In my wallet, I have three bank cards. When I opened the accounts, I remembered reading a vague reference to insurance, but until today, I had no idea what the insurance actually covered, how to use it, or what I’m paying for the privilege.

I have now learned I have 26 kinds of insurance coverage on those three cards. However, in spite of several dozen clicks, 90 minutes of reading, and two aborted phone calls, I still don’t understand many of the basics of when and how I can use the coverage. None of the card companies could tell me the fees I’m paying them. Some of the click paths online were circular. And every long list of claim requirements included an escape clause, allowing the insurer nearly unlimited power to deny the inexplicable benefits for which I’m unknowingly paying.

In the religion of the Internet, user experience is gospel; if there were an inquisition into my experience today, insurance would be excommunicated.
*****
Nearly nine years ago, I joined <a href="https://microensure.com/">MicroEnsure</a>, a pioneer in the field of inclusive insurance. Low-income customers in emerging markets experience risk as a fundamental fact of life. Opportunity – the focus of many a financial "inclusioneer" – is about something that doesn’t yet exist; meanwhile, risk is a present reality every day. If you’re a low-income mother in sub-Saharan Africa, risk is your breakfast, lunch, and dinner; you wake up in the morning worried if the bus driver will be drunk again, and you go to sleep hoping your rural uncle’s illness doesn’t get any worse.

The problem MicroEnsure wanted to tackle was how to protect these “emerging customers” – people in emerging markets who earn $2 to $20 per day – with sustainable solutions, since traditional insurance companies had no model to serve them. Traditional insurers have depended for decades on mandatory distribution channels: car owners must insure their vehicles, businesses their properties, and so forth. I like to call this, “making money in the dark,” where the product (like my credit card insurance) is largely hidden from view. In such an approach, customer preferences became less important to insurers. If a customer ever did really want insurance, that individual was likely to be either high-risk or a fraudster. Over time, this led to customers knowing little about their coverage, and being pushed away if they did try to access benefits. In the end, insurance became an industry that sees customers as the enemy. If you disagree, just consider that the industry calls claims “losses.” Let that sink in: when customers receive the service they paid for, insurers see a failure, not a success.

MicroEnsure, then, was clearly facing an uphill battle: we had no mandatory channels to leverage, and we had customers who faced significant risk. How could we protect customers who faced more risk than the average insured person, with less money to pay premiums, and no easy way to reach them?

The resolution we found, paradoxically, was to use these two problems to solve each other. If emerging customers faced more risk, then they would be more likely to buy products that help them, which meant that it should be easier to create channels to reach them.

The key to making the formula work was to upend the traditional insurance model. Instead of making money in the dark, we needed to make our value as clear as possible: to offer products that were easy to understand, valuable for the price, and straightforward to claim. We needed to respond to customer needs and requests quickly. We needed to be dissatisfied with low usage rates and nervous about unsustainably high profit margins. And we needed to think about our customers not only from a financial perspective, but also from social and emotional ones as well. In short, we needed to act like a company in any other industry, where customers are seen as an asset rather than a liability.
<blockquote>Instead of making money in the dark, we needed to make our value as clear as possible: to offer products that were easy to understand, valuable for the price, and straightforward to claim.</blockquote>
To be sure, there were tradeoffs to be made. Instead of paying the full cost of a customer’s loss, in most cases we paid a fixed part of it. Instead of covering many different customer needs, we limited our service to a few major ones. But by making our product and back office simpler, we also enabled scale much more quickly than traditional insurance. As a result, MicroEnsure reached more than 50 million low-income customers with their first insurance policies in less than a decade.
*****
I recently had the privilege to speak at the <a href="http://financialinclusionweek.org/cfi10/">CFI 10th Anniversary Symposium</a>, which marked an important career transition for me. Having helped MicroEnsure to build its model, I attended the Symposium on my first day as part of AXA, the world’s 2nd-largest insurance group. AXA sees that the old insurance model is limited: there are only so many mandatory insurance policies that can be sold in existing markets. And while it looks to emerging customers for growth, at the same time it recognizes that the business model for emerging customers holds some of the keys for renewing the insurance industry overall.

Which brings me to my credit card experiment.

Emerging customers who now have insurance – <a href="http://www.impactinsurance.org/about/facts-on-microinsurance">more than 500 million of them</a>, at last count – don’t often feel the way that I did today as an insurance customer. They don’t have to slog through endless jargon when the <a href="https://www.theguardian.com/global-development/2013/may/02/ghana-mobile-free-insurance">policy wording is contained in 3 SMS messages</a>. They don’t have to struggle for six weeks to get a small travel insurance claim paid, as I did last year, but can <a href="https://www.youtube.com/watch?v=vX6TySibSU8">receive a claim payment in West Africa in two hours</a>. They are provided with clear, simple products, not sold with traditional ads that – almost unbelievably – show <a href="https://www.google.com/imgres?imgurl=http%3A%2F%2Ffile.vintageadbrowser.com%2Fl-gwjbeo488h2lj7.jpg&amp;imgrefurl=http%3A%2F%2Fwww.vintageadbrowser.com%2Fmoney-ads-1990s&amp;docid=Xh9R6D9rEBQhiM&amp;tbnid=1Si3I3mwhFCe6M%3A&amp;vet=1&amp;w=660&amp;h=903&amp;source=sh%2Fx%2Fim">activities that aren’t covered by their policy</a>. Instead of seeing insurance as an annoyance, emerging customers tend to <a href="https://www.youtube.com/watch?v=0FOH9E1pe9o">see it as a blessing</a>.

