In recent decade, an increasingly number of insurtech solution firms, mobile network operators and other innovators are brought into the insurance industry to harness power of new data and technology to catalyze innovation to reduce costs and increase client value.

As one of the key pillars of the GIIF Program, innovation is central to realize the full potential of GIIF in closing the last mile protection gap with the aim to increase livelihoods of farmers and low-income families through improved access to knowledge, institutions (financial services and inputs, etc.) and markets. In July 2019, the first Agri Insurtech Forum was hosted in Mumbai India to award 9 Asian-grown start-ups out of 100+ applicants for the three categories: Data & Analytics, Sales & Distribution and Premiums & Claims. The positive potential of the technology is leveraged to tackle various challenges on data, basis risk, accessibility, affordability, and financial literacy with implementation in a few projects in Asia. Similarly, GIIF plans to integrate technology in its operation in Sub-Saharan Africa and has commissioned market scoping and diagnostic studies to identify emerging insurtech players and tech solutions providers to insurance companies in the region.

The Task Team Leader for this market analysis and mapping study in Africa is Levan Shalamberidze, Senior Investment Officer at the Equity and Fintech unit of the IFC Financial Institutions Group (FIG). Levan offered insights on the initiative in the broader context of technology and financial services.

1. Levan, could you please give us an overview of insurtech landscape globally?

Insurance is evolving driven by technological innovations and a need to better engage the customers. Led by new sets of data and digitalization, the insurtech companies are transforming the end-to-end process from product design, policy servicing to claims management with few obstacles of legacy products, processes, and IT systems that traditional players must deal with. Insurance is moving from push to pull by offering contextual on-demand products with straight-through processing at customers’ moment of truth and through continuous engagement.  Dynamic, on-demand and usage or behavior/wellness-based insurance products are gaining traction because they are better tailored to customers’ specific needs and allow insurers to use new sets of data for underwriting. Consumer shift towards on-demand behavior-based products is expected to continue post-COVID-19.

Insurance innovation is strong in the matured markets such as United States and Europe as well as in Asia-Pacific, notably in Japan, South Korea, and China. There are many insurtech applications. For example, machine learning, computer vision and artificial intelligence for product design and portfolio management; technologies such as telematics and the Internet of Things for new product development in motor, home and health in many mature markets; e-registration, premium collection and claims payment through the digital platforms; blockchain in index-based agriculture insurance in both Africa and Asia to improve transparency, reduce transactional cost and speed up claim payment etc.

Compared to other areas in fintech (e.g. payments and lending), insurtech started out later but is catching up fast. Despite COVID-19, 2020 recorded the largest investment amount $7.1 billion for 377 deals with interest coming from both financial and strategic investors according to a Willis Towers Watson study. In Africa, many insurtech startups are operating in the microinsurance and digital brokerage sector. WorldCover in Ghana, Pula and Lami Technologies in Kenya just to name a few.  In order to create a growing insurtech pipeline at IFC, Fintech insurtech vertical manages relationship with key partners such as Venture Capital funds, insurers and reinsurers and startup accelerators. We have invested in online brokers and aggregators (ComparaOnline in Chile), and virtual insurers and Managing General Agents (Roojai in Thailand) as well as infrastructure layer provider between e-commerce and insurance companies such as PasarPolis in Indonesia.

1. Could you tell us the challenges and opportunities of deploying technology in financial services industry in the development setting?

The financial industry is a data-driven industry. In recent years, the availability of data both in size and format is rapidly growing thanks to digitalization, which provides rich information source for financial firms.  Fintechs and insurtechs have been disrupting the banking and insurance sectors for more than a decade, creating innovative impulse in the industry to improve customer experience and product/service qualities. They are also venturing into untapped markets and addressing unmet needs.

The use of digital technology enables companies to scale their operations rapidly in a cost-effective manner beyond the limitations of bricks-and-mortar branches. Countries like Kenya, Ghana, Rwanda, and Tanzania with relatively high penetration rates of mobile money accounts have seen strong gross premium growth over the last decade. Since financial service is a trust business, low levels of financial literacy, complex nature of financial products and claim management means that the right mix of digital models and human presence need to be balanced to build trust and serve the last miles. Affordability is a major concern for low-income households. To be successful in catering to the needs of vulnerable households and individuals, the financial services need to run on a high-volume-low-margin business model that requires continued product and process innovation. COVID has pushed more things online and accelerated digital transformation in all sectors. There will be more mobile banking solutions and digital insurance products in poor regions of developing countries. I feel that to unlock the power of technology and finance for development at human scale, we need to carefully evaluate opportunities and capitalize risks while being agile enough to adapt to the changing environment, incorporate lessons learned to course-correct and reinvent ourselves to meet the needs of our clients and beneficiaries.

1. Given GIIF’s decade-long involvement in developing climate risk insurance in Africa, how do you see the new initiative by GIIF and the Fintech Group contributing to the next phase of development for long-term sustainability?

The goal of the current study is two-fold: conducting a market diagnostic study for the Africa region and mapping the insurtech companies in selected markets such as Kenya, South Africa, and Nigeria. The market diagnostics will survey the regional insurtech ecosystem in key emerging markets, including market sizing, market trends, investment landscape, successful business models and regulatory framework for the insurtech companies. The market mapping section will shortlist some players in the agriculture and SME insurance space and will include development stage, business model, KPIs where available and their major investors as well as rank them against IFC investment criteria and scalability/ sustainability of the business model. Based on the outcome of the diagnostic and mapping, a decision will be made as to whether IFC should immediately pursue new investments.

This initiative will help GIIF to identify new implementing partners to scale up risk solutions in the agrarian communities as well as expand to the next linkage on the agriculture value chains, for example, to protect agribusiness whose livelihoods are highly dependent on the quality and quantities of produce from the farms.  I am sure it will help grow the Program’s technological capacity to design and distribute effective solutions for low-income households and high-risk individuals, to make societies more resilient and more inclusive.

We thank Levan for his valuable insights and contribution to this piece.