A Dubai start-up plans to give the Middle-East's low-income population access to insurance cover - one mobile phone user at a time.
About 99 per cent of the region’s low-income population cannot afford or secure protection, according to insurance technology firm Democrance, and large companies do not serve them - much to the frustration of the company' s co-founder Michele Grosso.
“Unfortunately in emerging markets, a lot of social security isn’t efficient and public healthcare may not exist and that’s why we started Democrance," says Mr Grosso. “Insurance companies sell policies in a traditional way where you need to talk to a broker, review and sign pages of a contract that’s hard to understand and pay with a credit card; these are all barriers to entry for the low-income population.”
This inspired him to set up Democrance in 2015, which connects insurance providers with those that need it the most via their mobile phones,
While the company does not sell the insurance policies directly, it offers a digital platform connecting low-income customers to insurance providers in partnership with telecommunications companies.
The insureTech sector, a growing cohort of companies looking to modernise the insurance market by leveraging new digital technologies, is heating up.
Global insurance technology startups raised $2.2 billion last year, up 36 per cent from $1.7bn in 2016, according to research firm CB Insights. Global insurance giants Allianz and AXA have venture funds that back insureTech startups. Local interest is also building with Dubai’s financial freezone signing an agreement with Startupbootcamp, a UK network of start-up accelerators, to help early-stage insureTech start-ups secure access to investors and partners.
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According to a 2018 study by Democrance of low-income employees, which was funded by the United Nations, 43 per cent of respondents regard life insurance as vital, yet almost eight in 10 are not insured, due to the high cost of insurance as well as lack of information.
While Democrance is targeting markets in the Middle East and North Africa including the UAE, Kuwait, Qatar, Bahrain and Egypt, it is also testing the waters in Asia, where insurTech is taking off, with a presence in Vietnam.
Former insurer Mr Grosso worked with insurance firms Metlife and AXA in Europe, before moving to Cairo and then Dubai to help develop micro-insurance products. He later decided to leave the corporate world to launch his own business.
“Insurance companies weren’t ready from a technology and innovation point of view to enter the low-income segment with micro-insurance,” he says, which is why he decided to build a tech platform to reach this segment.
The platform gives insurance companies access to a low-penetration market by digitising the front-end of their operations. Customers on the other hand, only need a mobile phone to buy a policy, file claims and use their insurance.
Types of coverage offered vary from healthcare to life insurance but depend on each market, Mr Grosso says.
In the Gulf, where governments are pushing for mandatory health insurance for all workers, the focus is on other types such as travel or accident insurance, he says, without specifying how big of a priority such products are for low-income workers.
In Egypt, where many low-income people struggle to get good healthcare, customers can get a cash reimbursement when they are admitted to hospital.
“Our solution is product-agnostic,” Mr Grosso says. “We try to understand the protection needs of the customer.”
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Democrance, which went live in November last year, is generating revenues and targeting break-even by 2019, says Mr Grosso, declining to reveal the commission percentage it charges or name the insurance providers on its platform
The aim is to bring micro-insurance to 15 million low-income people by 2020, he says, declining to provide the current number of customers or revenue growth.
He says the start-up has raised $1.3 million in capital to date in seed capital and grants.
Last year it obtained $800,000 in its first round of funding from tech investors Jabbar Internet Group and London-based insurtech venture capital investors Eos Venture Partners, among others.
Another $500,000 in grants came from sources including the United Nations’ International Fund for Agricultural Development,
Mr Grosso says Democrance, which also worked with C3, an accelerator that helps support social-impact entrepreneurs in the region, is now planning to expand its operations with new projects in the Middle East and North Africa as well as South East Asia in the coming months. Regionally, it is eyeing Saudi Arabia with its large population of migrant workers.
“We have a lot of work to do in the region,” he says.
In Asia, a region that has seen insureTech become a fast-growing industry, Democrance is eyeing a project in Cambodia where it will work with an insurance company and telecoms operator, Mr Grosso says.
The start-up, which currently has sufficient capital for its operations, may consider another round of funding at the end of the year as it grows its regional and Asian presence, he says.
While the insureTech sector is less developed in the Middle East compared to Europe and Asia, this gives start-ups like Democrance a first-mover advantage, Mr Grosso adds.
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Q&A with Michele Grosso
Who first invested in you?
Democrance raised US$800,000 during its first round of funding. Leading regional and global individual and institutional investors participated in this round. These included Jabbar Internet Group, one of the most prominent investors in internet and technology companies in the Arab world and Eos Venture Partners, a global InsureTech venture capital investor based in London.
Who were the other investors?
They included Turn8 from the UAE, F-Horizon Group from Saudi Arabia, Seedstars from Switzerland and several angel investors from the UAE and broader Mena region, Europe, South Asia and the United States.
What already successful start-up do you wish you had started?
Democrance was and remains the start-up I am most passionate about.
What is the next big dream you wish to achieve?
At the core of Democrance’s offering lies our commitment to make the protection insurance affords accessible to those who need it most, but can afford it least. All of our energies are directed at this goal and our big dream is to continue improving the lives of Mena’s low-income population through technology. For this, we continue to need strong partnerships. Certainly, one of our dreams is to bring on a large telecommunications operator in the Gulf.
What new skills have you learnt in the process of launching your business?
Running a start-up is a steep learning curve. People skills is something I had to learn quickly, including how to best understand individuals’ motivation and align their energy towards our common goals.
Anything else?
Resilience is another life skill that is indispensable in the start-up world: not being moved by setbacks, and staying focused on delivering the vision for our partners.
Profile of Democrance
Company / date started: Democrance, 2015
Founder/ chief executive: Michele Grosso
Based in: Dubai, DMCC
Sector: Insurtech
Size: (employees/revenue): 16
Stage of funding: Seed
Investors: Jabbar Internet Group, Eos Venture Partners, Turn8, F-Horizon Group, Seedstars