Consider these numbers to see the scale of the opportunity for mobile Microinsurance. In a developed market like the UK, 80% have some kind of Insurance. That goes down to 10% in India and 2.5% in Africa. It is pretty clear where the blue ocean market is.
These millions of new insurance customers won’t buy the legacy insurance products. The new products will need to be a) mobile end to end (i.e. not a mobile front end that requires you to use a laptop/desktop to complete a process) and b) available in very small amounts for very low cost (“microinsurance”). Whether these new mobile Microinsurance products are delivered by Insurtech entrepreneurs or agile established carriers remains to be seen.
Like Microfinance, Microinsurance is key to the transition from subsistence farming to a middle class life. One uninsured disaster and families face financial ruin. An insured borrower is also a better credit risk, so the two markets are connected.
Insurance Comparison Sites
Sometimes, the simplest innovation wins. In India we see a lot of comparison sites. This makes sense in market such as India, where lots of consumers are buying insurance for the first time. Compison sites also have a proven revenue model.
However, these comparison sites assume that the insurance product fits market needs and just need to be marketed, discovered & compared. The existing Insurance products meet the needs of those who are already in the urban middle class. This is a big growth market, but still small compared to the millions emerging from subsistence farming into the lower rungs of a middle class life (what we will call the “aspirant middle”). That market needs some innovation at the product level, not just at the marketing level. For that we need to look at Mobile Microinsurance. But first, the one product they need most – crop insurance.
Crop Insurance – the government approach
Crop insurance is what the aspirant middle needs most. One bad harvest leads to ruin. So, it is no surprise that the Indian Government is proactive on this front. In February 2016, they launched the Pradhan Mantri Fasal Bima Yojana (Prime Minister’s Crop Insurance Scheme). The premiums will be fixed, depending on the type of crop. The Indian Government clearly don’t want a repeat of rapacious loan terms from some of the Microfinance players.
Crop Insurance – the private sector approach
Crop Insurance could use some of that Blockchain & big data magic that we see brewing in startups. Something as simple as flood insurance is no longer simple, now that climate change forces a rethink on existing models. We have looked at big data ventures going after this market such as Meteo and Praedicat and then we looked at how blockchain is being used for catastrophe swaps.
So, there is plenty of innovation help for any insurance companies that want to offer crop insurance at those Government-fixed rates. It is likely that meeting those Government-fixed rates and turning a profit will need an entirely new generation of insurance, with innovation front to back. For that we turn to mobile microinsurance
An idea whose time has finally come
Mobile insurance is nothing new. It emerged in India way back in 1997, when telecom operators launched mobile based insurance (dubbed “mInsurance”). This has not been a great success story. Often an idea is simply ahead of the market reality. In this case, the market needed mass penetration of mobile – tick in the box for that today. It also needs new entrants, not just Telecom operators which have to date not been as successful as they could have been at leveraging their network and customer base and billing relationship into a big position at the application layer.
BIMA – Mobile Microinsurance but not in India
India has the ingredients to be a leader in Mobile Microinsurance, yet so far the action seems to be elsewhere. BIMA Mobile comes from Sweden, has an office in London and operates in many markets including nearby ones such as Pakistan, Sri Lanka and Bangladesh – but not yet India.
BIMA bridges the gap between Telecom operators and Insurance companies.
Given the scale of the market and the digital infrastructure being laid down by the Modi Government, one can expect to see BIMA come to India soon. Whether it will be new Carriers or old Carriers who the partner with remains to be seen.
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