This detailed report, part of our Ultimate Guides series, focuses on insurtechs. These account for just 6% of the emerging markets fintech ecosystem but are expected to see healthy market share gains by reaching out to customers without access to traditional insurance products.
The profitability and growth of this fintech sub-segment
The KPIs being targeted by these firms (transaction value)
The key values they deliver to their customers (seamless execution)
The main drivers of their success to date (innovative service offerings)
Top strategic priorities (entering new customer segments)
Targeted innovations (easier customer onboarding)
Their main growth constraints (funding/ capital)
The toughest regulatory hurdles (KYC/AML)
Emerging market fintechs: Digital insurance occupies a narrow niche
Insurance-focused fintechs (insurtechs) account for just 6% of the global emerging markets fintech ecosystem, making them one of the smallest product areas.
In our previous (2020) survey, insurtechs commanded a 7% share of the ecosystem. The drop in share reflects more limited investor appetite relative to other parts of the fintech landscape.
Insurtechs are most prevalent in South Africa and have the weakest presence in India
At 14%, South Africa’s weight of insurtech firms is more than double the global average. The weight of insurtechs in Kenya has increased the most since our previous (2020) survey, rising 3ppts points to 9% of the local ecosystem.
In contrast, insurtechs in India have seen their share of the total ecosystem collapse to 3%. This may reflect the power of sector leaders such as PB Fintech (Policybazaar). The poor performance of listed players in this space may also have starved the sector of fresh growth capital.
Despite lagging user growth, insurtechs have delivered at the top line
In comparison with other EM fintech products, insurtech has seen lagging user growth but superior average revenue growth. Unusually, insurtechs have been able to deliver positive ARPU growth.
Insurtech market share is expected to materially increase
We asked 900 emerging market adults to outline their current and projected usage of financial products. The results below combine responses relating to both general and life insurance.
Insurtechs, according to the unweighted responses of our sampled consumers, are expected to gain around 8ppts in market share over the next three years, mainly by reducing the incidence of financial exclusion.
Traditional financial institutions and informal channels are expected to maintain their market share over the next few years.
Unprofitable insurtechs could take longer to break-even
At 60%, the proportion of profitable insurtechs matches that of the broader global EM fintech ecosystem. However, for loss-making insurtechs, their path to profitability appears more convoluted than unprofitable fintechs focusing on other products.
7% of the insurtechs believe that they will take more than three years to turn a profit, which is more than 3x the proportion for the full EM fintech universe.
Insurtech KPIs: Transaction value, innovation, gross margins
The key performance indicators (KPIs) most targeted by insurtech firms in emerging markets are transaction value, product and service innovation, and gross margin. Moreover, insurtech firms tend to focus more on financial performance KPIs than EM fintechs specialising in other products
In our previous survey, market share, customer satisfaction and workforce satisfaction topped insurtechs’ targeted KPIs. While insurtech firms are still keen on lifting market share via transaction value, their emphasis on building customer satisfaction to gain loyalty has lessened.
The top 3 KPI’s for insurance fintechs:
This is the KPI most frequently targeted by insurtechs and is also one of the metrics commonly used by investors to assess the fintech sector. Firms actively targeting transaction value growth include Compareha (Egypt) and Pier (Brazil).
Product and service innovation
Product and service innovation enables insurtechs to reach their customers more cheaply and effectively. It also helps these firms to be more relevant to their customers, for example by offering them greater convenience or protection better suited to their needs. Firms citing these innovations as key to their success include PolicyBazaar (India) and Zhongan Insurance (China).
A high gross profit margin can indicate strong customer demand and increases the opportunity to turn a profit if overheads are controlled. For this reason, investors also tend to pay close attention to this metric. Insurtechs focusing on their gross margin include SaveKubwa (Kenya) and Zenda.la (Mexico).
Insurtech key values: Seamless execution, user-friendliness, responsiveness
The top values provided by insurtechs are seamless execution, user-friendly platforms, and responsiveness to customers’ needs. Indeed, insurtechs are much more focused on delivering user-friendly platforms than their fintech peers.
The importance of being customer-centric has declined by around 40% since our 2020 survey. In contrast, speed has gained substantially in importance.
The top 3 key values for insurtechs:
Users increasingly demand that insurtech-operated platforms and mobile applications should not have delays or interruptions. Firms that cite seamless execution as their key value include SaveKubwa (Kenya) and Curacel (Nigeria).
User-friendly platforms help insurtechs to generate more traffic and to inspire more confidence in their services, resulting in greater transaction volume. Firms highlighting user-friendly platforms as a key value include Zhongan Insurance (China) and Naked Insurance (South Africa).
Responsiveness to customer needs
Many incumbent firms are failing to address customers’ specific needs (due to difficulties in tailoring products/services), which is creating opportunities for insurtechs like PolicyBazaar (India) and Tameeni (Saudi Arabia).
Insurtechs success factors: Innovation, user experience
The top success factors cited by insurtechs are innovative service offerings and user-friendly platforms. These results broadly mirror those of the overall EM fintech ecosystem.
Previously, first-mover advantage and strong management were the top success factors for insurtechs, but their weights have each declined by around two-thirds.
The top 3 success factors for insurance fintechs:
Innovative service offering
Innovation is a key pillar for insurtechs’ success. It can, for example, allow firms to improve their service offerings and, hence, enhance the consumer experience. Firms that are striving to innovate include Leapstack (China) and Compareha (Egypt).
Insurtechs need to create an easy-to-use and seamless interface where operations are self-evident and product features are easy to understand. Firms citing this as a success factor include Policy Bazaar (India) and Futuready (Indonesia).
