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Startup Democrance Makes Insurance Accessible For MENA's Low-Income Population

Startup Democrance Makes Insurance Accessible For MENA's Low-Income Population
Image credit: Democrance

In the MENA region (and perhaps the world over), ask fintech entrepreneurs about their startup’s core business, and chances are that it’s likely to be around digital payments, peer-to-peer lending, or blockchain. While these fintech businesses have dominated investor and funding action for a while now, one can’t exactly say the same for innovations happening in the insurance space. However, globally, upstarts are emerging to change this scenario, and the insurance industry is seeing increased collaborations between the old and new guard.

According to CB Insights data, the annual deal activity in the insurance-technology (insurtech) space clocked US$1.69 billion in 2016, with the number of deals rising 42% on a year-on-year basis. Not just that, in a positive sign for aspiring insurtech entrepreneurs, “two of every three deals in 2016” took place at the early-stage. Be it through the application of artificial intelligence in insurance, or by facilitating microinsurance, this new breed of fintech startups are beginning to make their presence felt.

One such entrepreneur who has entered the MENA region’s insurance sector is Michele Grosso, founder and CEO, Democrance, an insurtech startup based in the UAE. Given his passion for microinsurance (a model focused on insuring low-income people) and its impact on society, Grosso was surprised to learn that the concept was “simply not available” in the region. “When I moved to the Middle East, I experienced that first-hand,” he explains. “And once I realized insurance companies wouldn’t be able to venture in these segments by themselves, because of lack of innovation, technology readiness and short-term priority, I had no choice but to do it on my own!” Stressing on the problem the startup aims to solve, Grosso points out that the low-income population’s lack of access to basic risk protection tools, such as social security, healthcare, and personal savings, drove him to float the company.

Michele Grosso, co-founder and CEO, Democrance. Image credit: Democrance.
So how does the startup try to correct this issue? Grosso explains it to me from the point of view of the end-users: “They only need their mobile phone to get insured, pay for insurance and use their policies. Our technology also helps insurance companies manage those high numbers of low-premium policies by automatizing the whole value chain- they wouldn’t be able to do it with their current manual and operationally heavy processes.” With the insurance sector (like all other industries) moving towards digitization, Grosso says Democrance helps insurers to go digital nimbly by offering a platform that does not need any complex integration to their existing systems, while unlocking the potential for an entirely overlooked population of consumers. Grosso notes that the number of SIM cards in the region is more than its population, and with that being the case, Democrance partners with insurance companies on one side, and telecom operators on the other, to utilize the mobile phone as a tool to reach the low- and middle- income segments, which can then just use their mobile phone to “buy, pay for and use insurance products.”

 

Having worked for some of the largest insurance companies in the world like AXA and MetLife in France, Egypt and the UAE, Grosso left the corporate world to launch Democrance in 2015, and the company is now in the process of implementing their first pilot projects in the UAE, which Gross expects will bring in their first revenues. As for building the core team, Grosso met Alberto Pérez and Damian Dimmich (Democrance’s Chief Revenue Officer and Chief Technology Officer) at the AstroLabs co-working space in Dubai, where the two were working on different projects and instantly “fell in love with the idea and purpose” of Democrance. “Their background and experience [Perez had previous stints with telcos in Sub-Saharan Africa, and Dimmich had experience in financial technology] are the perfect fit,” adds Grosso.

And how do they create awareness about their business proposition among the target population? “We leverage on the brand they already know, and interact with [them] as customers or employees (for instance a telco, remittance house or taxi company) to market the products and to create awareness,” replies Grosso. Interestingly, in taking up the role of a strategic partner for insurance companies and telcos, Grosso insists that the model is a win-win for everyone involved- profitable for both the insurer and the mobile operator, while protecting the vulnerable population who need it the most. Not surprisingly, for ventures in the insurtech space, strategic partnerships with large corporates (be it insurance companies or other industries) are a critical requirement to scale.

