Southeast Asia is a notoriously under-insured region, but insurtech Igloo has forecast only a relatively slow uptake.

Insurtech Igloo has been looking to expand in Southeast Asia’s underinsured market – which should offer strong potential growth -- but the region requires re-thinking traditional sales models to attract customers.

Of the around 400 million adults in Southeast Asia, around 198 million are unbanked -- or don’t have a bank account -- while another 98 million are underbanked, with a bank account, but without access to credit, investments and insurance, according to the e-Conomy SEA 2019 report published by Google, Temasek and Bain & Co. in October 2019, prior to the start of the Covid-19 pandemic.

Low Insurance Penetration

Countries in Southeast Asia have generally low penetration of insurance. For example, for natural disasters, Indonesia is under-insured by $14.6 billion with a penetration rate of just 0.5 percent, the Philippines by $4.2 billion with a penetration rate of just 0.6 percent, and Vietnam by $2.7 billion with a penetration rate of 0.8 percent, according to Lloyd’s data from 2018, the latest available. 

Raunak Mehta, CEO of Igloo, told finews.asia recently via email that the high cost of premiums is contributing to the underinsurance gap.

«Especially during the pandemic, many people cannot afford to pay extra for insurance when they are already struggling to make ends meet,» Mehta said.

Pandemic Poverty

In March, the Asian Development Bank (ADB) said the Covid-19 pandemic pushed 4.7 million people in Southeast Asia into extreme poverty in 2021, with the hardest hit being unskilled and retail workers, informal-economy workers and small businesses without a digital presence. Women, younger worker and the elderly in the region have also felt a disproportionate hit, the ADB said. 

That affects Igloo’s target market, with Mehta saying the insurtech is aiming for the underinsured low- to mid-income population in the region.

In particular, gig economy workers faced a disproportionally bigger impact, Mehta noted, adding those workers have special needs, such as needing loss of income coverage in the event of an illness or food delivery riders needing comprehensive coverage as part of their job.

Regional Growth

Mehta said Igloo still expected his company to see Southeast Asian growth of 6 percent to 10 percent as digital adoption in the region is rising. He said products around online activities are likely to see high demand, such as personal accident, online shopping and phone protection. Igloo is also looking at more offerings on cybersecurity, online fraud and insurance for delivery, he said.

«With the economic recovery in the region, we foresee that microinsurance and insurtech will play an even more pivotal role for insurance penetration and financial inclusion. Digital insurance is expected to grow at least three times faster than the overall insurance industry,» Mehta said.

Igloo’s official launch in Vietnam in March 2021 offers signs that demand is there for the right insurance products. Mehta said Igloo facilitated more than 3 million policies in Vietnam last year, with strong demand for non-life insurance products. The Vietnam launch got a boost from local partnerships, including Lotte Finance, Mehta said, citing products including cyber-insurance via credit card issuance channels.

Demand in Vietnam

Other partnerships for micro-insurance in Vietnam included telco Mobifone and one-hour-delivery e-commerce platform Loship, the company has said. With Loship, Igloo offered a failed or refused delivery insurance policy to drivers, and with Mobifone, subscribers were offered a personal accident package, which included the use of a tele-medicine consultation service, the company has previously said.

Only around 15 million adults in Vietnam were considered fully banked, with 7 million considered underbanked, while 49 million were unbanked, according to the 2019 e-Conomy SEA report for 2019 from Google, Temasek and Bain & Co. The report was published pre-Covid. Vietnam’s total population is around 97 million.

Mehta joined Igloo in 2018, and as the chief commercial officer, he led the company’s entry into the Philippines, Vietnam, Thailand, Indonesia, Australia and Malaysia, and has set up partnerships with regional online giants including Lazada, Shopee, Bukalapak, RedDoorz, FoodPanda and Lotte Finance. In March, Mehta become CEO. The company recently raised $19 million in series B funding, bringing its total to more than $36 million.