More than half of the world’s population does not have access to essential health services, according to a 2017 report from the World Bank and the World Health Organization. Currently, 800 million people globally spend at least 10 percent of their household budgets on health expenses for themselves, a sick child, or other family members, according to the report. These expenses drive many people—the report says almost 100 million—into extreme poverty, forcing them to survive on $1.90 a day, or sometimes even less.

In the last couple of years, there has been a global movement to try to provide vulnerable communities with a social safety net to protect them from undue hardship in times of crisis. Democrance, a Dubai-based startup co-founded by Michele Grosso, has made it its mission to “democratize insurance” by providing the MENA region’s poorest populations with a more secure future through microinsurance.

What is Microinsurance and Why Does it Matter?

“Microinsurance is a mechanism to protect low-income people against risk, such as accident, illness, and natural disasters, in exchange for insurance premium payments tailored to their needs, income and level of risk,” according to the Microinsurance Network (MiN), a global multi-stakeholder platform for professionals and organizations that are committed to making insurance inclusive.

“Telecoms [sic] companies and mobile network operators are entering the inclusive insurance market as service providers and distribution partners, and insurance companies are making significant investments in advanced data analytics and artificial intelligence applications,” according to MiN’s 2017 annual report.

Thanks to digital and mobile technology, inclusive insurance is rapidly becoming a trend that could enable more people to access insurance quickly and cheaply in the future. Democrance is currently trying to harness the power of digital and mobile technology to spread the inclusive insurance movement in the MENA region—and beyond.  

How is Democrance Disrupting Insurance in the MENA Region?

Before Democrance, Italian-born Grosso worked in strategy and distribution at global insurance firms AXA and Metlife in France, Egypt, and the UAE. After seeing how the region’s low-income population could not afford or secure protection, he left the corporate world to launch Democrance. “I founded Democrance in 2015, in the hopes of restoring insurance to its original purpose of providing mutual aid for those who need it most, but can afford it least,” Grosso told Inside Arabia.

In 2018, Democrance conducted a United Nations (UN)-funded study of low-income employees, which revealed that 43 percent of respondents felt that life insurance was “vital.” Yet, almost eight out of ten were not insured because of the prohibitive cost of insurance and the lack of information about the insurance options available to them.

“Unfortunately, in most emerging markets, social security or public healthcare systems may not exist or are insufficient, and this gap is where insurance can offer protection. However, most insurance companies still sell policies in a very traditional and costly way, which are barriers to entry for the low-income population, and this was a problem I was determined to rectify,” Grosso said.

Democrance overcomes these barriers to entry by digitizing insurers’ operations from mobile-first and fully-digital product distribution, to claims management through their proprietary platform. The InsurTech startup helps insurance companies manage high volumes of low-premium policies by automatizing the whole value chain. This is crucial because insurers are not able to do so with the manual and operationally-heavy processes they currently have. With Democrance, users only need a mobile phone to get insured, pay for insurance, and use their policies.

In addition, Democrance also focuses on building partnerships between insurers and distributors, such as telecommunications firms and remittance houses. For distributors, “microinsurance can be a powerful tool to monetize low- and middle-income customer segments, differentiate their services from competitors, as well as increase customer loyalty,” according to Grosso. Ultimately, these partnerships will help insurers reach a broader base of the uninsured, while simultaneously providing benefits for all parties involved.

Future of Global and MENA InsurTech Startups

Currently, the Gulf Cooperation Council (GCC) region is Democrance’s biggest market. However, the InsurTech startup is actively seeking to expand to other countries in the MENA region with large uninsured populations. Aside from the MENA region, Democrance also has plans to launch in Southeast Asia, starting with Cambodia. By 2020, the startup hopes to bring microinsurance to 15 million low-income individuals.

To date, Democrance has raised $1.3 million dollars in total. Last year, the startup raised $800,000 of funding from tech investors Jabbar Internet Group and London-based insurtech venture capital investors Eos Venture Partners, among others. It has also received $500,000 in grants from other sources, including the UN’s International Fund for Agricultural Development.

Although the InsurTech startup scene is still nascent in the MENA region, the global scene is quickly heating up. According to data from research firm CB Insights, global InsurTech startups raised a total of $2.2 billion in 2017, up from $1.7 billion in 2016. The establishment of InsurTech startup venture funds by insurance giants like Allianz and AXA only serves to prove that this industry is growing and here to stay. But, for Grosso, microinsurance is not just about the bottom line.

“Microinsurance can mean the difference between ending up on the streets or having a safety net when an unexpected crisis strikes for many in the low-income demographic. Financial inclusion, which includes access to insurance products, is fundamental to combating poverty and inequality,” he said.

“I would like people to know about how Democrance can help insurers with their digital transformation and unlock new market segments, and at the same time create real social value for populations that were previously excluded from the benefits of insurance,” Grosso concluded.

“Investments in health, and more generally investments in people, are critical to build human capital and enable sustainable and inclusive economic growth,” wrote World Bank Group President Dr. Jim Yong Kim in a World Bank report. “But the system is broken: we need a fundamental shift in the way we mobilize resources for health and human capital, especially at the country level.”

Relying on governments at the country level, however, can take decades. In the meantime, Microinsurance is just one of the many ways that key stakeholders in the public, private, and development sector can provide stability, security, and growth opportunities to millions. In a region that faces countless social, economic, and political challenges, Democrance demonstrates that economic growth and progress do not have to come at the expense of the world’s most vulnerable populations.