By making insurance more accessible and valuable for end users, we can help close the protection gap and build a global safety net that protects everyone – particularly marginalised populations or those that have been left out of traditional financial systems, thus boosting financial inclusion.

In our latest Qover webinar, CEO and Co-founder Quentin Colmant invited two industry experts who share a commitment to financial and insurance inclusion – Denis Thaeder, Chief Mission Officer at Wakam, and Patrick Smith, Founder & Executive Director at Tribe Advisory – to give their insight into how brands and insurers can enhance financial inclusion for their customers.

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Watch the full webinar replay → 

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What is financial inclusion? And how does it relate to insurance inclusion?

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Financial inclusion is about everyone having equal access to financial education, products and services, such as banking and insurance. This means that all groups – particularly lower income and minority communities – can access relevant, affordable and timely products.

Insurance inclusion sits within the framework of financial inclusion, in the sense that inclusive insurance can contribute to greater financial inclusion as a whole. We live in a world where anyone can encounter an unexpected event that affects their wealth and income-generating capacities, which is why it’s crucial that all people are able to protect their life, health and assets through insurance.

From a more technical point of view, insurance is about transferring the risk, which allows families and businesses to overcome such a shock and become more financially resilient.

Low-income families and minority communities are not only impacted more heavily by a financial loss or setback, but they’re also more discriminated against and have more difficulties accessing insurance services.

All of this had led to a growing gap in insurance protection.

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Barriers to insurance inclusion

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‘Inclusive insurance is becoming a crucial issue,’ Denis says. ‘Why? Because inequality rises. Some households and businesses can no longer afford insurance cover, including third-party liability. They then become a danger to the financial stability of society.’

‘If they cause an accident without being insured, no one will be able to pay for the repairs. So as insurers we have to assume that part of our sales need to be dedicated to protecting these people.’

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Accessibility is a huge barrier to insurance inclusion. This can include how available (the right) products are, how understandable they are and how much they cost.

‘There's sacrifice in buying a product,’ Patrick says. ‘And whether it’s as an organisation or society in general, what should we do to allow benefits to prevail? Does it have a societal role in the same way as social security and those kinds of things?’

‘Inclusive insurance requires a focus on the notion of vulnerability to which it is intrinsically linked,’ Denis explains. ‘Vulnerability can take many forms. It’s often perceived as financial fragility, but it's not solely dependent on the economic factor. There are social vulnerabilities or vulnerabilities linked to physical or mental health.’

Another barrier to insurance inclusion is a lack of financial education. Basic financial education is not a staple in most educational systems. 

On top of that, the concept of insurance is very hard to understand – not to mention the actual terms, policies and other insurance jargon. Even if they do have that knowledge, Patrick argues, it can vary widely around the world.

‘I think it’s wrong to assume that there’s necessarily a link between financial difficulty and poor education,’ he says. ‘There are highly intelligent people working in countries where they're not familiar with the culture, customs, laws or language. So it's not an intelligence issue; it's a familiarity issue.’

There’s also the reality of discrimination against certain communities that result in them being excluded from traditional financial and insurance systems.

‘In the insurance world, we are elitists,’ Quentin says. ‘We’re not very good in terms of inclusion from an employer perspective. So you have the elites that are trying to think about an insurance-inclusive product, but it's another reality. We have to actually reach out to those underrepresented communities.’

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3 ways companies and insurers can enhance financial inclusion through insurance

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1. Selling microinsurance products

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One path towards increased insurance inclusion is to sell and distribute microinsurance products.

At Wakam, Denis explains, they have a zero-margin product that is tailored to the needs of understaffed populations, including company employees, which provides gap protection to avoid worse economic situations or essential coverage at affordable prices.

‘It’s a financial effort from the insurance company,’ he says. ‘We face some challenges with taxes, for example, so it's not always an easy path. Tax regulation complicates microinsurance distribution. We expected to distribute it through companies offering their employees additional protection, but in France it’s considered an advantage that you submit to social taxes and benefit from.’

There should also be a clear desire and need for the type of microinsurance we offer, Patrick argues.  

‘Microinsurance is not a new concept,’ he says. ‘Probably one of the most popular insurances globally is mobile phone insurance. Why? Because we'd all be lost without our phone. That's why there's a need, there's a ready-made market to pay for that product. If we accept that the financially disadvantaged would probably prefer bite-sized rather than annual contracts, then we're quite good at bite-sized.’

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2. Making coverage more affordable through group and master policies

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Another way to advance insurance inclusion is through group or master policies that are offered at no additional cost to the end user.

‘When I look at group insurance’, Patrick says, ‘if I were to offer the product on an opt-in basis or a paid-for basis, would individuals subscribe? And generally speaking, they don't. So we have to differentiate between what makes a product attractive enough for someone on a lower income to prioritise and pay for, because that could be a harsh reality.’

‘The beauty of group insurance is when you're underwriting a portfolio, the individual portion of risk that falls upon every beneficiary is much, much lower,’ he explains. ‘And it's much more efficient to deliver because if I have 5,000 people in the group, you don't have to underwrite the risk 5,000 times; you do it once for a community of 5,000.’

