Microinsurance is InsurTech and there is more to come

For many years the FinTech buzz was primarily focused on banking. Last year that all changed when 2015 was labelled the year of InsurTech. Last year InsurTech start-up funding exceeded $2.5 billion. This trend continued in the first quarter of 2016, with 45 InsurTech deals generating over $650 million, according to CB Insights data. 
It’s hard to say exactly how many InsurTech companies exist today, but some trackers report well over 500. This includes innovations ranging from product development to distribution to claims, and everything in between. It also includes the marrying of technology with new business models. Cuvva, for example, provides car insurance in the UK that enables people to purchase cover only when they need it, from a single hour to a whole day. They offer a completely digital experience, where customers can use a mobile app to sign up, get a quote, and buy coverage in less than 10 minutes. 
These ‘bite-sized’ or ‘on-demand’ insurance offerings are becoming more popular. Companies like Metromile in the US are offering pay-per-mile insurance for low-mileage drivers, combined with a smart app to track and optimise trips, monitor car health, find a missing car, and get street sweeping alerts. Trov in the US is also about to launch on-demand protection for only the items a customer wants to insure, when they want to via their phone. 
Peer-to-peer insurance models are also gaining a lot of attention in more developed countries, with a number of companies popping up around the world including Friendsurance in Germany, Lemonade in the US, Inspeer in France, PeerCover in New Zealand, and TongJuBao in China. 
We are also seeing more bundling of insurance offerings with other related services that leverage technology. Oscar, for example, provides health insurance in the US, which includes an app that enables customers to talk to a doctor, get prescriptions, and keep track of their health history. Customers can also earn rewards for staying active using wearable devices like a step tracker. 
Other companies delivering insurance innovation based on the ‘Internet of Things’ include Beam. Beam has offered a Bluetooth-connected toothbrush in the US for a couple of years, which uses sensors to log brushing habits. At the end of last year they extended their offering to include group-based dental insurance, with discounts on premiums based on group brushing habits. 
There are also a number of more ‘back-end’ innovations, such as AdviceRobo, which combines data from structured and unstructured sources to score and predict consumer risk behaviour on an individual level. They apply big behavioural data and machine learning to generate predictions on default, bad debt, prepayments and customer churn.  A company called EagleView Technologies is even providing aerial imagery, data analytics, and geographic information solutions based on aircraft and drones that capture images throughout the year. The data can be used for cases such as assessing property damage in an area before and after a storm.
This is just a small sample of the many innovations in the insurance space around the world today, and we can expect to see an ever-more dizzying array in the years to come across the entire insurance value chain. 
The question I often get asked about InsurTech is ‘What does this mean for microinsurance?
My first point is always that microinsurance in emerging markets is by its very nature innovative. The context within which we work is often characterised by limited data, lower income consumers, large unbanked populations, and challenges with reach in rural areas. This requires new methods of distribution and more cost-effective ways of doing things. 
Mobile microinsurance is a good example of InsurTech in the microinsurance space. It addresses existing challenges by leveraging mobile channels for communication, registration, payment of premiums via airtime deduction or mobile money, claims submission, and claims payouts. The use of weather stations and satellite data for crop insurance, such as in the case of Kilimo Salama, is also an example of InsurTech, as is bundling of health insurance with offerings such as tele-doctor services, which we are starting to see more of. 
We might be so used to hearing about these examples in the microinsurance world that we don’t think of them as innovations anymore. But they are, and they should be more visible in coverage of global InsurTech developments. 
Of course there’s also potential for some of the developed market InsurTech innovations to be applied to microinsurance in emerging contexts. In particular those that address the data gap, as well as offerings based on bite-sized, on-demand, and peer-to-peer models. There’s also a lot of talk about the growth of smartphone penetration in emerging markets and how it could change the microinsurance landscape. In Sub-Saharan Africa for example, the GSMA estimates that smartphone penetration as a percentage of connections will accelerate to over 50% by 2020. 
While smartphones can drive innovation potential, innovation for the sake of it will not necessarily be successful. A smartphone app that lets consumers buy insurance and check coverage is unlikely to elicit a barrage of downloads or usage. It’s just not that valuable or fun. Offerings need to address consumer needs more holistically, as in the case of Oscar and Metromile.  And regardless of their growth and possibilities, let’s not let the smartphone craze overshadow the reality that at the end of the decade there will still be millions of feature phone users. For example, the GSMA estimates that by 2020 there will still be 430 million feature phone connections in Sub-Saharan Africa. 
So my view on InsurTech is that there is a lot of potential, and I look forward to telling more stories of innovation in microinsurance over the years to come. That said, I would like to close with a word of caution. It can be easy to get blinded by the drive for innovation and glitzy new technology. But let’s remember who microinsurance aims to serve and ensure we deliver innovation that adds value and helps us better address the needs of the consumers we seek to protect.
Blog by Jody Delichte, Chief Marketing Officer of Inclusivity Solutions, a company that designs, builds, operates and innovates digital insurance solutions.