A Dubai start-up plans to give the Middle-East's low-income population access to insurance cover - one mobile phone user at a time.
About 99 per cent of the region’s low-income population cannot afford or secure protection, according to insurance technology firm Democrance, and large companies do not serve them - much to the frustration of the company' s co-founder Michele Grosso.
“Unfortunately in emerging markets, a lot of social security isn’t efficient and public healthcare may not exist and that’s why we started Democrance," says Mr Grosso. “Insurance companies sell policies in a traditional way where you need to talk to a broker, review and sign pages of a contract that’s hard to understand and pay with a credit card; these are all barriers to entry for the low-income population.”
This inspired him to set up Democrance in 2015, which connects insurance providers with those that need it the most via their mobile phones,
While the company does not sell the insurance policies directly, it offers a digital platform connecting low-income customers to insurance providers in partnership with telecommunications companies.
The insureTech sector, a growing cohort of companies looking to modernise the insurance market by leveraging new digital technologies, is heating up.
Global insurance technology startups raised $2.2 billion last year, up 36 per cent from $1.7bn in 2016, according to research firm CB Insights. Global insurance giants Allianz and AXA have venture funds that back insureTech startups. Local interest is also building with Dubai’s financial freezone signing an agreement with Startupbootcamp, a UK network of start-up accelerators, to help early-stage insureTech start-ups secure access to investors and partners.
According to a 2018 study by Democrance of low-income employees, which was funded by the United Nations, 43 per cent of respondents regard life insurance as vital, yet almost eight in 10 are not insured, due to the high cost of insurance as well as lack of information.
While Democrance is targeting markets in the Middle East and North Africa including the UAE, Kuwait, Qatar, Bahrain and Egypt, it is also testing the waters in Asia, where insurTech is taking off, with a presence in Vietnam.
Former insurer Mr Grosso worked with insurance firms Metlife and AXA in Europe, before moving to Cairo and then Dubai to help develop micro-insurance products. He later decided to leave the corporate world to launch his own business.
“Insurance companies weren’t ready from a technology and innovation point of view to enter the low-income segment with micro-insurance,” he says, which is why he decided to build a tech platform to reach this segment.
The platform gives insurance companies access to a low-penetration market by digitising the front-end of their operations. Customers on the other hand, only need a mobile phone to buy a policy, file claims and use their insurance.
Types of coverage offered vary from healthcare to life insurance but depend on each market, Mr Grosso says.
In the Gulf, where governments are pushing for mandatory health insurance for all workers, the focus is on other types such as travel or accident insurance, he says, without specifying how big of a priority such products are for low-income workers.
In Egypt, where many low-income people struggle to get good healthcare, customers can get a cash reimbursement when they are admitted to hospital.
“Our solution is product-agnostic,” Mr Grosso says. “We try to understand the protection needs of the customer.”