A new company that is trying to disrupt the insurance industry announced a big round of financing. Bima, a startup based in Europe is creating a process of building and then selling Microinsurance services.
Not long after Lemonade managed to raise $120 million thanks to Softbank to fund its new take on the peer-to-peer insurance services, a new company that is trying to disrupt the insurance industry announced a big round of financing. Bima, a startup based in Europe is creating a process of building and then selling Microinsurance services. These services are aimed at consumers with low incomes living in Latin America, Africa, and Asia.
With them, Bima managed to attain $96.6 million using a strategic investment made by Allianz X, the insurance giant’s digital investment body. The funds will be used to expand the existing products of the company. They include health, accident and life insurance, but also teledoctor services currently available in 14 markets and some additional countries where the startup is planning to expand into. Right now, Bima’s biggest markets are Pakistan, Ghana, Bangladesh and Sri Lanka, but the company has over 24 million customers across the globe. Out of the sum, $30 million in funding was provided in equity as a secondary transaction.
These funds will be used to buy the shares from LeapFrog, an investment company that made a valuation in the pre-money phase of about $260 million. Bima’s post-money phase valuation is around $300 million, as was stated in an interview by Mathilda Strom, the startup’s CEO. The company, which has its headquarters in Stockholm and London, managed to raise over $150 million up to this point according to the data from CrunchBase.
Similar to the companies from the financial services domain, the insurance industry is currently focused on the developing markets for their next source of growth. In the developed economies, the markets are usually oversaturated with services and the competition is fierce. The emerging market opportunity is huge – Swiss Re is estimating that the global Microinsurance market at this point is valued at over $40 billion. This is mainly thanks to the health and life insurance, which could potentially cover about four billion individuals. At the same time, there are important economic and geographical issues that need to be addressed.
It has been said that the people living in the emerging markets are on the wrong side of the global digital divide. Because of this, they lack access to working capital that is needed for new businesses and other economic opportunities. Insurance services aim to change this using a different approach. If people lack health insurance and something tragic occurs, the afflicted family will struggle because they lack any savings. The idea of the insurance industry is to provide a financial cushion. This way, the insurance industry provides some level of security to the same persons, which can know that they will be able to fix any setback after an unexpected event.
Also, according to the Strom, a big challenge will be the process of education of individuals about their need to have insurance. Almost three-quarters of the company’s users had never owned any form of insurance before, she stated. This is why the company needs to educate their users about what insurance is and why people need it.
The key feature of Microinsurance is to offer insurance services that are right-sized for the particular economy where they are being sold. Bima revealed that the company’s 93% current customer base earns less than $10 per day. The insurance offers premiums and coverage plans that are very low, sometimes as low as two cents daily.
The expectation is that the Microinsurance will help the users’ fortune to improve, and then slowly grow with the growth of the national standard. Strom said that the company even began to stop calling the same product as Microinsurance. A better concept for them would be insurance for individuals who never had it before. Also, just like in financial services in emerging market, many of these Microinsurance procedures are completed using a mobile phone.
This is possible because Bima allows its users to pay for their policies using small fees provided over their mobile phones. Because they lack bank accounts, the customers can employ prepaid credit to pay for their policies. On the other hand, the CEO of the Allianz SE, Oliver Bate, said that their investment in Bima shows the company’s dedication to digitalization. He also underlined the commitment of Allianz SE to the growth in the emerging economy, where the company plans to acquire the so-called “next billion customers”.