Report

InsureTech for Development: Emerging Markets Trends Webinar

Haffiya Abdalla

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.

The Sudan FinTech Association (Shomoul) organized a webinar, Wednesday 30 March on InsurTech for Development: Emerging Markets Trends, hosted by Sasha Lünsche, the Research Analyst at Cenfri.

Sasha joined Cenfri in March 2021 as a researcher on the Resilience team. The Webinar was presented by a member of the Sudan Fit Tech Association (Shomoul), Manal Mubarak Yassin.

Sasha completed his Honours in Economics at Stellenbosch University in 2017. After a brief stint as a data analyst for a startup in Berlin, he enrolled in a master’s degree in Development Economics at the University of Amsterdam.

Lünsche pointed out the overview role of insurance in development and the role of microfinance in further growth, zooming on Africa and the emerging InsurTechs.

He stated that insurance matters for growth and development has a strong role to play in combating poverty and advancing development, saying that the key challenges impeding the growth of microfinance, are lack of knowledge about consumers, their different needs, and how trust and insurance as a solution to overcome microfinance delivery challenges.

It is worth noting the current state of InsurTech in emerging markets. Investments in InsurTech in underserved insurance markets are on the rise, which promises significant advancements in insurance penetration. This note assesses how well InsurTech is addressing the insurance provider challenges in expanding insurance in emerging markets. It also provides an overview of the types of products that are offered, which elements of the product lifecycle InsurTechs serve currently, and which technology types dominate.

The analysis is based on a database of 292 InsurTech initiatives that operate in 85 countries across Africa, Latin America, and South-East Asia. Since 2017, when the database was first put together, there has been significant growth in the number of InsurTech: from 157 to almost 300. While there is increased activity in the space, they also recorded significant churn in initiatives, with almost a quarter of the initial InsurTechs having to be removed due to inactivity. Expensive distribution and hence not being able to reach scale remain the largest barriers to the expansion of InsurTechs in emerging markets.

Africa shows the highest number of InsurTechs compared to the other two regions, yet it experienced the highest churn. Africa is also the market where InsurTechs replicate their initiatives more often across countries, which suggests that fewer solutions are tailored to the local context when compared to the other two regions. Asia dominates in the field of new data and analytics. Six different categories of InsurTechs were identified, of which digital platforms dominate the market.

Most initiatives center on the mobile phone as a distribution mechanism. Technical service providers (TSPs) build the majority of these systems to use their competitive advantage of being agile and at the forefront of technology to offer value-added services to the insurance industry. This is in line with the rise of virtual marketplaces in emerging markets that increasingly allow consumers to conduct their retail lives online.

Shomoul is on a mission to democratize finance and leave no one in Sudan without access to all the financial instruments available in the country. We endeavor to work with all stakeholders in both the public and private sectors to facilitate access to affordable, accessible, easy-to-understand, and fair financial services to everyone across Sudan.

Shomoul is a center of excellence in FinTech thought leadership, collaboration, sandboxing, education and training, and mentoring. By connecting all stakeholders with a growing global FinTech ecosystem, Shomoul will support the growth of FinTech as a driver for financial inclusion in Sudan.

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