The reason emerging customers feel this way isn’t because they are fundamentally different from traditional customers; it’s because the industry changed to reach them in the first place. And if the changes have succeeded in reaching this new market, then – at least for me – the lessons learned are relevant for existing markets as well. Insurers will become consumer-centric, lest Amazon and Google do it for them. They will find ways to make money in the light – where customers who have 26 covers actually know that they are covered in the first place. User experience will eventually drive the insurance industry, just as it does everywhere else.

For me this is why, while the last decade has seen an explosion of micro insurance, the next decade may be when “micro” insurance becomes “macro.” On the one hand, emerging customers will continue becoming insured, as more and more commercial insurers see the <a href="https://microinsurancenetwork.org/groups/microinsurance-risk-protection-4-billion-people">size and potential of the market</a>. On the other hand, though, I’m making a bolder bet: that the emerging customer model will go mainstream.

It should be an exciting few years.

Insurance: from Micro to Macro

Sub-Saharan Africa

Inclusive insurance

Insurance

Blog Post

In celebration of its 10th anniversary, the Center for Financial Inclusion at Accion asked 10 leaders in the financial inclusion community to set out their agenda for Getting Inclusion Right. The resulting essays and webinar series creates a roadmap to take financial inclusion into the next decade.

For the first virtual event in the series, Garance Wattez-Richard, Head of AXA Emerging Customers and Elisabeth Rhyne, Managing Director of CFI discussed the topics of getting insurance right and getting inclusion right from the customer’s perspective.

Webinar: Getting Inclusion Right

CFI Research Fellows Program

Webinar

Amee Parbhoo

Coryell Stout

Federico  Gomez Romero

Justin Matheson-Turner

Kathleen Yaworsky

Megan Peterson

Michael Schlein

Vikas Raj

Colombia

East Asia and Pacific

Europe and Central Asia

India

Kenya

Latin America and The Caribbean

Middle East and North Africa

North America

South Africa

South Asia

Zambia

Advisory Services

Agricultural and Rural Finance

Alternative Data

Challenges and Crises

Consumer Credit

Consumer Protection

Credit

Credit Provision

Crop Insurance

Data Analytics

Delivery Channels

Digital Credit

Digital Financial Services

Enabling Environment

Financial Health

Financial Inclusion Strategy

Financial Service Providers

Financial Technology

Fintechs

Health Insurance

Human Centered Design

Human Touch

Impact Investing

Insurance Companies

Insurtech

Life Insurance

Microfinance Institutions

Mobile Banking

Over-indebtedness

Payments

Refugees and Migrants

Resilience

Rural Populations

Saving

Smallholder Farmers

Social Performance

Trends

Underwriting

Underserved Groups

Women

Article

Podcast

India is a global leader in financial inclusion. For over a decade, Accion has worked with and learned from India’s innovators, investors, and policymakers to expand economic opportunity for its people and businesses.

[embed]https://soundcloud.com/accioninternational/everyone-is-out-there-reassessing-how-much-liquidity-they-have-toffee-insurances-rohan-kumar[/embed]

“Everyone is out there reassessing how much liquidity they have. Do they have enough safety nets for their kids — do they have enough savings if they were to go to the hospital?,” says Rohan Kumar, Co-Founder and CEO of <a href="https://toffeeinsurance.com/" target="_blank" rel="noopener noreferrer">Toffee Insurance</a> in India. Health concerns and other risks from COVID-19 are causing consumers to reassess whether their current safety nets are adequate. Insurance has switched from being a “push product to a pull product,” and people across income levels are “going out and proactively looking for products.” In episode six of <a href="https://www.accion.org/series/venturekast-rebuild" target="_blank" rel="noopener noreferrer">VentureKast: Rebuild</a>, Rohan talks about how the pandemic is changing consumer perceptions of insurance and why fintechs are uniquely positioned to meet the increased demand with truly affordable, flexible, and high-quality offerings. Toffee leverages a digital infrastructure, including payments and claims management, to offer simple health, home, and income insurance to the 500 million Indians who have historically been overlooked by traditional insurers. This agile and enterprising fintech is expanding insurance access in India. “Something that has taken 10 years for people to solve, has been solved in three months,” says Rohan.

Toffee’s new monthly subscription model expands access to affordable insurance with a payment schedule that complements the income cycles of low-income customers, providing the security that “if [consumers] were to contract COVID-19 they would have some sort of coverage which doesn’t empty their banks.” While the vast majority of traditional insurers who rely on outdated products and legacy delivery methods are ill-equipped to adapt to the needs of consumers in a COVID-19 world, Toffee — which “started all digital from day one” — can bring products to market at a rapid pace. Rohan adds that the “mass behavioral change” in perception of insurance in India “has a huge impact which continues to stay.” With empathy, Rohan reminds us that despite the strain caused by the pandemic, COVID-19 has encouraged insurers to serve previously ignored populations.

Please join our host and co-Managing Director of <a href="https://www.accion.org/how-we-work/invest/accion-venture-lab" target="_blank" rel="noopener noreferrer">Venture Lab</a> <a href="https://www.accion.org/bio/vikas-raj" target="_blank" rel="noopener noreferrer">Vikas Raj</a> as he interviews industry leaders every Thursday about how COVID-19 is impacting their work.

“Everyone is out there reassessing how much liquidity they have” – Toffee Insurance’s Rohan Kumar

Toffee Insurance

Business Leader

Financial Inclusion Practitioner

Impact Investor

Accion Venture Lab

COVID-19: Economic response and resilience

VentureKast: Rebuild

For people in Colombia who are living paycheck-to-paycheck, and particularly the 45 percent of Colombian adults working in the informal economy, financial security can feel unattainable. Helping these groups to strengthen their financial health has always been challenging, but it’s even more difficult as the devastations of the coronavirus pandemic continue to unfold.

