How can we bring insurance to those who need it most?
The world’s poor live only one illness, drought, or flood away from disaster. The world’s most vulnerable people don’t have the basic financial tools needed to protect their families, homes, and livelihoods.
Both the need and the opportunity is enormous. The Center for Financial Inclusion at Accion (CFI) and the Institute of International Finance found that the estimated addressable market of uninsured people is 3.8 billion.
Why are so many people left unprotected? It’s largely due to the high costs of designing, delivering, and administering insurance products. Creating these products and services for low-income customers can be lengthy, difficult, and expensive.
This is something we can, should, and must fix. And it’s why Accion is so committed to creating inclusive insurance that protects the world’s underserved people and businesses.
One of the ways that we’re helping extend coverage to more people is by investing in and supporting innovative insurance startups. New technologies can fundamentally change the costs of providing policies to the underserved: McKinsey & Company estimates that automation can cut the costs of managing a claim by 30 percent.
At Accion, we provide new insurtech companies with the capital and support they need to expand: these resources help them integrate new technology far faster than legacy financial service providers. Accion Venture Lab made its first three insurtech investments this year. These three startups are using new technology to make insurance more inclusive:
Lumkani uses an internet-connected heat detector to give South Africans living in informal settlements insurance that protects against loss of life, shelter, and assets in the case of a fire.
· Pula bundles insurance with seed, fertilizer, and credit, using satellite data to see how a client’s farm is doing and providing them with agricultural advice via text messages.
· Toffee works with retailers to sell insurance policies that cover relevant products — for instance, selling personal accident and bicycle damage insurance in addition to the bicycle itself.
In time, startups like these can scale to serve more people and businesses. Take AllLife, the first company in the world to provide insurance for people diagnosed with HIV/AIDS. It uses a proprietary, tech-driven model for continual operating and patient care that’s helped cut premiums by 40 percent, if clients follow their treatment regimes. AllLife was launched in South Africa and has licensed its technology to Royal London, the U.K.’s largest mutual life, pensions, and investments company. By reducing back-office costs, AllLife’s underwriting innovations can change how insurance policies are created and administered, ultimately protecting more people.
And it’s not just fintech companies that are working to make insurance more inclusive. We’re working with several joint mobile network operator/insurance partnerships in Sierra Leone, Tanzania, and Zambia, advising several organizations on how to better leverage data to design better mass market, micro-health, medical, personal, and business insurance.
Microfinance institutions are also working to protect their clients: we’re working with MFIs in Colombia, India, Mexico, Tanzania, Uganda, and elsewhere to design health, motor vehicle, fire, livestock, and funeral insurance.
In addition, we’re working to define some best practices about creating inclusive insurance. CFI continues to publish important research on inclusive insurance: providers need to find an appropriate balance of “tech and touch” to enroll customers, resolve issues, and make payments. Moreover, the products they design must be simple: customers love something they understand, and the easier it is to administer a product, the lower the costs are for the insurer. CFI has also identified the bottlenecks that limit the spread of inclusive insurance: regulators need to approve new products much quicker than they are and allow for a completely paperless process.
We’ll continue watching, supporting, and investing in insurtech to protect more underserved families and businesses.