This translates into more beneficial, affordable coverage.

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3. Using simple language and inclusive product design

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In order to make products more accessible, they need to be designed in a way that’s inclusive and clear. When we asked webinar attendees what they would change in the insurance industry to enhance inclusion, 70% said simplifying policies – beating out greater accessibility and lower premiums.

This includes using plain, simple language and clear examples that end consumers can understand. An obvious place to start is with the terms and conditions and other policy documentation – which, Denis explains, can take years.

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‘The first thing we had to solve was breaking the wall with our employees,’ he says. ‘The people writing the product are legal specialists, which means they prefer to have terms and conditions that are very precise. But after one or two years of expert training and practice, they’re now convinced it's possible to do it in a different way.’

Another set of considerations when designing insurance products is the UK’s Consumer Duty, which the FCA launched to protect vulnerable consumers. Although Europe lags behind in this type of guidance, Patrick says it’s helpful to take a ‘purpose-led approach’ and get close to the people you’re trying to reach.

‘As an industry we're not really inclusive,’ Patrick explains. ‘We're creating products for communities that we’re not part of. Having more of those communities you’re hoping to serve as part of your design process is absolutely key because they'll tell you what's important and what they value. They'll give you insight into their lives, because protection is just one dimension of people's livelihoods.’

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The role of technology in resolving insurance inclusion issues

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Technology can certainly contribute to closing the insurance gap when used as a tool to better reach end customers.

Digital tools like WhatsApp can improve product distribution for the most vulnerable, Denis explains. But it should enhance the overall solution rather than be the solution. 

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Patrick adds, ‘We shouldn't assume that everybody in society has the tools to access digital experiences. When we think about financial disadvantage, not everybody has a phone, or maybe not everybody knows how to use it – think about elderly people. You can throw great digital tools at them, but they don't even know how to log in.’

‘Maybe you can't solve everything with tech, but you can embed technology into tools that you know your community already uses. The technology's there, but it’s the way we use it as an industry, our habits that lag behind.’

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The importance of a high loss ratio and regulatory intervention

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At Qover, we believe that the loss ratio measures how much value you add to society. The insurance industry should aim to maximise the loss ratio while still remaining profitable, which means minimising expenses and commissions.

So how do we tackle this balance?

When you look at the gross price of any product, you should be able to defend the cost of each layer – be it the cost of claims, administration or commissions, Patrick argues. If the product is overtly profitable, you can build in a device to repay that surplus.

‘You should go into any product with a suitable target loss ratio,’ he says. ‘Only then can you judge what a surplus looks like. Ultimately, where commission is a viable form of remuneration for actors in the process, it needs to correspond to their role and responsibility.’

One option could be capping the level of commissions and reaching a claims ratio that is sufficient enough to give money back to the customer, which is Wakam’s approach.

‘We have to think very clearly about the pricing and process – who does what and needs to earn what,’ Patrick says. ‘I'm not saying that insurance should be charity, but I think if we were all leaner in our expectation, it might have an add-on effect in terms of cost. More affordability, means more take up and engagement.’

In terms of regulation, the FCA is very keen on treating customers fairly, Patrick adds. But this should already be a mantra for insurers.

‘We shouldn't be doing this because the FCA or another regulator requires us to do it. It should be in our DNA.’

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Looking ahead: transforming the insurance industry

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Aside from employing the various strategies to increase insurance inclusion, there are larger mindset shifts that the industry needs to make in order to enact long-term change.

One is being able to pivot and make improvements more quickly, particularly for established insurance companies.

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‘Too often I see a disjoint between the claims story and the product design,’ Patrick explains. When people are genuinely frustrated about their claims, that could be an opportunity to improve cover.

‘Modification is not an annual exercise connected to renewal,’ he says. ‘If we find a need to do it right here, right now, let's do it. Let's not get [bogged down] by our own policies and procedures. Let's be able to, as established businesses, pivot like an entrepreneur, like the very people we're looking to protect.’

This also translates to innovation.

‘One of the criticisms of the insurance industry is that the true purpose around innovation is to look “innovative” rather than to solve problems and find new ways of doing things. Insurance is highly regulated and rightly so. But ultimately, true innovation comes when you almost start again. Too often I see new products simply as being an evolution of an old product and therein is the problem of making complexity more simple. It's much easier if you start fresh and then stress test from a regulatory or legal position, “why can't we do this?”’

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One way to ensure that your end goal is improving the lives of your end customers is by becoming mission-driven. In a poll we ran during the webinar, 86% of respondents said it’s ‘extremely important’ for today’s brands to be mission-driven.

‘​​The current way of thinking is that we’re always strengthened by the short term; we want to have results tomorrow,’ Denis says. ‘But by being mission-driven, we can build long-term transformation.’

‘At Wakam, we’re convinced that insurance can play a role as an economic and social stabiliser. That's why we've made financial fairness and inclusion an integral part of our mission objective and a key concept in maintaining insurability in tomorrow's world.’

We all have a role to play in enhancing financial inclusion and resilience through insurance: leading brands, insurers, brokers and insurtechs alike. 

If you’d like to join the cause, let’s chat.