Colombia’s fintech sector has the potential to bring much-needed financial security and resilience to vulnerable populations. With its growing number of entrepreneurs, successful startups, and increasing interest from venture capitalists, Colombia has the third-largest fintech sector in Latin America, and it's <a href="/2020-and-beyond-whats-next-for-fintech-innovation-in-latin-america">one of the markets we’re watching</a> at Accion Venture Lab. <a href="https://www.grupor5.com/" target="_blank" rel="noopener noreferrer">R5</a> caught our attention because of their unique model as an asset-backed lender for the underserved. Customers can use their cars and motorcycles as collateral to receive long-term, low-priced loans. The company started by selling online vehicle insurance, which complements their loan product and improves underwriting.

R5 keeps their mission of improving people’s financial health through innovative products at the core of everything they do. The company provides products that meet people’s needs, including longer terms, larger loan sizes, and affordable, convenient insurance, while using data to ensure a responsible use of funds and avoid over-indebtedness. This focus on affordability, accessibility, and sustainability is essential for Colombians who struggle to make ends meet or to find stability in turbulent times.

Just over a year after launching, R5 has built a strong team culture, driven exponential growth, laid out an ambitious product roadmap, and maintained healthy financials. We are excited to add R5 to our portfolio because they are:
<h3>Helping customers use funds responsibly</h3>
When we look for consumer lenders, we try to find those who go the extra mile and commit to making a positive impact on their clients’ financial health, not only by providing them with a fast and fairly priced product, but also by considering their long-term value to consumers. R5 is highly intentional about lending responsibly and avoiding client over-indebtedness. Although the use of assets as a guarantee improves the financial offer, the company takes all the necessary measures to avoid repossession. During the underwriting process, they carefully track the use of funds and estimate the impact of a new loan on the client to ensure that the loan will be beneficial in the long run instead of burdensome.
<h3>Leveraging new assets for more responsible and affordable financial services</h3>
Formal access to credit in Colombia, as in most of the emerging markets where we work, is strikingly low. R5’s target population finds it extremely hard to access long-term, affordable funding. Short-term loans from credit cards for the employed and payday loans for informal workers can help people manage their monthly cashflow imbalances, but the high costs can trap people in debt. R5 is improving their clients’ financial options by using their vehicles to offer larger loans at lower rates and longer tenors, helping them consolidate more expensive debts, face unexpected life events, and secure working capital for their new and existing businesses.
<h3>Designing a holistic set of financial products for the underserved</h3>
In its mission to increase financial inclusion in Colombia, R5 is providing a suite of financial products to underserved people. Beyond loans, the company offers vehicle insurance policies through a seamless digital process. Their unique machine learning risk model allows them to price their policies significantly below the competition. Their success with this insurance product is leading the company to develop other innovative policies for an unserved population that has otherwise limited options in the market. By lowering prices and improving products, R5 provides its clients with better coverage and improves the low-income population’s access to insurance.
<h3>Doubling efforts during the COVID-19 crisis</h3>
Colombians without financial safety nets, like many workers in the informal economy, are particularly vulnerable to the economic impact of Colombia’s lockdown measures to contain the outbreak. Those without formal employment don’t have the luxury of remote work or job protections that others enjoy. As soon as the coronavirus crisis started, R5’s team stepped up to help this population by:
<ul>
 	<li>Accelerating development of a lending product for motorcycle delivery drivers</li>
 	<li>Working to expand its insurance offerings through a fully digital, low-cost medical assistance service</li>
 	<li>Developing tools and resources to support the financial health of Colombians</li>
</ul>
During extreme situations like this pandemic, companies can show their true commitment to their mission, and we are thrilled to see that R5 continues innovating to support those in need.

Through its innovative and affordable products, R5 is opening new opportunities for many lower-income Colombians. We’re extremely excited to be partnering with R5 and look forward to supporting the team not only in Colombia but also as they expand through Latin America with their unique value proposition.

Fintech makes financial stability attainable for low-income Colombians

Entrepreneur

<a href="https://www.forbes.com/sites/vikasraj/2020/03/13/coronavirus-will-be-even-worse-for-low-income-people-and-businesses-but-fintechs-can-help/#13418bee2116">This article originally appeared on Forbes</a>.

As the world reacts to the novel coronavirus — now officially a pandemic according to the World Health Organization — many countries are beginning to suggest ways to help the citizens hurt by the virus. Quantitative easing to bolster the stock market, tax breaks and extensions for the sick, and stimulus for industries affected by the crisis are all on the table, from across the political spectrum. But coronavirus isn't just an issue for people who are infected and those hurt by stock market declines. With many offices shut down, tourism grinding to a halt, and yes, even the NBA on indefinite suspension, we are beginning to see how spurts of economic inactivity are particularly difficult for the economically vulnerable and may have long-lasting effects.

Around the world, financially insecure people are fundamentally more susceptible to financial shocks like coronavirus, and the current crisis is bringing the challenges this population faces into stark relief. Lower-income and underserved individuals are less likely to have access to quality, affordable health insurance that would help them get better quickly. Their livelihoods are particularly vulnerable to business interruptions. Small businesses, with their thin capital bases and difficulty borrowing, are especially affected by shifts in supply and demand in the economy. Even here in the U.S., nearly half of people do not have $500 in savings. And a mind-boggling number of people do not have paid sick leave to enable their own recovery or care for loved ones. The financially excluded, many of whom live on the fine line between stability and poverty, are facing a terrifying next several months.
<h2>Innovative, inclusive fintech is crucial for weathering this pandemic</h2>
At times like this, it is good to know there are fintech startups around the world that are part of the solution. Companies like <a href="https://digit.co/">Digit</a> and <a href="https://even.com/">Even</a> are helping Americans to save their money more effectively and deal with working capital imbalances. Companies like <a href="http://www.bimamobile.com/">Bima</a> globally and our portfolio company <a href="https://toffeeinsurance.com/">Toffee</a> in India are helping people access critical insurance for the first time. Companies in our portfolio like <a href="https://www.lidya.co/us/en/home/">Lidya</a> in Nigeria and <a href="https://www.firstcircle.ph/">First Circle</a> in the Philippines are ensuring small businesses have access to the short-term financing they need to weather tough times.

