How Is AI Revolutionizing the Microinsurance Sector?

Highlights:

• Introduction
• Role of AI in the industry
• M&A deals in the sector

Microinsurance refers to insurance schemes that are designed specifically for low-income households. These policies offer basic coverage and financial security against risks like accidents, death, natural disasters, illness, crop failure, and injury at affordable premiums, thereby providing a comprehensive safety net. The idea of microinsurance has become extremely popular in developing countries, including India, China, Brazil, Indonesia, China, etc., where a sizable chunk of the population is still below the global average income levels. In these nations, both government agencies and private players have launched initiatives to give microinsurance products at reasonable costs. Moreover, since agriculture is the main occupation of people living in these countries, almost all the policies provide insurance cover in case of crop failure.

Advancements in microinsurance policies creating new investment opportunities

As per several studies done by leading financial organizations, more than 50% of the largest insurance companies started offering microinsurance policies in the last two decades. The rising penetration of Internet services and digital tools has played an important role in the growth of the microinsurance market in recent times. Additionally, the advent of Artificial Intelligence has enabled companies to improve their reach and cater to a larger customer base, thus expanding their footprint in the industry. For example, financial institutions offering automobile microinsurance policies have started integrating AI tools in their platforms to enhance the efficiency of their operations. These tools aid in automating car inspections and assessment tasks, thus simplifying claims processing. In addition, these mobile applications allow car owners to submit photos and videos of their vehicles digitally, reducing the delay and chances of fraud significantly.

Moreover, AI-powered chatbots have also been developed by microinsurance companies to connect with their customers more efficiently. These solutions help address users’ doubts and offer details on various policies offered by the company. Moreover, these AI-based platforms also act as a grievance redressal mechanism through which consumers can raise their complaints and get the issues resolved quickly. The rising use of such AI tools is anticipated to help the microinsurance industry gather a revenue share of $11.570.5 million by 2034. The market accounted for $6,704.7 million in 2024 and is anticipated to grow at a CAGR of 6.3% during 2025-2034.

Strategic alliances by leading players accelerating industry growth

In the last few years, several multinational financial institutions and fintech companies have signed M&A deals with their peers to strengthen their position in the microinsurance industry. For instance, in September 2023, Turaco, Africa’s leading insurance firm, announced the acquisition of MicroEnsure Ghana, another key business in the sector. MicroEnsure Ghana was one of the leading companies on the African continent, and this business move helped Turaco to increase its presence in Kenya, Ghana, Uganda, and Nigeria. The company highlighted in its press release that Turaco aims to establish similar alliances with technology firms and banks in the coming period.

In May 2024, Howden, a global insurance group, announced that it had signed a definitive agreement to acquire MiCRO, a microinsurance specialist. For years, MiCRO was the leading provider of parametric insurance policies to underserved sections of the population in Latin American countries. As per several industry experts, the deal is anticipated to expand Howden’s footprint in countries like Colombia, Guatemala, Mexico, and El Salvador.

To sum it up, the microinsurance sector is predicted to experience exponential growth in the near future owing to the rising demand from low-income groups for comprehensive financial coverage plans. The increasing governmental support for such policies and the use of advanced technologies by private companies have boosted the revenue share of the market in recent times.

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