One of the key recent trends in global insurance has been the growth of InsurTechs in emerging markets. Research by SwissRe previously forecasted that emerging market premiums would more than double over the next ten years and outpace advanced market premium growth by four times. Post-pandemic, is this forecast still relevant?
The growth of InsurTech in emerging markets can be commonly attributed to two key factors – the presence of big players entering the emerging economies and the growth of smaller native InsurTechs piercing their local markets and targeting unmet needs. This combination is creating a hyper-competitive market for insurers globally.
Whilst the insurance market still has some key known big players – AXA, UnitedHealth and Allianz to name a few – the industry is beginning to see an opening in competition as smaller, more nimble organisations eat into their market share.
Life.io president and CMO Muriel Petri believes the widening disruption of the insurance industry is helping the market mature and is giving upstarts an opportunity to take on larger firms.
She commented, “Global markets are rapidly maturing. Countries that were once dominated by a single carrier are now seeing the rise of competitors, the result of which has been a steady erosion of the incumbents’ market share. Carriers in these markets are hungry for an edge that InsurTech companies provide. Carriers recognize both the need and value of digital tools in marketing, lead generation, sales, engagement, and support to improve reach, accelerate growth, and enhance the efficiency of their operations.”
Petri highlighted that the chief focus and challenge for software-as-a-service (SaaS) businesses is scalability. However, she believes there are limits to how far companies can use the model of ‘build it once and sell it a thousand times’ when competing in international markets that have significant differences.
She said, “Finding multiple markets that share a common language can minimize risk and improve return on investment. For example, there are 21 Spanish-speaking countries. However, ignoring the importance of localisation can doom a project and partnership well before a go-live date. Regardless of the market, InsurTech SaaS players need to find and carriers need to demand that the services delivered sit in that sweet spot between you the extreme cost of a bespoke, fully custom, solution and the low cost of a static, off-the-shelf approach.”
One of the biggest recent change agents to come to the InsurTech industry has been the aftereffects of the Covid-19 pandemic in regard to digital transformation. Far from hindering growth in emerging markets, the move to a majority-digital approach will provide InsurTech firms with the opportunity to scale at more affordable costs and possibly cast a wider net over potential new clients in emerging economies globally.
This statement is echoed by Petri, who believes that not only does the pandemic effects create more digital transformation, but also helps to keep current industry players on their feet as smaller competitors force them to be smarter.
She added, “The pandemic has been a boom for the InsurTech industry. The challenges presented by the pandemic have forced the hands of carriers across the globe to accelerate their move toward digital tools. Sales that were once largely done person-to-person with a literal handshake have been made impossible in many cases and needlessly risky in others.
“Sales and engagement tools, like those Life.io provides, allow carriers to not just do the same things digitally that they did in person, these tools are drastically enhancing their capabilities when it comes to gathering information, generating leads, processing sales, cultivating customer relationships, and creating affinity and loyalty. Carriers can no longer sit on the sidelines in this new environment, they are forced to be smarter, more efficient, and less intrusive.”
The SwissRe research – compiled in 2019 – detailed that of the emerging economies, Asia, particularly China, would drive global insurance market growth going forward, with the nation expected to be the biggest insurance market in the world by the mid-2030s.
Besides Asia, there is also much room for innovation and disruption in key markets such as Latin America, Africa and the Middle East as growth in mature markets in Western Europe and North America continues to slow.
According to Sentiance General Manager for the Americas Peter DeLuca, there are many fresh opportunities for InsurTechs to find in the LatAm market, despite the challenges posed by the Covid-19 pandemic over the past 12 months.
He said, “At Sentiance we’ve seen a marked increase in interest from emerging markets in LatAm over the last year or so — even in the midst of a global pandemic. We’ve just partnered recently with LatAm companies building a new digital insurance offering, a family safety app, a car share platform, a smarter roadside assistance app, just to name a few.”
DeLuca highlighted that the underlying problems being addressed by these companies have remained largely the same as they were pre-pandemic, such as finding ways to use new technology to provide better experiences than what is currently available on the market.
He added, “A common term I hear from our new clients is ‘peace of mind’. These founders asked themselves how could they build a product that is simple and intuitive, but also one that gives people and their family member a feeling of safety and security and this peace of mind, and how can they turn it into a business?
“Perhaps the pandemic has given these entrepreneurs an opportunity to step back, look at existing problems, and form clearer ideas for how things could be improved. There are so many opportunities in LatAm and so many of these entrepreneurs who are willing to make bets on their fresh ideas. It helps having a massive audience of people looking for better products too.”
Social responsibility and Africa
According to Cloud Insurance CEO Axel Sjøstedt, InsurTechs need to take a social responsibility perspective when talking about insurance in emerging economies.
He said, “Traditionally, insurance has been reserved for the upper class in these economies. Take for example the health insurance space, where around 80% of the population has no form of private health insurance. Entering the digital age, we believe that InsurTechs could enable the insurance providers to make their products relevant and available to the majority of the populations in the emerging markets.”
Cloud Insurance partner and CEO of Kunga Insurance Tauriq Adams added, “Product market fit is key in emerging markets. The ability to cater to a young, demanding and mobile-first generation is imperative. Traditional insurance products typically sold via brokers may not be as relevant. Tapping into underserved markets and meeting consumers where they are will be key.”
One of the key emerging economies identified by Sjøstedt was Africa, a region that is one of the ‘hottest’ for InsurTech.
He commented, “It’s [Africa] been showing steady economic growth in most countries, and the largely underdeveloped insurance sector opens many opportunities for new players. In addition, the shift to digital channels is well underway in many countries across the continent, and with that comes greater expectations of service delivery. While we see many insurers starting to digitise customer journeys, significant opportunities still exist to accelerate this in many markets.”
Sjøstedt noted that competition amongst insurers led to notable disruption in the African market. He remarked, “Insurance providers found themselves in a situation where they needed to deliver better, customer-friendly online services while cutting costs. Hence, innovative partnerships between insurers and InsurTechs became more widespread, and we expect this trend to accelerate further.”
On the topic of Africa, Adams added, “With a large percentage of written premiums as well as a presence in other markets by the bigger insurance companies makes South Africa a key market for us. Africa is often seen as one homogenous block, but the reality on the ground could not be more different. For this reason we focus very specifically on each country to ensure that we cater to their specific needs.”
Rise of usage-based insurance?
With the growing digitalisation of insurance speeding up during the pandemic, this will undoubtedly have an effect on how the market evolves in more emerging economies as well, and potentially shape how they develop overall.
Earnix head of insurance international Peter Reynolds believes that the pandemic has accelerated the need for advanced technological solutions in insurance, specifically ones with personalisation capabilities, that are shaping the future of the industry post-pandemic.
Reynolds mentioned the rise of a usage-based insurance (UBI) as a trend that has grown considerably over the pandemic. UBI is a type of auto insurance that, depending on the specific insurer’s program, can measure how far a vehicle is driven, where it’s driven, and how it’s driven.
UBI, Reynolds believes, is a testament to the growing trend of consumer-driven need for the right product, at the right time, and at the right price.
He said, “We’ve seen both large and small insurers introduce UBI and this has been one of the growth drivers for InsurTechs. The stress test for UBI over the next months will be whether a solution empowers insurers to bring personalized UBI offers to the market, operationalize and fully utilize telematics data and engage with consumers through a mobile app in real time.”
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