Many of these companies are themselves early in their journeys and are susceptible to the global shocks of this pandemic. At this point, <a href="https://www.accion.org/coronavirus-response-recommendations-for-the-accion-venture-lab-portfolio">we are counseling them</a> to stay the course but to be extra cautious, and most importantly, remember the people they work with—their employees and their customers. Our portfolio companies’ customers are going to be facing severe challenges, and we are working with our companies to ensure they are able to serve as allies and sources of support during these unstable times. Tweaks to product design, like repayment schedules for loans, can truly help consumers during this period of volatility. Those changes can also be helpful in building long-term customer loyalty and driving lifetime value. From a team perspective, we are encouraging our companies to minimize or avoid travel, get set up for a long period of remote work, and keep a close pulse on team morale during this time of stress.

From a business perspective, disruption is inevitable. Early-stage fintech for inclusion startups in emerging markets that have less than 18 months of runway (and that is most of them) should start planning now for higher burn rates and longer fundraise cycles. Cash burn will go up as revenues come down and, in many cases, expenses go up. This may be particularly acute for lending startups that could face higher write-offs and higher costs of capital as institutional investors move out of emerging markets. Companies that are in the process of raising capital should push to close rounds as quickly as possible. Companies seeking to raise money in the next 12 months should start thinking about managing burn to extend runway.

We have a challenging several weeks, and likely months, ahead of us, but inclusive fintech startups are still doing the important work of making sure the most vulnerable among us continue to have the access to services they need through this crisis. Regulators and governments would be well-served to remember the importance of innovators in financial inclusion and other critical areas and ensure they are able to continue their work. For example, we would like to see more liquidity facilities set up by development banks to support early-stage startup innovators. These innovators are crucial for supporting the people and small businesses that are most vulnerable during this perilous time, and they deserve support in turn.

Coronavirus will be even worse for low-income people and businesses, but fintechs can help

First Circle

Lidya

Institutional Funder

Social Good

The majority of Kenyans have mobile money accounts; their activity demonstrates digital financial services’ potential. Accion helps Kenyan innovators harness emerging technologies to create new financial services.

Rose Kilonzo comes from a long line of farmers in Kitui County, Kenya. “I love it because when you farm, you won’t go hungry,” says Rose. She has always valued being able to provide for her family through the crops she grows, both by putting food on the table and by selling the surplus to earn money for school fees and clothes for her five kids. Plus, she enjoys the autonomy of being her own boss. But Rose knows that a good harvest is never a certainty. She compares farming to playing a game of cards — the outcome is never guaranteed. A season of scarce rains can destroy her fields and leave Rose and her family with no food or source of income. 

When Rose heard about Accion Venture Lab portfolio company <a href="https://www.pula-advisors.com/">Pula</a>, she was excited to learn more about how their innovative insurance and agriculture advisory services could benefit her. Pula provides agricultural insurance for traditionally excluded small-holder farmers by leveraging cutting-edge technology and an extensive network of partners, including the <a href="https://www1.wfp.org/r4-rural-resilience-initiative">World Food Program’s R4 Rural Resilience Initiative</a>. In addition to insurance, Pula provides data-driven insights and advice to help farmers like Rose gain higher yields on their crops in sustainable ways. 

Rose now has confidence that she can provide for her family no matter the circumstances. “When you plant, you have faith it will be taken care of should your crop fail,” she says. Rose has become an advocate of insurance for farming and shares her experience with other local farmers. With a more secure income, she’s looking forward to expanding into commercial agriculture and teaching her children and grandchildren the trade.

For Rose in Kenya, crop insurance is a game-changer

Pula

The real impact of financial inclusion

When a family member falls ill, especially a breadwinner, the unexpected costs can tip the family finances from coping to crisis. Insurance can help families manage and recover from shocks — a key indicator of <a href="https://www.centerforfinancialinclusion.org/beyond-financial-inclusion-financial-health-as-a-global-framework">financial health</a>. However, according to the <a href="https://www.fsdzambia.org/publication/finscope-2015/">2015 Finscope</a>, only 2.8 percent of adults in Zambia are insured.

To combat this problem, we’re supporting a Zambian insurtech startup to develop and pilot a new digitally delivered microinsurance product. This work is part of a multi-year project focused on <a href="https://www.opml.co.uk/projects/deepening-financial-inclusion-in-sub-saharan-africa">Data Management and Analytical Capability</a> (DMAC). One of the primary goals of the DMAC project is to develop financial service providers’ capacity to leverage data strategically so they can develop innovative and inclusive products that respond to the needs of unserved and underserved adults. One such product is a mobile-based hospital cash plan in Zambia.

When this product launches, mobile money subscribers will be able to pick a plan and pay the premiums straight from their mobile money account. If they or a family member falls ill and is admitted to the hospital, they can initiate a claim. They’ll receive a mobile money payout directly to their wallet for each day spent in the hospital. This fast, flexible cash benefit can be used to pay for whatever the family needs to make ends meet. It also saves the family from falling prey to exorbitant rates for small short-term loans from moneylenders or others.

