Magic in Emerging Markets
There is a phenomenon being pioneered in the emerging markets of Latin America, Asia and Africa called micro insurance (or insurance inclusion) which has had an extraordinary effect on the local population. On a recent trip to Nairobi, I had the pleasure of visiting a host of the leading micro insurance providers & InsurTech startups to get an idea of the challenges and opportunities this growing market presents.
Micro insurance is the protection of low-income people (those living on between approximately $1 and $4 per day) against specific perils, it takes advantage of current low insurance penetration rates and the increasing need to protect consumers from ﬁnancial shocks. Microinsurance intermediaries tend to partner with mobile network operators (MNOs) and oﬀer products to the subscriber base.
One micro insurance provider described paying a recent claim to a street of vendors whose businesses had suffered at the hands of a fire, completely destroying their stock and ability to do business and feed themselves and their families. Normally, this would mean complete and utter ruin for the vendors.
“We see these claims incidents as an opportunity to show the local market the good that our products can do, educating the market is our single greatest challenge…we turned up with a big cheque and notified local TV stations, our customers couldn’t believe it, they called us miracle workers.”
The Micro insurance market is booming with reports that more than 500 million microinsurance policies have been sold in the past decade. This growth can be attributed to the culmination of several factors including rising populations, disposable incomes, innovations in mobile and insurance technology and an enabling regulatory environment. The global market is estimated to make up 4 billion consumers.
The activity in the insurance inclusion space is highly entrepreneurial and energetic, the innovation in technology is cutting edge since companies need to reduce their margins in order to survive and grow. Industry analysts highlight insurance inclusion as one of the top three most proﬁtable opportunities that insurers can invest in, with even greater future proﬁtability and beneﬁts for ﬁrst movers. Interestingly, many of our InsurTech darlings here in the UK and the USA are micro insurance providers, low-cost, short-term and digital. This is the holy grail of the B2C market and it has already been achieved for hundreds of millions of people across the globe.