In­no­va­tion in In­surtech: The case for fi­nan­cial in­clu­sion

Michele Grosso ex­plains how tech­nol­ogy can be put to use to help in­sure low-in­come pop­u­la­tions

IN LOW-IN­COME POP­U­LA­TIONS, ba­sic in­sur­ance can of­ten mean the dif­fer­ence be­tween end­ing up on the streets or hav­ing a safety net when an un­ex­pected cri­sis strikes.

Many in de­vel­oped coun­tries do not need to give health, life or ac­ci­dent in­sur­ance a sec­ond thought, but fig­ures from the In­ter­na­tional Labour Or­gan­i­sa­tion show that 55 per cent of the global pop­u­la­tion are not cov­ered un­der a so­cial pro­tec­tion sys­tem.

Why is this a prob­lem? Be­cause fi­nan­cial in­clu­sion – ac­cess to fi­nan­cial prod­ucts and ser­vices such as in­sur­ance re­gard­less of in­come level – is fun­da­men­tal for vul­ner­a­ble groups to com­bat poverty and in­equal­ity at ev­ery stage of their lives. Ac­cess to life in­sur­ance can make all the dif­fer­ence for a bread­win­ner who is ex­posed to oc­cu­pa­tional haz­ards and sup­port­ing his or her fam­ily back home.

Sim­i­larly, un­ex­pected hos­pi­tal bills can eas­ily drive in­di­vid­u­als to per­sonal bank­ruptcy, and those who lose their pos­ses­sions in fires and floods are of­ten not able to eas­ily re­build their lives without some form of pro­tec­tion.

Un­sur­pris­ingly, the in­sur­ance pro­tec­tion gap is widest in emerg­ing mar­kets, where only 3 per cent can ac­cess or af­ford in­sur­ance. In the GCC re­gion, one out of two res­i­dents is a mi­grant worker, and con­se­quently mi­grant in­sur­ance is an in­creas­ingly im­por­tant is­sue.

Un­sur­pris­ingly, the in­sur­ance pro­tec­tion gap is widest in emerg­ing mar­kets, where only 3 per cent can ac­cess or af­ford in­sur­ance. In the GCC re­gion, one out of two res­i­dents is a mi­grant worker, and con­se­quently mi­grant in­sur­ance is an in­creas­ingly im­por­tant is­sue.

So what is pre­vent­ing mi­grant work­ers from tap­ping into in­sur­ance?

The chal­lenges are man­i­fold, but a ma­jor hin­drance to reach­ing the unin­sured is the high costs as­so­ci­ated with con­ven­tional in­sur­ance mod­els, due to out­dated ad­min­is­tra­tion pro­cesses and ex­pen­sive hu­man dis­tri­bu­tion chan­nels. For ex­am­ple, the peo­ple in geo­graph­i­cally-re­mote ar­eas are of­ten un­der­served due to a lack of phys­i­cal ac­cess to in­sur­ance bro­kers.

Other bar­ri­ers in­clude the lack of rel­e­vant prod­ucts, low aware­ness lev­els by, and in­ad­e­quate ac­cess to, low-in­come groups.

Last year, Democrance con­ducted a study, en­ti­tled Life­style and At­ti­tude of Work­ers within the Low-In­come Group in the

UAE, to un­der­stand the needs and wants of low-in­come mi­grant work­ers in the UAE. We found that 43 per cent of re­spon­dents re­gard life in­sur­ance as vi­tal, and yet eight in 10 are unin­sured due to the high pre­mi­ums and lack of in­for­ma­tion. More than a third of re­spon­dents worry about job loss and be­ing un­able to sup­port their fam­i­lies back in their home coun­tries. These are con­cerns and risks that can be ad­dressed by the pro­tec­tion that in­sur­ance of­fers.

In­creas­ingly, and be­cause of gov­ern­ment ini­tia­tives such as the in­tro­duc­tion of manda­tory health in­sur­ance, the in­dus­try is look­ing for ways to fur­ther fi­nan­cial in­clu­sion and the democrati­sa­tion of in­sur­ance. In par­tic­u­lar, the ad­vent of new In­sur­ance Tech­nol­ogy (In­surTech) can sig­nif­i­cantly re­duce the costs of sell­ing and ser­vic­ing in­sur­ance poli­cies, boost ef­fi­cien­cies and ac­cu­racy, and help un­lock new cus­tomer seg­ments that were pre­vi­ously not eco­nom­i­cally-vi­able.

In­creas­ingly, and be­cause of gov­ern­ment ini­tia­tives such as the in­tro­duc­tion of manda­tory health in­sur­ance, the in­dus­try is look­ing for ways to fur­ther fi­nan­cial in­clu­sion and the democrati­sa­tion of in­sur­ance. In par­tic­u­lar, the ad­vent of new In­sur­ance Tech­nol­ogy (In­surTech) can sig­nif­i­cantly re­duce the costs of sell­ing and ser­vic­ing in­sur­ance poli­cies, boost ef­fi­cien­cies and ac­cu­racy, and help un­lock new cus­tomer seg­ments that were pre­vi­ously not eco­nom­i­cally-vi­able.

New so­lu­tions are on the rise, rang­ing from the wide­spread use of data an­a­lyt­ics to in­form in­sur­ers of cus­tomers’ needs and be­hav­ior pat­terns, to the in­tro­duc­tion of smart sen­sors to help mon­i­tor and col­lect real-time data to gen­er­ate more ac­cu­rate pric­ing and tackle in­sur­ance fraud. For low­in­come pop­u­la­tions specif­i­cally, in­no­va­tion can be as straight­for­ward as util­is­ing mo­bile tech­nol­ogy to al­low cus­tomers to eas­ily buy, use and make claims on their mo­bile phones, giv­ing even un­banked in­di­vid­u­als the op­por­tu­nity to ben­e­fit from in­sur­ance.

In short, tech­no­log­i­cal ad­vance­ments have the power to drive down costs and fur­ther reach. While there has been a lot of dis­cus­sions about what in­no­va­tion can do to boost pro­duc­tiv­ity and the bot­tom line, I strongly be­lieve that tech­nol­ogy is without pur­pose un­less it serves hu­man­ity.

Many of the is­sues that we face to­day, en­shrined in global com­mit­ments such as the Sus­tain­able De­vel­op­ment Goals 2030, are in­cred­i­bly com­plex and will re­quire multi-stake­holder co­op­er­a­tion.

To re­ally make in­sur­ance af­ford­able for all, tech­nol­ogy providers and in­sur­ers need to join hands with dis­tri­bu­tion chan­nels ac­ces­si­ble to low-in­come pop­u­la­tions. While I am not sug­gest­ing that tech­nol­ogy alone holds the key to solv­ing all of the world’s press­ing is­sues, I am con­fi­dent that it is in our power to en­sure ba­sic so­cial pro­tec­tion sys­tems are in place for those who need pro­tec­tion most but can af­ford it least.

To re­ally make in­sur­ance af­ford­able for all, tech­nol­ogy providers and in­sur­ers need to join hands with dis­tri­bu­tion chan­nels ac­ces­si­ble to low-in­come pop­u­la­tions. While I am not sug­gest­ing that tech­nol­ogy alone holds the key to solv­ing all of the world’s press­ing is­sues, I am con­fi­dent that it is in our power to en­sure ba­sic so­cial pro­tec­tion sys­tems are in place for those who need pro­tec­tion most but can af­ford it least.