On the heels of Lemonade raising $120 million from Softbank for its new “peer-to-peer” spin on insurance services, another company aimed at disrupting the insurance market is announcing a major round of its own. Bima, a Munich-based startup that builds and sells “microinsurance” services for low-income consumers in Africa, Asia and Latin America, has raised $96.6 million in a strategic investment from Allianz X, the digital investment unit of the insurance giant.
The new funding will be used to expand Bima’s existing products — primarily life, accident and health insurance, as well as a teledoctor service — across the 14 markets where it already operates, as well as move into new countries. Currently, Bima’s biggest markets currently are Ghana, Sri Lanka, Bangladesh, Pakistan, and it has 24 million customers in total globally.
The funding — $30 million of which is in equity, and the remainder as secondary transaction to buy out shares from Leapfrog, another investor — was made at a pre-money valuation of around $260 million and gives Bima a post-money valuation of around $300 million, deputy CEO Mathilda Strom said in an interview. Bima has raised $171 million in funding to date.
Similar to financial services, the insurance industry has been eyeing up developing markets as its next big growth area at a time when more developed economies are oversaturated competition and existing services.
On one hand, it’s a large opportunity: Swiss Re estimates that the microinsurance market is currently worth some $4 billion globally, primarily in the areas of life and health insurance.
On the other, it’s a very important geographic and economic area to address.
People in emerging markets are often described as being on the wrong side of the “digital divide”, lacking basic access to working capital to build businesses and take up other opportunities.
Insurance services tackle that same problem from a different direction. People often cannot afford to access health services, and when something tragic does happen like a death in a family, one problem for those families is a lack of savings or any other kind of financial cushion. Insurance essentially provides some security for people to be able to fix these problems in the event that major setbacks like these come up.
All the same, one big challenge, Strom said, has been in educating people about the need for insurance in the first place. “Seventy-five percent of our subscribers have never had insurance before,” she said. “We need to educate people about what it is, and also why you need it.”
The main idea behind microinsurance is to provide insurance that is right-sized for the economy where it’s being sold. Bima says that 93% of its existing customer base lives on less than $10 per day, and so the people it targets are offered smaller premiums and smaller coverage plans, sometimes as low as two cents per day.
The hope/expectation is that as these consumers’ fortunes improve — as they often do in fast-growing, emerging markets — those microinsurance plans will expand with them.
“In some cases we’ve even moved away from calling it ‘microinsurance’,” Strom said. “It’s essentially insurance for people who haven’t had it before.”
Also similar to financial services, much of the trade of business in microinsurance is done over mobile phones, with Bima letting people pay for policies in small increments using their mobile phones. “In the absence of a bank account, customers can use prepaid airtime to pay for their Bima policies,” said Strom.
“Our investment in BIMA underscores Allianz’s commitment to digitalization, supporting the growth strategy of the Group in emerging economies, as well as enabling us to serve the so-called ‘next billion customers’,” said Oliver Bäte, CEO of Allianz SE, in a statement.
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