Exploring insurtech’s competitiveness and cross-industry relevance in South-East Asia and Africa

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IFC recently concluded two regional insurtech mapping studies in Africa and South-East Asia. The studies provided useful insights on industry trends and investable opportunities. Insurtech is reimagining insurance for incumbent (re)insurers and customers. Key trends include data-driven process optimization, industry-agnostic product development and cloud-based platforms . Usage-based personalized products and personalized customer service platforms such as offered by Naked Insurance  are industry-agnostic and provide a large value add applicable across various insurance sectors.

Remote claims assessment powered by drone technologies, coupled with data analytics, artificial intelligence, blockchain, or other emerging technologies are also increasing cost efficiencies for insurtechs and (re)insurers. Meanwhile, cloud-based services are opening up the industry for insurtech firms and innovative (re)insurers, increasing marketplace competition, and driving customer value innovation.  For this issue of the newsletter, the GIIF team caught up with Zeeshan Vazeer, IFC Senior Insurance Specialist and technical lead of the South-East Asia insurtech mapping study, and Alex Thomson, Co-Founder of Naked Insurance – a fully digital insurance platform. 

GIIF Interview with Zeeshan Vazeer, IFC Senior Insurance Specialist 

GIIF: What was the motivation for undertaking the insurtech mapping in South-East Asia?

Zeeshan Vazeer: Insurance is a priority sector for IFC as it provides safety and security for individuals while supporting growth for firms and countries. Emerging markets - with large rural populations mainly engaged in agriculture – represent ~20% of global insurance premiums and present four times faster growth compared to developed markets over the next decade. IFC undertook a mapping study in South-East Asia to surface innovations in insurtech that can serve these populations.

The 2021 IFC Africa insurtech mapping study provided valuable market intelligence and identified investment targets - resulting in IFC’s first Africa insurtech investment. Given the size and importance of Asia for IFC’s insurance efforts, a similar study was thus conducted.

Among all of the emerging markets Asia is expected to witness the strongest growth.  As in other emerging markets, this strong growth potential is driven by low insurance penetration rates. Furthermore, COVID-19 has arguably made people realize several vulnerabilities, increased their risk awareness and accelerated digitization of the insurance sector. We consider these as encouraging indicators of growth and relevance of insurtechs. 

GIIF: What are the emerging trends in insurtech and how did the mapping align with these trends?

Zeeshan Vazeer: Asia is a diverse region with the insurance sector varying among countries by product mix, distribution channels and growth drivers. The study provided insights into this regional diversity to better navigate it and better equip IFC in assessing future investments.

Historically, insurtechs predominantly focused on a digital distribution business model. However, there has been a trend towards a digital insurance carrier model, for reasons varying from more control over product development, stability of risk capacity, to better unit economics. The study validated this trend and identified digital insurance carriers and software-as-a-service (SaaS) providers among better scalable alternatives than digital distributors. This is aligned with evidence from two of our portfolio companies in South-East Asia.

Furthermore, most of the insurtech activity has hovered around the non-life sub-segment, with room wide open for innovation in life and health insurance segments serving the rural poor. The study identified life and health insurance as most promising business lines for growth and disruption. This is aligned with our recent investment in Kitabisa that sells short-term life and health insurance products using their crowdfunding platform comprising ~5 million users.

GIIF: Were there any surprising or unexpected insights from the analysis?

Zeeshan Vazeer: One of the more fascinating findings highlighted in the study was the involvement of more traditional fintechs (e.g. digital payment providers and e-wallets) and technology companies in peripherally selling insurance. For example, Grab Financial Group which is a part of the broader Grab ecosystem provides financial services across payments, rewards, lending, and insurance.
This convergence in technology-enabled financial services is relevant for a couple of reasons. Firstly, it opens up for IFC a new area to explore and engage with in furthering insurance. Secondly, it exposes a new breed of competition for insurtechs, including IFC’s portfolio companies. I believe as IFC we will need to adapt to this fast-evolving space to better serve our clients.

GIIF Interview with Alex Thomson, Co-founder, Naked Insurance

GIIF: How did the vision for Naked (Insurance) to disrupt the insurance industry come about?

Alex Thomson: I cofounded Naked with Sumarie Greybe and Ernest North while we were all consulting actuaries in short-term insurance. Two things stood out for us: the rapid tech digital transformation of other industries and the (customers’) frustration with traditional insurance, particularly lack of transparency, high costs, and inconvenience. 

Realizing there was a great opportunity to leverage digital technologies to create a fairer, more convenient and affordable insurance offering we set about creating a fully digital insurance platform. We used the latest cloud-first technologies, artificial intelligence, big data and automation to transform the customer experience while recreating insurance as a social good. Through Naked, we are contributing to making insurance more relevant, transparent, inclusive and accessible. 

GIIF: The world is just emerging from the Covid-19 experience; how will digital insurers like Naked continue to be relevant and impactful across the continent and globally?

Alex Thomson: During Covid-19, we got a boost because people accelerated their adoption of digital technology. Even consumers who were previously skeptical about e-commerce were suddenly forced to do everything remotely and discovered that they loved the convenience of digital tools. This certainly made them more open to trying digital insurance.

To remain relevant, we continue to enhance our digital experience, enabling people to get a quote, buy a policy, manage their policies and even claim online without speaking to a call center. This automation is driving down costs and allowing us to design and deploy more affordable products to reach previously underinsured and uninsured users who couldn’t afford insurance. We join other efficient insurtech companies in this exciting endeavor to grow the insurance pie in Africa while closing the protection gap.

GIIF: What were your main takeaways from the 2022 Africa Financial Industry Summit?

Alex Thomson: It was exciting to feel the energy in the room as so many trailblazers from around the continent got together to share insights and ideas. One of my key takeaways is how much opportunity remains in the African fintech and insurtech space, with so many gaps to fill in addressing financial exclusion. It’s also great to see how investors are backing Africa’s dynamic fintech sector. FinTech’s have an important role to play in driving economic and sustainable development by creating innovative solutions to the day-to-day challenges in their markets.

GIIF: Any parting shot?

Alex Thomson: We recognize that improving access to insurance products is an important driver of financial inclusion and economic development in South Africa because it helps people preserve assets and reduce uncertainties. Our goal is to make insurance an affordable, accessible and trusted part of consumers’ lives.

Insurance should be a safety net that gives people financial security when they suffer a loss – not a grudge purchase or something that is too expensive or inaccessible for most. If we get this right, we can dramatically improve our customers’ lives by protecting them from severe financial consequences when disaster strikes.

We thank Zeeshan Vazeer and Alex Thomson for their valuable insights and contribution to this piece.