Is microinsurance becoming “smart”?

An insight on technological advances in insurance offerings today

An eye-opening session took place at the 12th International Microinsurance Conference in Sri Lanka on the use of technology in microinsurance, presenting a number of interesting innovations on the way insurance can be offered.
Payments via blockchain technology and mobile platforms have increased the outreach of health and life insurance policies. Consuelo, a microinsurance service provided by the Mexican-based mobile platform offers microinsurance products to Mexican migrant workers in the US. Because insurance has been related for a long time with bureaucratic and complicated paperwork, Consuelo, the Spanish word for consolation, makes insurance uptake easier and more efficient through on-line platforms.
Other peer-to-peer insurance businesses, such as Friendsurance (Germany), Guevera (UK), PeerCover (New Zealand), and TongJuBao (China), have been established with the core principle of simplifying the insurance process, cutting bureaucracy and costs and therefore enhancing efficiency and customer satisfaction. However, the only peer insurance business to secure major funding till now has been Lemonade (USA), raising USD 13 million from Sequoia capital. 
Lemonade is a form of mutual insurance company or self-insurance group, where small groups of policy holders pay premiums into a claims pool, which is used as a reserve to donate unclaimed money to good causes. Through the application, users select a cause that they care about —a process which eventually creates virtual groups of like-minded people, or “peers.” How regulated markets will deal with peer-to-peer insurance has yet to be explored. 
“Since limited purchasing power is a problem of low income people, insuretech can reduce costs through radical digitalisation, blockchain systems and peer to peer approaches. Insurance-on-demand makes premium payment easier, and concierge intermediation reduces costs through more transparent competition in the insurance industry”, highlighted Peter Wrede, Senior Insurance Specialist at the World Bank. “Moreover, the data on reputational and trust scores cannot be manipulated in peer-to-peer insurance” he further added.
In terms of innovations in agriculture insurance offered to low-income farmers, Kilimo Salama, introduced an insurance designed for Kenyan farmers to insure their farm inputs against drought and excess rain. It proved its success by creating a strong partnership between the Syngenta Foundation for Sustainable Agriculture, UAP Insurance, and the mobile network operator Safaricom. The innovative elements featured in this scheme were the use of a mobile phone registry, a digital payment system, and distribution through rural retailers. 
In the area of health innovations, Tyler Tappendorf, from Inclusivity Solutions in South Africa, stressed the fact that programmes need to build data based on trust networks and need to create incentives to enhance consumers’ health behaviour. An example would be Vitality-Discovery in South Africa, which links policies to certain client activities such as going to the gym and the type of the consumer’s basket of food in the supermarket, which if healthy will give extra points to the consumer. 
Another example would be Tonic, Telenor’s first comprehensive mobile-based health and wellness services platform for Asia. This digital platform provides a bundle of different products: High quality health information to build a happier and healthier life, discounted hospital services, and access to health facilities and hospital cash in case of hospitalisation. Tonic proved successful in Bangladesh, lately, and aims at scaling digital health services to tens of millions of consumers across Telenor markets and beyond. 
Moreover, technology could be harnessed to combine different products such as health savings, health insurance, and products that offer credit for healthcare. Thus, the concept of a whole risk management perspective is enhanced as opposed to risk transfer only.
Telemedicine, the remote diagnosis and treatment of patients by means of telecommunications technology, is being leveraged in new ways now, through mobile network operators, to reach people in rural areas.
In Kenya, Sema Doc, or Hello Doctor in Swahili, provides healthcare solutions via the mobile phone with the following features:
  • A permanent mobile access to medical doctors;
  • A health Account to save for medical expenses;
  • Access to instant health loans; and
  • Hospital cash benefit 
According to Tyler Tappendorf, Inclusivity Solutions is set to launch a health insurance product, with health micro-franchise allowing bundled sales of insurance products with maternity kits via health agents, thereby focusing on consumer education as well. 
In this digital era, regulations will have to be revised to address the role and use of new technologies in inclusive insurance markets. In this respect, the International Association of Insurance Supervisors is in the process of drafting an Application Paper to provide guidance on the proportionate application of relevant insurance core principles in the light of digital technologies. The paper is expected to be adopted by end of 2017.
As a conclusion and based on the statement by Doubell Chamberlain, Chair of the Microinsurance Network and Managing Director at Cenfri: “Microinsurance today is entering into its Uber moment”.