Extensive distribution network
Extensive distribution capacity can help firms gain scale at lower unit cost. Firms citing this success factor include Saphron (Philippines) and Zhongan Insurance (China).
Insurtechs strategic priorities: New segments and products
The top strategic priorities for EM insurtechs over the next three years are entering new customer segments and introducing new products/services. In fact, entering new customer segments is viewed as being almost twice as important for insurtechs as for the global EM fintech population. In contrast, introducing new products and services is viewed as slightly less important for insurtechs relative to their EM fintech peers.
Since our previous report, there is less emphasis on enhancing management expertise (which was previously the top strategic priority) and a greater focus on expanding into new markets.
The top 3 strategic priorities for insurtechs:
Entering new customer segments
The diversity of the customer base in many emerging markets is huge, with significant disparities across geography, age, gender and income. Financial exclusion is also an important issue. Therefore, it makes sense for insurtechs to modify existing offerings to appeal to a broader range of customer segments. Firms planning to enter new customer segments include Smartchoice (Pakistan) and Prosto.Insure (Russia).
Introducing new products/ services
Developing new products provides a means to grow wallet share with existing customers and increase a firm’s appeal with new customers, in turn helping to drive increased scale and market share. Insurtech firms planning to invest in technology include Pier (Brazil) and Curacel (Nigeria).
Increasing use-cases of existing products/services
Insurance fintechs can partner with merchants and institutions to expand the use cases for existing products. This can help to drive growth in the user base and in transaction volume. Firms planning to enhance product/service use cases include Futuready (Indonesia) and Tameeni (Saudi Arabia).
Insurtech innovations: Customer onboarding, AI, blockchain
The most frequently targeted innovations by insurtechs are those that ease customer onboarding or use artificial intelligence or blockchain technology. This prioritisation aligns with the priorities of the broader EM fintech universe.
In our previous survey, chatbots and virtual assistants were given a higher priority, but artificial intelligence has taken over their mantel.
The top 3 targeted innovations for insurance fintechs:
Using technology to ease customer onboarding
A complex customer onboarding process can result in lower business volume and less customer loyalty. Due partly to regulatory requirements, customer onboarding has traditionally been a lengthy procedure, but insurtechs like Curacel (Nigeria) and Saphron (Philippines) are working to improve the process.
Artificial intelligence for predictive analysis
Predictive analytics powered by AI/machine learning embedded in business processes can drive significant improvements such as reduced operating and underwriting costs, increased margins and profitability, and better security and reliability. Firm with plans in this area includes Futuready (Indonesia) and SmartChoice (Pakistan).
Blockchain can improve the trust, security, transparency, and traceability of data shared across business networks, and can help to deliver cost savings. Firms planning to innovate in this area include Tameeni (Saudi Arabia) and Pier (Brazil).
Insurtech growth constraints: Incumbent competition, regulation, funding
The top growth constraints for insurance fintechs are competition from traditional financial institutions, regulation, and funding/ capital.
Distribution capacity was the biggest limiting factor in our previous survey but is now not viewed as a major hurdle. Overall market size has also diminished in importance as a growth constraint.
Relative to the broader EM fintech population, competition from traditional financial institutions is twice as important as a growth constraint for insurtechs.
The top 3 key growth constraints for insurtechs:
Funding/capital is the lifeblood of insurtechs because the business requires significant up-front investment, such as marketing spending to attract unbanked/underbanked customers. Capital may also be required to meet regulatory requirements. Firms looking on funding/capital as a growth constraint include Pier (Brazil) and Prosto.Insure (Russia).
Insurtechs’ operations often differ considerably from those of incumbents, and rulebooks are being continuously updated as regulators catch up with the pace of innovation. Regulatory oversight also tends to rise as fintech firms grow. These factors can generate substantial regulatory uncertainty, which can act as a barrier to investment and growth. Insurance fintechs that regard regulation as a growth constraint include INSO (Vietnam) and Naked Insurance (South Africa).
Competition from traditional financial institutions
The use of mobile phones for financial services has allowed developing countries to leapfrog the traditional model of brick-and-mortar branches and make substantial gains in financial inclusion. However, many people still prefer to use traditional financial institutions, particularly for big-ticket or important financial decisions. Firms citing this as a growth constraint include Saphron (Philippines) and Tameeni (Saudi Arabia).
Insurtech regulatory hurdles: KYC, AML, data protection
The biggest regulatory hurdles for insurtechs are know your customer/ anti-money laundering regulations and data protection regulations. Relative to other EM fintechs, KYC/AML regulations are more important while capital requirements are less of an issue.
This actually represents a major shift in the industry. In our previous survey, capital requirements were the biggest regulatory hurdle for insurtechs, but this is no longer the case.
The top 3 regulatory hurdles for insurtechs:
KYC/AML rules can be tough to adhere to in countries with a significant undocumented economy, particularly when competing with informal providers. Insurtechs that have cited this as a major challenge to their operations include Tameeni (Saudi Arabia) and Policy Bazaar (India).
One way insurtechs can generate competitive advantages is through the collection and utilisation of customer data. Data protection regulations play a key role in determining the extent to which these companies can obtain and use such information, and the processes they must follow to protect it. Insurtechs citing data protection regulations as a hurdle to their growth include Leapstack (China) and Inso (Vietnam).
Disclosure requirements to investors/lenders
Disclosure refers to the timely release of information about a company that may influence an investor's decision. It includes both positive and negative news, data, and operational details that impact the business. Insurtechs that have cited this as a growth constraint are Compareha (Egypt) and Zhongan Insurance (China).
The authors thank Rohit Kumar and Rabail Adwani for their assistance with this report.