Luckily for these upstarts, insurance companies too seem to be realizing the value in such collaborations. For instance, Accenture’s Technology Vision for Insurance 2016 revealed that 44% of global insurers intend to “pursue digital initiatives with startups from the insurance industry over the next two years.” And it’s a testament to the quality of Democrance’s product that the startup has managed to win the endorsement of the insurance industry too. LumenLab, insurance major MetLife’s Singapore-based innovation center, announced eight finalists for its inaugural insurtech pitch program Collab in February 2017, and Democrance was one among the eight global startup finalists. Collab attracted over 135 applications from 34 countries around the world. “It is a great experience to be exposed to the insurtech ecosystem in Asia and to learn how startups can work with one of the largest insurance companies in the world,” says Grosso, commenting on the Collab experience.

Democrance team. Image credit: Democrance.
Related: Moving Mainstream: A VC's Perspective On The MENA Fintech Ecosystem

 

Further, Democrance is also about to close their first round of external funding, with “almost all of it already subscribed by leading regional and European angels and venture capitals.” Grosso expects this external funding boost to help the company fuel its “business development efforts, accelerate the implementation of our first partnerships, and constantly upgrade our technology platform.” Even with the financial and partnerships momentum going in its stride, working with large established players in the sector is not without its hurdles, and Grosso sheds light on one such challenge he anticipates in scaling up Democrance. “One of the challenges is the speed and time to market of our insurance and distribution partners- at the end of the day, they’re huge corporates and we are a small startup, so it is normal that we work on different time frames,” he notes.

Luckily for Democrance, the company’s founder is not alien to the corporate world, and understands the nuances of working with the other side- a trait that has helped him grow his startup. “You’d hear a lot of entrepreneurs criticizing the corporate world, although most successful entrepreneurs wouldn’t be successful in growing their ventures if it was not for the skills and tools learnt in enterprise,” says Grosso. Admitting that it was quite a struggle for him to adapt to the startup life, he notes how “there’s no down time as you’re always there trying to make it happen, whether working, thinking or worrying about it! There’s also no rest time either, as you constantly need to drive your team, clients, partners and investors towards your vision- and that requires a lot of energy!” He advises entrepreneurs to be ready to put in “the mental and physical efforts required, [which are] similar to no other corporate job.”

As industry data and research points to a huge potential for insurtech, quite a few global companies are working to solve the same need as Democrance (such as European players Microensure and BIMA), and hence the UAE-based startup has been smart enough to focus solely on the MENA market for now, which they believe is getting there to be on par with global insurtech markets. Grosso says that by sticking to MENA, as one of the very few insurtech players in the region, Democrance is enjoying a lot of visibility as an early-mover. He adds that their decision is also guided by the supportive environment offered by regulators in the UAE for new innovations in general, and fintech in specific. Thus, keeping in mind that fintech requires a “longer-term approach” than other startups, Democrance has set itself a target to provide access to basic life and health insurance to “15 million low-income people across the MENA region” by the year 2020- a population segment in which majority have never been insured before. Suffice to say the company’s ambition is impressive- and its potential social impact is even more so, making it a venture to watch in this region. 

'TREP TALK

Michele Grosso, co-founder and CEO, Democrance

How has your experience been in building and growing your company in the UAE?

“The UAE was the natural choice for us to implement a product targeting emerging MENA markets and the emerging consumers of large corporates from the region. When compared to the rest of the region, the UAE gives you access to clients, investors, talent and resources you wouldn’t find elsewhere. The region holds so many opportunities and is unique in so many ways, I don’t understand why entrepreneurs would want to migrate to the West or try to implement copycats here from the West!”

What is your opinion on the startup-funding scenario in MENA, and globally for insurance technology, and what would be your advice for aspiring entrepreneurs pitching for funds in this region?

“Insurance technology startups are raising a lot of interest among investors globally. MENA is catching up, and it may take a bit longer, but it will definitely get there too as the ecosystem develops. For entrepreneurs in any industry or region, I would tell them to remain committed to their passion, without worrying too much about what everyone else says. Investor interests are cyclical, but what matters at the end of the day is to bring your idea forward and stay true to your value and beliefs.”

What are your top three tips for an entrepreneur to start a business here in the MENA region?

“Passion, passion and passion: passion is an ever-lasting source of strength and focus; passion can guide you through the difficult times that you’ll inevitably face during your journey as an entrepreneur. Your initial passion will be there to guide you when everything and everyone else will try to distract you!” 

Related: Launching A Fintech Startup? Here's How We Built Ours