Developments in InsurTech Market: Innovations, Benefits, and Lessons for Ethiopia

InsurTech, short for Insurance Technology, is a term that refers to the application of technological innovations in the insurance industry. This involves utilizing various technologies such as the Internet of Things (IoT), Blockchain, Big Data, the Internet, Social Media Data, Mobile, Chatbots, Telematics, Biometrics, Artificial Intelligence, and Machine Learning to enhance specific components of the insurance value chain.

Over the years, InsurTech has progressed from basic services such as digital price comparison tools and online brokers to more advanced developments like embedded insurance and Insurance-as-a-Service (IaaS). The industry has gained significant traction recently, driven by technological advancements, the COVID-19 pandemic, rising consumer expectations, and increased competition.

The adoption of technology in the insurance sector has been shown to optimize all aspects of insurance services and products, including:

  • Improved efficiency across the insurance value chain and reduced costs,
  • Increased insurance penetration and coverage,
  • Increased confidence in the authenticity and security of data through the use of blockchain technology
  • Increased insurance risk measurements, especially with growing data volumes,
  • Improved insurer investment guarantee through algorithmic and artificial intelligence calculations,
  • Greater protection against operational risks for insurers
  • Improved accessibility and shorter claims processing period, and
  • Increased customer risk profile assessment accuracy via powerful and accurate data analytics tools capable of managing big data volumes.

Adopting systems designed to maximize these benefits requires adopting new technologies and implementing risk mitigation measures for potential negative consequences. While digital insurance reduces the risk of traditional safety issues, it also creates a new category of digital risks dominated by data loss, cyber-attacks, market manipulation, higher losses from failed disruptive models, and instability caused by disruptions to conventional risk pooling systems. Thus, it is essential to carefully weigh the benefits and risks of InsurTech and ensure that the necessary measures are in place to mitigate potential risks.

Innovative InsurTech Products

The InsurTech market is a highly diverse sector, encompassing a fragmented industry consisting of global and local operators with various specializations, such as InsurTech, InfoTech, technology service providers, and digital service providers. In this article, we have compiled a list of a few digital insurance and insurance technology providers whose principles can be emulated to enhance the existing insurance market in Ethiopia.

1. Igloo is a Singaporean InsurTech firm that operates in several East Asian countries. It collaborates with both insurers and brokers to provide a wide range of insurance products, including an automotive insurance service that uses IoT devices installed in automobiles (plug-and-play) to track driver behavior (distance, speed, journey duration, time of day, and areas driven) to conduct more efficient risk assessments and create tailor-made premium insurance packages. Such usage-based auto insurance services are gaining popularity globally, with the global consumption-based automotive insurance market valued at $28 billion in 2020. Metromile, a US-based company, employs similar technology to offer pay-per-mile insurance services to its customers, while in South Africa in 2017, MTN partnered with Huawei to launch consumption-based motor insurance aimed at collecting data from a device installed in the consumer’s car.

2. Dinghy is a UK-based digital insurer that provides insurance services specifically tailored to freelancers and self-employed professionals. The insurance policies offered by Dinghy are designed to meet the unique insurance requirements of freelancers, including professional indemnity insurance, public liability insurance, and business equipment insurance. Professional indemnity insurance covers damages caused when freelancers or self-employed individuals make errors in their work that requires compensation. Public liability insurance covers costs associated with legal issues, while business equipment insurance is designed to cover the cost of damage to business equipment not typically covered by home insurance.

3. Hippo is an insurance agency that offers home insurance products in various states of the USA, providing users with the ability to obtain quotes and purchase home insurance online. Hippo’s packages include Hippo Smart Home, which offers various smart tech sensors and devices (such as water sensors, smoke detectors, entry sensors, and security cameras) monitored from a dedicated app. The Hippo Home Care App creates a personalized home health profile with home care services and maintenance advice. Additionally, the Smart home discount provides home insurance premiums for active savvy home kit users.

4. Pula is an insurance company that provides yield index insurance products to protect farmers from a wide range of risks associated with climate change, including drought, excessive rainfall, pests and diseases, and other perils. Pula’s insurance products are available in several African countries, including Kenya, Rwanda, Uganda, Nigeria, Malawi. It has also expanded its services beyond Africa to provide coverage for farmers in India, Sri Lanka, and Myanmar.

Pula offers hybrid index insurance, a combination of Weather Index Insurance (WII) and Area Yield Index Insurance (YII), designed to provide comprehensive coverage for farmers. Pula’s products are divided into agroecological zones based on historical yield data and other factors. In addition to insurance, Pula also provides farmers with inputs, such as seeds and fertilizer, and advisory services to help increase yields.

5. Based in South Afrtica, InvestSure is an innovative insurance product designed to protect shareholders from losses caused by management fraud and other issues. With the rise in financial fraud and corporate scandals, this insurance product offers a secure and fast way for shareholders to protect their investments and financial future.

InvestSure’s offering allows shareholders to insure their investments against management fraud and other issues. This insurance product provides real-time calculation of claims as shares are sold. sell shares,

Global and Regional Trends in Insurance Technology

The global InsurTech market revenue was valued at $5.48 billion in 2019 and is forecasted to reach $10.14 billion by 2025. North America has the largest InsurTech market accounting for more than 36% of the global revenue in 2022. Asia Pacific is anticipated to emerge as the fastest-growing regional market between 2023 and 2030. 

Although insurance coverage and penetration have been low in Africa and South America, startups are emerging in both regions. The InsurTech market in Africa is dominated by insurance products that require second-party underwriting. Some startups also build products that either seek to reduce risk or create new insurance business models.

Additional Resources

Insurance Technologies

Tech and Innovation Trends

InsureTech Market Overview  

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