To develop this product, the insurtech startup partnered with a national Mobile Network Operator (MNO) as part of their data strategy to use alternative data — such as mobile KYC and mobile money transaction data — for customer acquisition and underwriting. Following a <a href="https://www.accion.org/are-you-unleashing-the-full-potential-of-your-data">data-driven product development methodology</a>, we helped the insurtech map out the data inflows and outflows that the new hospital cash plan will generate. This exercise informed the operational processes and technical requirements needed to support product delivery. For example, the insurtech pinpointed the minimum set of data fields required in the mobile phone menu that the MNO database would need sent to their backend system through their Application Programming Interface (API) for underwriting. They also identified the critical success metrics to measure and track customer usage and satisfaction with the product experience through <a href="https://www.accion.org/preparing-financial-service-providers-for-digital-transformation-2">customized analytics dashboards</a>. This evaluation process will enable a data-driven feedback loop for continuous product improvements.

This experience has underscored that an organization’s ability to <a href="https://www.accion.org/implementing-big-data-10-tips-fsps">strategically leverage big data</a> and build data-driven products depends on identifying and implementing the appropriate mix of staff skills, tech, and operational systems. Strategic partnerships make it possible to meet these business objectives. In Zambia, for example, the insurtech would not be able to digitally acquire and underwrite new customers without the backend insurance administration and reporting systems they’ve developed, an in-house data analyst supported by a local firm specializing in data collection and management, and a strong partnership with the MNO.

Today, there are very few microinsurance plans available to low-income segments in Zambia.  As we prepare for the pilot launch of this new product, we’re hopeful that it can help make insurance more inclusive. Once the tool is live, the dashboards built will be used to track customer usage and experience and enable refinements. This data-driven product has the potential to insure people in Zambia who’ve never had quality insurance, helping them find new resilience in the face of a health crisis. As the <a href="https://www.economist.com/international/2019/08/22/the-poor-who-most-need-insurance-are-least-likely-to-have-it">Economist</a> recently reported, the poor, who most need insurance, are least likely to have it. But mobile phones and innovative fintech, like the projects we’re working on with DMAC, can make a difference.

___________________________________

Data Management and Analytics Capabilities (DMAC) is a two-year program that uses data-driven evidence to help Financial Service Providers (FSPs) in sub-Saharan Africa to designing inclusive and affordable financial products and services that respond to the needs of unserved and underserved adults, with a particular focus on women and youth. 

Initiated by <a href="https://www.fsdafrica.org/">Financial Sector Deepening Africa</a> (FSD Africa) and <a href="https://www.idrc.ca/">International Development Research Centre</a> (IDRC) in partnership with <a href="http://www.fsdt.or.tz/">FSDT</a> and <a href="https://www.fsdzambia.org/">FSDZ</a>, it’s being implemented by <a href="https://www.opml.co.uk/">Oxford Policy Management</a> (OPM), in collaboration with Accion’s <a href="https://www.accion.org/how-we-work/advise/accion-global-advisory-solutions">Global Advisory Solutions</a> and <a href="https://www.masterdata.co.za/">Master Data Management</a> (MDM).

The program is operating across three different markets of varying digital maturity — Sierra Leone, Zambia, and Tanzania — and with three different types of FSPs: insurers, fintechs, and commercial banks.

Helping families in Zambia cope with a health crisis

Financial Service Provider

Accion Global Advisory Solutions

South Africa is a global hub for fintech innovation. Accion supports and advises South African innovators using technology to help entrepreneurs expand their businesses and families protect their homes around the world.

"I’ve been here in this informal settlement for 14 years,” Fundiswa explains as we visit the makeshift home she shares with her sister and their children outside of Cape Town, South Africa. Such neighborhoods, which are home to more than 1 billion of the world’s poorest people, are especially vulnerable to fire, as residents live in crowded conditions and building codes are not enforced. And when a fire does break out, residents lack the resources to rebuild. “If I had to buy everything again after a fire, it would be very hard because I don’t have a lot of money,” says Fundiswa.

<img class="alignleft wp-image-16829" src="http://content.accion.org/wp-content/uploads/2019/01/Lumkani_0007-1024x683.jpg" alt="Lumkani IoT heat detection device" width="500" height="333" />Lumkani, a South African insurtech startup and Accion portfolio company, is offering people like Fundiswa both protection and peace of mind with its innovative fire insurance product. Clients receive a heat sensing device, which sounds an alarm if it detects fire nearby. And the insurance policy helps pay for repairs or replacements if a home does burn.

Fundiswa became a Lumkani client because she wanted to know her family and possessions would be safe in a fire. Lumkani makes the process simple for customers, says Fundiswa: “I pay and then they send me an SMS to say I’m covered for the month with the insurance.”

But even more important than the straightforward process is the sense of safety Lumkani gives its customers. “If the house next door burns, I don’t stress. I just lock my door and run, because I know I’m covered by the insurance,” says Fundiswa. “People even steal from people’s homes when there are fires, but I don’t worry about any of that because I know I’m covered, and I know I will get back what is due to me after I send my claim.”

While Fundiswa hasn’t had to worry about a fire yet, she has already seen the impact of Lumkani in her community: “I know someone who lost everything in the fires and got a voucher, and he got everything back.”

Fire insurance provides peace of mind in South Africa

Lumkani

Fintech companies are, of course, technology-driven. The word “tech” is part of their name, after all! And yet, even fintechs usually include elements of human touch in their business models. For example, sales agents may help contact and enroll new customers, or support staffers may be available to help troubleshoot when problems arise.

In our recent paper, <a href="https://www.accion.org/the-tech-touch-balance/">“The Tech Touch Balance: How the Best Fintech Startups Integrate Digital and Human Interaction to Accelerate Financial Inclusion,”</a> we showcase several fintech startups in the Accion Venture Lab portfolio that are finding an optimal balance between tech and human interactions, making their offerings accessible, affordable, and attractive to their target customers. Two are located in Africa: Apollo Agriculture, and Lumkani.

