Fintech gets most of the attention paid to African startups. But the fintech mix is changing every year, with new sub sectors getting love from investors in line with expanding consumer tastes.

Today’s edition of The Next Wave gleans from a report on the state of fintech in Asia, Africa and Latin America. The report provides many talking points but we focus on the often neglected member of the fintech band: insurance.  

Year of insurtech?

If you mention ‘fintech’ to anyone familiar with Africa’s startup ecosystem, the word is likely to stir images of payments, digital lending and mobile money companies. 

Because they have been in the news a lot, cryptocurrency exchange and stock trading apps might appear in that imagination. But how often do you reckon insurance comes up?

Well, it is coming up a lot in the minds of investors and startup founders, according to the State of Fintech in Emerging Markets report published last week by BFA Global’s Catalyst Fund and Briter Bridges.

The report surveyed over 200 investors and startups in Africa, Asia and Latin America. When respondents were asked what the future of fintech is, most appeared to mention insurance more often than other sectors.

The sentiment does not reflect present investments made in fintech so far in 2021: big ticket deals have been in payments (Flutterwave) and banking (Kuda). I am looking forward to some attention-grabbing fintech funding announcements in the coming days and weeks but they are mostly in mobile money and digital banking.

That’s doesn’t mean investors aren’t backing up their futuristic hope for insurtech with funding.

Since the beginning of the year, TechCabal has tracked a handful of investments in the sector; the volume has surpassed last year. The most recent raise was in Kenya where Lami announced the close of a $1.8 million seed round.

It’s not just that insurtech is rising — it’s also good to see diversity in what the startups are setting out to accomplish. 

To take one example, Curacel is not an insurance policy provider. Instead, they want to be the backbone on which insurers depend for efficiency. Insurance from Pula and OKO target farmers, differentiating from the pack of health management organisations whose domain is health insurance.

Insurance is a tough business to sell in poor communities as people prioritise present needs over saving against future loss. That poses challenging questions about the business model of insurance in Africa.

Insurance industry respondents to the Catalyst Fund and Briter Bridges survey said commissions are how they make money. That is also how those in the credit business make money. It would seem then that insurers can learn some tricks from credit businesses to know what levers to pull for insurance to be more appealing and adopted by customers.

A lot of the buzz about digital lending is in using data to provide tailored customer products and services. If well deployed, big data and analysis could be the pillar that boosts insurance in Africa, activating a market potential estimated to be up to $68 billion by McKinsey.

The investor and startup communities seem to think this future is achievable, a signal that we could yet see more investments into the insurance sector in the latter months of 2021.