New Strategies and Technologies Are Making Insurance More Inclusive

By Michael Schlein

Financial services can help make our lives better. They can help us save for the future, seize opportunities, and even rebound from disasters.

That last point is particularly timely. After Hurricanes Harvey, Irma, and Maria, we’ve all seen just how important insurance can be in helping people rebuild, get back to work, and provide their families with the care that they need.

Unfortunately, many of the world’s most vulnerable people can’t access high-quality insurance. According to new research from the Center for Financial Inclusion at Accion (CFI) and the Institute of International Finance (IIF), the estimated addressable market of uninsured people is 3.8 billion people. That’s far too many families who live just one injury, illness, or hurricane away from financial ruin.

Made possible with support from MetLife Foundation, “Inclusive Insurance: Closing the Protection Gap for Emerging Customers” explains how business model innovations and new technologies make it easier to provide underserved families and communities with the insurance that they need.

The report explains that new innovations can reduce back-office costs and help make the business case for working down-market. New technologies and processes can help to:

  • Eliminate costly verification screenings to identify “exclusions”
  • Provide insurance policies without any fine print
  • Automatically distribute payouts based on verifiable events instead of waiting on claim submissions
  • Engineer more frequent payouts to consumers

In the past, insurance was frequently a difficult product for providers to sell at a profit to lower-income people. The costs associated with selling, collecting payments for, and administering lower-value policies was uneconomical. And an even larger challenge was reaching a large, diverse pool of customers: providers want to reach both high- and low-risk customers so that a single event doesn’t affect their entire clientele.

New technologies, distribution channels, and partnerships between fintechs and financial service providers are helping address those risks. In fact, those new solutions aren’t just applicable in emerging markets — they can also work in more developed countries. Look at Accion partner AllLife, the world’s first company to provide insurance to people who have been diagnosed with HIV. Their proprietary model of tech-driven perpetual underwriting and patient care allows them to serve the needs of an extremely excluded population in South Africa. Recently, they’ve begun using the same technology to cover people with diabetes. And their model has become so effective that Royal London, the U.K.’s largest mutual life, pensions, and investments company will soon use AllLife’s technology platform.

That’s why the recent CFI / IIF report is so important: it shows commercial finance the solutions and innovations for-profit businesses can use to provide high-quality financial services to the underserved, promote social progress, and realize economic returns.

The report also emphasizes how essential it is to begin with an understanding of clients and their needs. Important as new technologies and efficiencies are, this understanding is the cornerstone of any successful financial product, particularly insurance. Providers must understand what prospective clients’ needs are and how insurance can help them.

CFI will continue working with IIF’s membership as part of a two-year project to learn the best ways for financial institutions to respond to specific challenges and reach lower-income people and markets. “Mainstreaming Financial Inclusion: Best Practices” will publish new findings on improving agent banking models, opening bank accounts remotely, and utilizing data analytics.

By addressing each of these challenges, we can tap the capital markets and foster a financially inclusive world.

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