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InsurTech represents the fusion of insurance and technology functions to enable financial inclusion growth as its primary tool. Today’s system has complicated rules and specific requirements, making it hard for many people to get coverage because of high premiums. This is especially true for citizens from developing nations and poor households living in prosperous countries. However, the industry is changing due to several new factors, enabling underprivileged people to gain access to affordable alternatives for underprivileged people seeking insurance packages.
This article examines how InsurTech startups change benefits and products to meet the different needs of customers in both established and emerging markets.
Global Overview of InsurTech and Financial Inclusion
Financial inclusion is finally ready to evolve. Firstly, in Southeast Asia, distribution is starting to keep pace with the times, offering stackable micro-insurance programs. For example, Singapore Grab drivers can get micro-insurance coverage for just 0.22 USD per trip. The update has led to over 20 million micro-policies, making the whole process more convenient.
Foodpanda riders and JupViec domestic helpers in Vietnam can access small insurance plans they pay for while working. In India, the penetration rate grew from 3.76% in 2019-2020 to 4.20% in 2020-2021, with micro-insurance becoming popular in rural areas.
In Sub-Saharan Africa, more than 43% of people now use mobile phones, opening new opportunities for the InsurTech industry. Mobile and digital platforms are crucial for reaching people who are not familiar with traditional insurance methods and packages. Even though not many people have policies in this region, the sector gained 19% more customers and 6% more transactions during the pandemic, so the service is definitely gaining popularity. This growth is partly due to Pula, which offers parametric insurance for climate risks to 3.5 million rural customers.
Breaking the Mold and Overcoming Challenges
Historically, certain populations have faced various hurdles in obtaining a policy, making financial inclusion in this sector a complicated and ongoing challenge.
Low-income families often struggle with the costs of traditional fixed-premium plans. Regular premium payments and large initial fees are usually unattainable for them. Plus, getting insurance can be stressful due to long application forms and confusing terms. People with limited financial knowledge may feel lost and distrustful of most companies.
Furthermore, people in developing countries do not realize how important it is to protect their assets, let alone what types of coverage are available. Few insurance products are available for low-income consumers in emerging markets, and the options that do exist typically do not meet local risks and specific needs, making them useless.
Breaking Barriers and Expanding Access to Insurance
However, several trends prove that InsurTech is finally starting to change the traditional system by removing barriers and creating economic opportunities for more people. By combining mobile technology with artificial intelligence, machine learning, and big data, companies offer affordable solutions for those who typically have no access to the market. Here are several ways the industry helps improve financial inclusion:
Microinsurance
InsurTech is enhancing financial inclusion through microinsurance, offering low-income individuals small-scale benefit plans at affordable rates. Vendors in developing countries like India, Kenya, and the Philippines leverage smartphones to deliver low-cost proposals with specific risk coverage and simplified processes. This innovation has made insurance more accessible, helping vulnerable communities stay protected within monetary safety nets.
Pay-Per-Use and On-Demand Insurance
With pay-per-use and on-demand insurance models, customers only pay for a policy when they need it. This flexibility allows policies to match their needs without requiring them to commit to annual policies. It is ideal for people who need a temporary solution, can’t afford traditional policies, or don’t require year-round protection.
Also, some startups in the sector offer point-to-point protection plans, empowering users by allowing them to pay for coverage by the day or hour—based on how much they use their vehicle. This sort of offer is affordable for people with lower incomes and unpredictable usage patterns.
Last but not least, on-demand health insurance is becoming popular, especially for part-time workers and gig economy individuals. Its flexible nature allows customers to start and stop paying for their package as they go. The short-term policies system is cost-effective and provides essential access to healthcare.
Mobile Technology and Accessibility
The rise in mobile phone usage has allowed InsurTech startups to provide services directly through mobile apps. In Sub-Saharan Africa, many people use mobile phones to access services without the requirement of physical offices or middlemen. These platforms allow users to buy benefit plans, file claims, and receive payments on their phones. This not only makes it easier for people to get coverage but also reduces providers’ expenses.
Success Stories
Lately, there is a solid number of businesses that are showing strong growth by using technology to improve everyone’s insurance coverage. Here are some ways InsurTech has succeeded in the market:
Bima is an enterprise that connects mobile phones to distribute microinsurance products throughout African and Asian low-income communities. Bima partners with mobile network operators to provide protection packages for life, health, and accidents, helping millions who cannot access traditional options.
Lemonade is an insurance firm in the United States that uses artificial intelligence to offer budget-friendly renters’ and homeowners’ protection plans. The organization distinguishes itself by utilizing technology to simplify service operations and claims handling for customer benefit.
CureMetrix is a global company that uses artificial intelligence to help radiologists spot breast cancer. Lemonade offers affordable diagnostic services to patients who have medical needs.
The Road Ahead
The mission of InsurTech is to help more people access insurance, but it goes beyond just providing coverage, aiming to educate customers about the basics of insurance. Many people in underserved areas do not fully understand the system and struggle to assess their needs, and they still face obstacles in adopting products due to slow internet, humble digital literacy, and regulatory issues.
InsurTech also aims to improve financial inclusion by using clever business models that cater to different groups by offering customizable financial products. They also provide affordable packages combining health, life, and property insurance. Low-income families particularly benefit from this because they often struggle to manage multiple fintech products and have little time to shop around among various providers.
However, positive developments in FinTech platforms and financial inclusion programs offer hope for the future. Digital tools have the potential to provide affordable protection to millions globally as governments and businesses recognize the benefits these technologies bring in expanding insurance options for diverse consumers. Some vendors put use AI to good use and are able to create personalized plans that fit customers’ specific budgets and lifestyles.
