Micro Insurance and Insurtech V2

Until Insurtech, insurance companies were defining micro insurance policies as social responsibility project. With the magic touch of technology, the picture is changing rapidly!

Micro insurance is a type of micro financial activity, which protects low-income people and communities with low premiums and limited coverages against risks. The main objective is providing financial protection for all low-income members with pooling risks and financial resources. Target customer group is quite big as well. As a fast growing industry more than 2 billion people are potential customers of micro insurance worldwide.

Besides, when we have a look to its social effects, micro insurance enhances financial security and peace of mind, supports social security system of poor or developing countries and provides a high-level risk management system. As a long-term investor, micro insurance contributes stabilizing and development of financial markets in developing and poor countries and provides a considerable liquidity for critical times.

Four key features are very crucial for penetration of micro insurance:

* Premiums should be affordable for low-income households

* Products should be very basic, easy-to-understand and cover limited risks

* UW, claims and collection processes should be operated with high effectiveness

* Products should be distributed effectively and with minimum distribution cost

For providing these conditions, insurance companies defined micro insurance activities as social responsibility projects and did not expect any financial gains after UW process. Until now!

With insurtech, the picture is changing rapidly! Insurtech is converting micro insurance into a very profitable area for insurance companies with advantage of reaching a huge customer group. So, the first rule of insurance, the law of large numbers, is now valid for micro insurance business as well. With insurtech, number of insureds is widening and this makes claims more stable and predictable for insurance companies.

The first impact of insurtech in micro insurance is on UW processes. Because of the low premiums, operational efficiency is the key of success in projects. Insurtech allows insurers for having their own automated UW decision making processes for fast and costless policy production. The key of success, management of operational risk, is reduced significantly. The products are simple, do not require any financial literacy and are very user-friendly.

While penetration of smart phone usage is relatively high even if in poor countries, target customers reach policy without location restrictions via digital distribution channels. Premium collections, claims notifications and all compensations activities are performed with digital tools that were developed and perfected by insurtech.

For now, micro insurance projects are mainly focus on personal accident, health and agricultural activities, but new products are developing promptly. With all its components; like Artificial Intelligence, Machine Learning, Chatbots, Internet of Things; insurtech is becoming the new leverage of micro insurance. Not just diversifying and absorbing risks of individuals, for also providing very strong preconditions for other productive activities of policy owners.

#MicroInsurance, #DevelopingCountries, #Insurtech, #Penetration, #IoT, #MachineLearning, #Chatbots, #IoT, #ZeynepStefan

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