experience run from a smartphone. What is also addressing a customer need is that Cuvva gets customers covered for only as long as they need it; from a single hour to a whole day – rather than the usual single option of a year.

Another imperfection, at least in the eyes of customers, is the costs of deductibles. insPeer allows users to share insurance deductibles with their friends and family members.

Collision damage waiver and loss damage waiver on rental vehicles are also always expensive. Insuremyrentalcar provides the solution with a package that starts from $5 a day to $93.99 a year.

Embroker says it aims “to revolutionize the way businesses buy, manage and understand insurance.” The company combines the service and expertise of the best-in-class brokers with an innovative technology platform. The 100% online solution allows customers to optimize insurance spending with policy benchmarking tools and provides a real-time interface to track and manage claims, apart from many other beneficial features.

Claim Di and Snapsheet are both all about making the most important moment of truth of a car insurance, when an accident takes place and the claim process that follows, less of a hassle.

The Claim Di mobile app “shake and go” feature facilitates communication and claims between parties in an auto accident and their insurance companies. The drivers can shake the phone near the phone of another party who also uses Claim Di, allowing for an insurance claim without waiting for a surveyor from their respective insurance companies to arrive at the scene (which is common practice in Thailand). Claim Di also includes roadside assistance, a call service for insurance companies and a module to facilitate payment to claimants.

Snapsheet provides insurers the process and technology to optimize virtual claims operations. Claims adjusters get the tools they need to provide a seamless experience; a mobile solution enables customers of insurers to settle a claim completely virtually. The solution simplifies claims adjusting, reduces the cycle time and increases customer satisfaction. Consequently, Snapsheet’s solutions are transforming claims organizations into a customer-first experience and cost-efficient operation.

Bauxy’s offerings takes away hassle and frustrations in a very different way. They enable consumers to file their claims just by taking a photo of the invoice. No more queuing on the phone to talk with insurance company call agents, asking when the money will be reimbursed and getting frustrated in the process. Bauxy submits the claim on the consumer’s behalf.

What these insurtechs have in common is that they cut two ways. On the one hand they solve frictions and dramatically improve customer engagement. On the other hand, they simultaneously improve operational efficiency. In our view, this is what makes an insurtech a winner.

In our next post we will focus on the second flavor of winners in fintech insurance; insurtech solutions for dramatic cost savings. So stay tuned!

InsurTech Need Not Be a Zero-Sum Game

This summer, I have attended a number of disruption/innovation insurance industry conferences in London that often, to varying degrees, come down to a debate regarding the extent to which InsurTech startups will be able to come and eat the lunch of industry incumbents. There is little argument that, should the insurance industry fail to better engage with its customers and continue to poorly communicate its social value in protecting people, communities and assets somewhere else will transform what today for many is a “grudge transaction” into a delightful relationship.

However, I believe InsurTech does not have to be a zero sum game. I am a proud member of the International Insurance Society (www.internationalinsurance.org) led by Michael Morrissey. In Singapore at the IIS annual conference, a keynote presentation was delivered on the recently formed Insurance Development Forum (IDF). The IDF was formally launched in April and is a collaboration between the insurance industry, the World Bank, the UN and various other institutions. The IDF is chaired by Stephen Catlin, with Rowan Douglas leading the Implementation Committee that includes industry heavyweights such as Dan Glaser, Nikolaus von Bomhard, Greg Case and Inga Beale. Its mission is to incorporate the insurance industry’s risk management expertise into governmental disaster risk reduction and to give insurance a larger role in providing resilience to communities all over the world.

In a speech at the conference, IDF Chairman Stephen Catlin noted, “We talk about innovation and new products. The reality is we are not even selling well the product we know and love dearly.” I believe the less insular InsurTech community — with its diverse skills sets (often from outside of the insurance industry) — can help insurers start to address the obvious misunderstanding consumers, governments and regulators share of the social value of the insurance product. Sam Maimbo of the World Bank, who sits between deep technical insurance teams and the public sector, noted he spends 70% of his time explaining what the industry has to offer. Addressing this communication gap has parallels to what many InsurTech companies are trying to do in providing better engagement with consumers than is currently provided.

There is real opportunity for InsurTech to work with the insurance industry in addressing blockages in the system that, if unlocked, would drive increased demand and grow the overall insurance pie. We are seeing a bit of this in microinsurance with companies like MicroEnsure and Bima providing low-cost insurance solutions to customers that, before recent technological advances, were just not possible. For instance, we need to see more examples of smart contracts founded on blockchain technology. In Africa, it is now possible to buy crop insurance through a mobile device that pays out based on a parametric weather-related trigger through a blockchain-validated third party source that almost eliminates the cost of handling a claim.

I am confident we are at the start of this kind of innovation and look forward to seeing more InsurTech companies look to grow the overall industry pie for the benefit of themselves and society as a whole.