Both companies are innovative in that they offer services that have not previously existed in the market. <a href="https://apolloagriculture.com/">Apollo</a>, based in Kenya, provides high-quality seeds and fertilizers for smallholder farmers. Apollo also provides guidance and information to the farmers so they can improve input yield and better respond to storms or droughts. The second Africa-based company profiled, <a href="https://lumkani.com/">Lumkani</a>, sells fire insurance to residents of informal settlements in South Africa. The insurance package includes an alarm that can detect a fire and then trigger an alert to residents and neighbors, so they have a chance to seek safety. And if a home does catch fire, the insurance payout helps policyholders replace damaged property. Since both Apollo and Lumkani offer products and services that customers are less familiar with, human interaction helps drive adoption and overall retention.

[caption id="attachment_17740" align="alignleft" width="500"]<img class="wp-image-17740" src="http://content.accion.org/wp-content/uploads/2019/02/Kenya_Nakuru_0034-1-1-1024x684.jpg" alt="Apollo agents in Nakuru, Kenya" width="500" height="334" /> Apollo Agriculture balances its high-tech model with field agents to serve smallholder farmers in Kenya.[/caption]

Apollo’s clients, smallholder farmers, are among the world’s most financially underserved populations. They also tend to be less digitally savvy, and many have had negative experiences with financial institutions in the past. At the same time, they are very interested in receiving help to boost their yields and incomes, so Apollo’s model is attractive.

Apollo primarily relies on tech to determine the creditworthiness of its customers: it employs a highly sophisticated, tech-driven underwriting process that leverages data collected from satellite imagery and the farmers themselves. All of Apollo’s loans are repaid through mobile money and require no human touch, which is convenient for farmers in remote, rural areas. Apollo also uses SMS to communicate with farmers for matters ranging from payment reminders to weather alerts.

On the other hand, Apollo field agents are an essential part of the customer journey, especially in the early stages, as they visit potential clients and answer questions. Agents are also available to go in person to handle challenges that can’t be managed through SMS. Call centers and automated Interactive Voice Response (IVR) systems are also part of Apollo’s tech-touch continuum.

In South Africa, mobile money systems are much less available than they are in Kenya, so they are not a good option for Lumkani clients to use to manage policy payments and payouts. Additionally, people in the informal settlements where Lumkani provides its services tend to be limited in both financial literacy and experience with technology, so they need information on what the insurance product is and how it works.

So Lumkani relies on agents — many of whom live in the same settlements — to do face-to-face sales pitches and enrollments. The agents, however, carry smartphones with an app for setting up the new accounts. Agents also collect cash payments in person but send SMS reminders to keep clients up to date. The fire detectors not only sound an alarm to warn people in the home when they sense heat nearby but also report back to Lumkani so that SMS alerts can be sent throughout the community. The company can then follow up with clients, both electronically and in person, to see if any fire damage occurred, and to begin the claims process if so. In combining tech and touch, Lumkani earns the trust of its clients while making the signup and payout processes faster and less expensive than many traditional insurance models.

For more examples of how fintech startups balance tech and touch as they develop their offerings, and general advice on these issues, read the full paper <a href="https://www.accion.org/the-tech-touch-balance">here</a>.

Two African startups where inclusive fintech comes with a human touch

Apollo Agriculture

Mastercard Foundation

The tech touch balance

For people who struggle to get by, a financial shock is devastating. Without resources to recover, low-income consumers in emerging markets can have the course of their lives altered by one unfortunate event. Insurance can make a drastic difference for these populations. But serving these customers poses significant challenges for insurance companies — from cost-effectively reaching and educating consumers to accurately assessing and pricing risks to efficiently managing claims. <a href="https://www.accion.org/how-can-we-bring-insurance-to-those-who-need-it-most">Startups can play a critical role in solving those challenges</a> with products intended to address specific risks for underserved communities, new distribution channels to reach these populations, and new streams of data to more effectively assess and price risk.

Accion Venture Lab has been excited to make its first three investments in the insurtech space this year with investments in <a href="https://www.pula-advisors.com/">Pula Advisors</a>, operating across Africa, <a href="https://lumkani.com/">Lumkani</a> in South Africa, and <a href="https://toffeeinsurance.com/">Toffee Insurance</a> in India. These startups are doing exciting things across geographies and products — covering personal accident, health, property, life, and agriculture insurance.

