Impact investment for inclusive insurance

When Leapfrog Investments sold 90 percent of its stake in mobile insurance leader BIMA to Allianz last year for an impressive US$96.6m, many in the industry saw it as vindicating the business case for impact investment in inclusive insurance. As Leapfrog partner Stewart Langdon said at the time, “BIMA is a stellar example of a digital financial services firm that has scaled quickly and profitably.”

Traditional investors in inclusive insurance have included multilateral institutions and development finance institutions. More recently, impact investors operating in the financial inclusion space, such as Leapfrog, have shown it is possible for microinsurance to provide a good return on investment.

The potential for investors is huge: according to the World Bank’s International Financial Corporation, micro, small and medium enterprises (MSMEs) account for more than more than half of all employment worldwide.[1] The potential growth of this market, coupled with insurance tied to microfinance products such as loans should be tempting, but uptake of microinsurance by clients of microfinance institutions has often not matched expectations.

MicroEnsure is another company attracting private money - suggesting that impact investment can give inclusive insurance the big push it needs to have impact at scale. As MicroEnsure’s insurance products have gained popularity and demonstrated financial viability, it has attracted private sector investors including Omidyar Network and AXA. Omidyar likes to invest in companies and start-ups that use pioneering technology to increase reach, usage, and scale impact of financial inclusion solutions - so far this amounts to more than US$600 million.[2]

Would-be private investors need to be convinced the inclusive insurance market will grow quickly and significantly. That means tackling constraints to growth such as lack of consumer trust; the need to scale up low-margin, high-volume products; products designed without consumers’ needs in mind; inefficient distribution; and business models which fail to maximise each part of the value chain. Furthermore, there is often little incentive to invest in insurers launching new products or business models in challenging and untested markets.

To answer some of these questions, the Microinsurance Network is hosting an interactive workshop at the forthcoming European Microfinance Week (e-MFP) in Luxembourg from 14-16 November 2018. The interactive workshop, Making insurance markets work for the poor: is financing the binding constraint? will look at what puts traditional investors off and how targeted, innovative funding mechanisms and InsurTech could help fill the gap. The session will also explore whether responsible investment and responsible exit strategies may also create obstacles.

Both BIMA and MicroEnsure are essentially insurance distribution channels - the next challenge is to get investors to put their money into InsurTech companies and to build capacity in developing markets. As ever, scale is the big obstacle. Emily Coleman, an insurance expert with the International Fund for Agricultural Development (IFAD), says that “to attract the private sector without the need for donor support for ever more, it [microinsurance] needs to be delivered at a large scale, for it to be sustainable. If it can’t wash its own face, it won’t last.”

[1] International Trade Centre, 2017. MSMEs and the 2030 Agenda for Sustainable Development. [Online] Available at: [Accessed 3 November 2017].