(Micro)InsureTech: Five Buzzwords for Now and Tomorrow

By Tyler Tappendorf

Las Vegas is a city known as a place where people take risks. So maybe it’s appropriate that it was the location for a recent gathering of 1,500 insurance industry professionals. And while some of the attendees may have gambled in the casinos, even bigger bets were being discussed as insurance players looked to the future of their industry—a future that like so many other sectors will depend on how technology is harnessed. Building off of its FinTech peer, InsureTech or InsurTech is the newest phrase used to describe these trends.testimonial4

The InsureTech Connect event, both by the number of people attending and the depth of the discussions, showed that big changes are happening. Technology is already being leveraged in innovative ways to reshape how insurance companies provide coverage, and even more importantly, how customers experience an industry not known for its high customer approval ratings.

While a majority of conference attendees hailed from the likes of the US and Europe, it was clear that the shifts occurring are not limited to mature markets and products. InsureTech is also creating new opportunities for players in the microinsurance sector.

Perhaps no better way captures what’s happening in InsureTech than the buzzwords being floated across discussions. This blog highlights five areas of InsureTech innovation and how they are already or could in the future make their mark on microinsurance.

Artificial Intelligence (AI) and Machine Learning

Although “big data” might be a trendy term, data is nothing new. It’s been harnessed in various forms for years to create better products. What’s becoming more revolutionary, however, is the use of AI and machine learning to leverage new and unstructured sets of data. Drive Spotter is using video data from dashboard cameras to build virtual databases of roads, street signs, and even potholes, creating live adaptive models to warn drivers of hazards ahead. In another case, Zhong An, the first online-only insurer in China, is using machine learning to customise pricing on products for online retailers—leveraging a consumer’s purchase history to gauge their individual risk around returns and warranties. From the microinsurance perspective, the possibilities for AI and machine learning are endless; the challenge, however, is finding reliable datasets to start building models. With fewer available data sources—like credit histories, online usage, and even national ID systems—developing markets need to be ever more creative in identifying unique datasets. One such company, Captricity, has already implemented projects in a number of emerging markets to start building those datasets by transforming physical paper documents (like death certificates and hand-filled forms) into digital formats.

Peer-to-Peer (P2P)

Although P2P often means different things to different people, in general, it’s used to describe products that group individuals into pools, which both share in risk (when there are claims) and reward (when there are fewer claims). It’s a concept that was pioneered and brought to the mainstream by Friendsurance almost 5 years ago, and is certainly abuzz in recent weeks with the high-profile launch of Lemonade in the US. Technology is taking P2P beyond just being a mutual by allowing groups to form via social media and smartphones, and providing real-time tracking of the claims history of your groups. Players like Friendsurance and So-Sure say their customers are seeing upwards of 33-80% savings over traditional products, created by groups’ shared incentives to minimise fraudulent claims. P2P is not necessarily a new concept in emerging markets, with thousands of individuals participating in groups that help peers protect each other, save together, and provide lines of credit (think ROSCAs, ASCAs, VSLAs, etc.). However, technology has the ability to transform these groups and create new group structures that can make transactions more transparent, payments safer via digital, and provide new ways to connect to peers.

On-Demand Protection

African_American_familyof4bwResearch has repeatedly shown that many emerging consumers prefer to purchase items frequently in small quantities as opposed to less frequently in bulk. This often aligns with irregular income streams and competing needs at any given time. In microinsurance, this has led to products offering short-term policies often payable in daily, weekly, or monthly amounts. Likewise, though, this could also translate into insurance policies that become “on-demand”, turning on or off depending on consumer need. Already examples of short-term accidental insurance like Safari Bima or Cover2Go have been tried where individuals can purchase scratch cards or send an SMS to activate coverage at taxi ranks. In more developed markets, on-demand insurance from companies like Trov and Cover has evolved to allow customers to insure assets by taking photos of the items via smartphones, with functionality to turn cover on-and-off automatically via certain programmable criteria like geolocation or time of day. As smartphone penetration increases in emerging markets, it will likewise be interesting to see the opportunities unlocked for similar protection of houses, livestock, and other assets for low-income consumers.

Chatbots

When considering distribution of microinsurance products, there is often a struggle between low-touch approaches (think USSD), which are often key to creating a viable business model for low-premium products, and high-touch approaches (think agents), which are often vital to establishing consumer understanding and trust in insurance products. Chatbots provide an interesting opportunity somewhere in between these low-touch and high-touch models. A number of insurance players, like Spixii, along with other industries are already using chatbots to improve customer experience. Likewise, Facebook’s facilitation of chatbots on their popular Messenger platform shows that this technology can reach billions without the need for consumers to download new apps. When looking at the typical microinsurance customer, however, one must consider a number of aspects to gauge potential usefulness of chatbots. Literacy rates, smartphone penetration, target market age, and culture could all factor into whether consumers will be able to and desire to link to insurance via chat.

Internet of Things (IoT)

IoT has quickly become a regular part of many people’s daily routines and insurance is leveraging these devices to harvest data, reduce risk, customise communication with customers, and improve overall experience. From wearables like FitBit to vehicle telematics devices to apps on smartphones, IoT has one of the clearest and most impactful roles to play in insurance for years ahead. In linking to emerging consumers, a number of examples have already come into play like Lumkani (networked smoke detectors for informal settlements), RFID chips to track livestock for insurance as employed by IFFCO-Tokio in India, and weather stations that facilitate crop insurance for smallholder farmers by ACRE.

While just the tip of the iceberg of what’s happening in InsureTech, these five buzzwords highlight some of the most promising and exciting areas of where microinsurance is headed in the future. And just as emerging markets have often led the way in a number of FinTech innovations, it’s clear that they can do the same in InsureTech—testing and scaling new opportunities to make emerging consumers more resilient as the world becomes ever more technologically advanced.

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