Based on our recent investments and our ongoing exploration of new insurtech businesses around the world, we have identified four areas of inclusive insurance innovation that we’re particularly excited about.
<ol>
 	<li>A tangible “hook” to attract customers: For the vast majority of low-income customers, insurance remains an intangible product with intangible benefits. Unlike credit, insurers ask customers to pay upfront for a product only to see the benefits days, months or years later — if ever. We’re seeing insurtech models now that, rather than relying on this traditional approach, are offering a solid hook to attract customers and provide immediate benefits in addition to the longer-term value of insurance. For example, <a href="https://www.accion.org/insurtech-fire-protection-south-africa">Lumkani provides South Africans living in informal settlements</a> with a unique bundle: insurance that protects against loss of life, shelter, and assets in the case of a fire, and an Internet of Things (IoT) heat detector that detects fires in and around homes. In addition to providing early warning, the heat detector, often proudly displayed in a home, reminds customers every day that their purchases are keeping their families safe and protected.</li>
 	<li>Distribution models that build trust and that scale: In addition to defining a strong hook or value proposition to customers, traditional insurance models often struggle with reaching customers, educating them about the product’s benefits, and providing confidence in the overall experience. Selling insurance door-to-door is too costly for many microinsurance policies. We have seen insurtech businesses leverage existing distribution channels to piggyback on the trust of existing customer relationships. For example, Toffee in India works with retail channel partners to sell products that have a natural overlap with their insurance policies, such as commuters insurance paired with bicycle retailers. By ensuring sales channels are part of their target customers’ everyday lives, such as pharmacies where they plan to sell insurance, Toffee makes its offering accessible to a relevant customer base.</li>
 	<li>Unique and compelling product design features: Another challenge traditional insurers face is designing relevant products for the underserved. Insurance products created for middle- or higher-income customers are not always relevant for the realities of a low-income customer who faces different circumstances and different risks from day to day. Insurtech companies can successfully understand what their customers need and reimagine how the product could be made relevant to their lives. For example, <a href="https://www.accion.org/changing-climate-technology-provides-agricultural-insurance-farmers">Pula uses cutting-edge technology</a> coupled with partnerships with seed, fertilizer, and credit providers to make agricultural insurance feasible for rural farmers. Customers read about Pula’s coverage on a sticker on the bag of seed or fertilizer they’re purchasing, and then they register their unique policy via their mobile phone. Pula has designed their free coverage in a way that’s relevant for farmers. Using satellite data, Pula can provide farmers with a new bag of seed while they are still in the planting season. Doing so gives farmers another chance at a harvest.</li>
 	<li>Backend claims automation: Ultimately, the most important part of insurance is getting a claim paid. Claim processes in emerging markets are notoriously slow and unreliable. Often customers are unaware of how to process a claim, or insurers require onerous paperwork to submit one. Once received, it can take time — something many customers don’t have. Insurtech companies are leveraging technology to automate much of the claims process, relying on agents at the relevant points in the claims journey. For example, Toffee is developing a fully digital claims experience where customers can submit and track claims on their smartphone app. Pula relies on satellite and yield data to automate claims decisions, proactively letting customers know once they qualify for a payout. Lumkani’s heat detector informs the company of a possible fire and sends one of its agents within a day to investigate and support a customer through the claim.</li>
</ol>
We’re seeing incredible innovations in insurance, similar to what we saw in the lending space just a few years ago. From acquisition to underwriting to customer engagement, insurtech companies have a real opportunity to increase access and improve the quality of this critical financial service.

Four innovations making insurtech more inclusive

The world’s poor live only one illness, drought, or flood away from disaster. The world’s most vulnerable people don’t have the basic financial tools needed to protect their families, homes, and livelihoods.

Both the need and the opportunity is enormous. The Center for Financial Inclusion at Accion (CFI) and the Institute of International Finance found that the estimated addressable market of uninsured people is <a href="https://www.linkedin.com/pulse/new-strategies-technologies-making-insurance-more-michael-schlein/?published=t">3.8 billion</a>.

Why are so many people left unprotected? It’s largely due to the high costs of designing, delivering, and administering insurance products. Creating these products and services for low-income customers can be lengthy, difficult, and expensive.

This is something we can, should, and must fix. And it’s why Accion is so committed to creating inclusive insurance that protects the world’s underserved people and businesses.

One of the ways that we’re helping extend coverage to more people is by <a href="https://www.accion.org/four-innovations-making-insurtech-more-inclusive/">investing in and supporting innovative insurance startups</a>. New technologies can fundamentally change the costs of providing policies to the underserved: <a href="https://www.mckinsey.com/industries/financial-services/our-insights/time-for-insurance-companies-to-face-digital-reality">McKinsey &amp; Company</a> estimates that automation can cut the costs of managing a claim by 30 percent.

At Accion, we provide new insurtech companies with the capital and support they need to expand: these resources help them integrate new technology far faster than legacy financial service providers. <a href="https://www.accion.org/how-we-work/invest/accion-venture-lab">Accion Venture Lab</a> made its first three insurtech investments this year. These three startups are using new technology to make insurance more inclusive:
<ul>
 	<li><a href="https://www.accion.org/insurtech-fire-protection-south-africa">Lumkani</a> uses an internet-connected heat detector to give South Africans living in informal settlements insurance that protects against loss of life, shelter, and assets in the case of a fire.</li>
 	<li><a href="https://www.accion.org/changing-climate-technology-provides-agricultural-insurance-farmers">Pula</a> bundles insurance with seed, fertilizer, and credit, using satellite data to see how a client’s farm is doing and providing them with agricultural advice via text messages.</li>
 	<li><a href="https://www.accion.org/toffee-insurance-closes-1-5-million-in-seed-funding">Toffee</a> works with retailers to sell insurance policies that cover relevant products — for instance, selling personal accident and bicycle damage insurance in addition to the bicycle itself.</li>
</ul>
In time, startups like these can scale to serve more people and businesses. Take AllLife, the first company in the world to provide insurance for people diagnosed with HIV/AIDS. It uses a proprietary, tech-driven model for continual operating and patient care that’s helped cut premiums by 40 percent if clients follow their treatment regimes. AllLife was launched in South Africa and has licensed its technology to <a href="https://www.accion.org/insurtech-leader-alllife-raises-funds-to-expand-coverage-to-people-living-with-diabetes-and-hiv">Royal London</a>, the U.K.’s largest mutual life, pensions, and investments company. By reducing back-office costs, AllLife’s underwriting innovations can change how insurance policies are created and administered, ultimately protecting more people.

And it’s not just fintech companies that are working to make insurance more inclusive. We’re working with several joint mobile network operator/insurance partnerships in In Sierra Leone, Tanzania, and Zambia, advising several organizations on how to better leverage data to design better mass market, micro-health, medical, personal, and business insurance.

