Insurtech has a significantly different impact in emerging markets, where the focus is on expanding access, compared with developed markets, where the focus is on enhancing existing services.

The main driver for these differences is insurance penetration, which is roughly 2-3 higher in developed markets than in emerging markets, with the average insurance penetration rate in developed markets at around 9-10% of GDP, whilst it is about 3-3.5% of GDP in emerging markets.

Many emerging markets, especially in Africa and Asia, have penetration rates below 1% (with the notable exception of South Africa at 12% of GDP). The insurance gap is particularly large in countries like Bangladesh, India, Vietnam, Philippines, Indonesia, Egypt and Nigeria.

Insurtechs are therefore primarily focused on closing the significant protection gap that exists in emerging markets. They are making insurance more accessible and affordable through mobile apps and digital platforms for easy policy purchase and management, micro-insurance products tailored for low-income populations, and usage-based and on-demand insurance options.

One study shows that 37% of Insurtechs are active in distribution, of which 75% are focusing on enabling distribution through digital platforms. For example, Pula focuses on providing agricultural insurance solutions tailored to the needs of farmers and agribusinesses in Africa, and Kenya-based Turaco offers insurance solutions for low-income individuals and families, focusing on healthcare coverage.

However, emerging market Insurtechs are also improving efficiency and the customer experience, as is happening in developed markets, by offering personalised products based on data analytics and AI, providing faster claims processing and settlement using digital technologies, and implementing chatbots and AI-powered customer service

Despite the challenges that the insurance industry faces in emerging markets, including lower income levels and smaller middle classes, less developed insurance ecosystems and regulatory frameworks, lower insurance awareness and financial literacy, underdeveloped distribution channels and the lack of trust in insurance institutions, the insurance premium growth has been almost 10x in emerging markets (11% per annum) over the last decade compared to 1.3% for developed markets.

Developed Markets, characterised by higher penetration rates, highly competitive markets with established players, and stricter regulatory environments, aim primarily to improve customer experience and operational efficiency for established insurance products.

This has changed since the end of the low interest rate era, with venture funding not being so readily available – there are no longer new large challenger Insurtechs launching, such as Lemonade in the US and Europe.

Key areas of innovation include AI-driven underwriting, fraud detection and claims management, telematics for usage-based insurance, embedded insurance integrated into other products and services

Entry points for Insurtechs also tend to be different: In emerging markets, this can typically be life insurance (often linked to loans) and health, whilst in developed markets it is often auto, renters, and property insurance.