Microfinance institutions are also working to protect their clients: we’re working with MFIs in Colombia, India, Mexico, Tanzania, Uganda, and elsewhere to design health, motor vehicle, fire, livestock, and funeral insurance.

In addition, we’re working to define some best practices about creating inclusive insurance. CFI continues to publish important <a href="https://www.centerforfinancialinclusion.org/the-radical-reinvention-of-inclusive-insurance">research on inclusive insurance</a>: providers need to find an appropriate balance of “tech and touch” to enroll customers, resolve issues, and make payments. Moreover, the products they design must be simple: customers love something they understand, and the easier it is to administer a product, the lower the costs are for the insurer. CFI has also identified the <a href="https://www.centerforfinancialinclusion.org/ten-years-gone-ten-years-to-go-taking-inclusive-insurance-from-adolescence-to-adulthood">bottlenecks that limit the spread of inclusive insurance</a>: regulators need to approve new products much quicker than they are and allow for a completely paperless process.

We’ll continue watching, supporting, and investing in insurtech to protect more underserved families and businesses.

How can we bring insurance to those who need it most?

AllLife

Everyone needs access to high-quality financial tools. They give entrepreneurs the keys to start businesses, let parents send their kids to school, help families finance the significant moments in their lives — from marriages to children to retirement. These tools are helpful for building better lives, but they are also necessary to help people stay resilient through life’s worst moments.
With the earthquakes, hurricanes, floods, and wildfires of 2017, it’s becoming increasingly clear that those with the least money often pay the highest price during natural disasters. Many of the world’s poorest people live in communities that lack resilient infrastructure and financial tools. Often, these are in hot regions and coastal areas that are vulnerable to harsh weather. For people to prepare, rebuild, and feel confident that their families will get back on their feet, they need access to financial services and tools such as insurance, savings, and loans.

<h3 class="graf graf--p">Insurance Should Be Simple and Affordable for More People</h3>
Globally, there are 3.8 billion low- and middle-income individuals without adequate coverage. The <a class="markup--anchor markup--p-anchor" href="http://www.centerforfinancialinclusion.org/" target="_blank" rel="noopener noreferrer">Center for Financial Inclusion at Accion</a> and the <a class="markup--anchor markup--p-anchor" href="https://www.iif.com/" target="_blank" rel="noopener noreferrer">Institute of International Finance</a> are researching how to provide affordable <a class="markup--anchor markup--p-anchor" href="https://www.iif.com/publication/research-note/insights-inclusive-insurance" target="_blank" rel="noopener noreferrer">“inclusive insurance” for these underserved consumers</a>.
The purpose of this research is to help insurance companies provide better coverage for those who need it most. Losing everything due to unforeseen events is already devastating, but for people with limited disposable income and no insurance, it is almost impossible to recover. Without insurance, people cannot manage the financial shocks caused by natural disasters. These events can permanently derail businesses and force families into life-altering decisions, such as taking kids out of school and putting them to work.
Microinsurance, one of the topics of the research, makes coverage more accessible to low-income consumers through lower premiums. Insurance companies are updating their offerings due to the demand for these more modest insurance products. There has been a lot of growth in this industry in the last decade. From 2005 to 2016, prominent insurance companies that provide microinsurance grew from seven to 60.
Insurance companies are also finding other ways to update their services and help make coverage more accessible for an emerging middle class around the globe. One example is creating uncomplicated plans, such as pay-as-you-go models.
Another opportunity that is helping widen insurance coverage is coupling services with existing mobile financial products or creating new mobile solutions that bring insurance services straight to a consumer’s phone.

<h3 class="graf graf--p">Everyone Needs a Rainy-Day Fund</h3>
Without money and credit, how can someone rebuild after disaster hits? That’s a big question for the 3 billion people worldwide who lack access to bank accounts, credit cards, loans, or online money-transfer.


[caption id="" align="alignnone" width="1382"]<img class="graf-image" src="https://cdn-images-1.medium.com/max/1440/1*Lv2SX5VDxCVrNebBOI0YZw.jpeg" alt="José Ramón Gómez builds his business with funding from Financiera FAMA in Nicaragua. These loans reinforce his tile-making enterprise so he can help reinforce his neighbor’s roofs." width="1382" height="922" /> José Ramón Gómez builds his business with funding from Financiera FAMA in Nicaragua. These loans reinforce his tile-making enterprise so he can help reinforce his neighbor’s roofs.[/caption]
To address this need, our partners go the extra mile to make financial services more inclusive. For example, one of our partners, <a class="markup--anchor markup--p-anchor" href="http://www.accion.org/7970-2/" target="_blank" rel="noopener noreferrer">Financiera FAMA</a>, is building a digital banking platform in Nicaragua to bring small loans to rural clients, who have long been on their own without access to banks and funding. In Nigeria, <a class="markup--anchor markup--p-anchor" href="http://www.accionmfb.com/Home.aspx" target="_blank" rel="noopener noreferrer">Accion Microfinance Bank</a> is developing a mobile savings-based loan program that will make it easier for lower-income customers to save and access small loans. And <a class="markup--anchor markup--p-anchor" href="http://www.ayefin.com/" target="_blank" rel="noopener noreferrer">AYE Finance</a>, in India, is helping small business owners who lack the financial history to secure a loan through traditional banks by evaluating them based on similar businesses and distributing funds. Thanks to innovative practices like these, people previously left out of the financial system can now take out a loan or start a savings account — simple actions that can prove invaluable in the face of natural disasters.
Improved savings and loan services and inclusive insurance plans are necessary for people to take control of their lives when life feels most out-of-control. Let’s make sure everyone can build their businesses, support their families, and stay resilient in an unpredictable world.

With natural disasters getting more severe, people need money to prepare and rebuild

Accion Microfinance Bank

Aye Finance

FAMA