Fintechs getting ready to compete in the digital insurance business

Fintechs are gaining a foothold in Latin America’s insurance sector, seeking to take advantage of low coverage rates of 2-3% of GDP, according to OECD figures.

Insurance is seen as promising, after fintechs have successfully entered the payment services and credit businesses.

MercadoPago is selling life insurance in Brazil and started a partnership with insurer Prudential in Argentina. And Chile’s Tenpo allied with Chubb to offer theft insurance. The agreement also includes expansion into other sectors and markets.

Chubb’s motivation for the alliance was the success of digital payments in a region where consumers used mostly cash.

“We are very proud that it is starting in Chile but with a regional vision,” Rodrigo Valiente, Digital VP for Chubb Latin America, told BNamericas.

In Brazil, Chubb is offering different insurance coverage in alliance with digital bank Nubank.

“The insurance world, in a way, was very tied to traditional distribution channels. So, if a person is not banked, it is very difficult for them to have received a relevant insurance offer,” Carlos Cernadas, regional director of MercadoPago’s insurtech business, told BNamericas.

The challenge is to reach consumers that are not traditionally insured and offer them a better and 100% digital service. "Easy user experiences are the expectations digital customers have," said Valiente.

Tenpo CEO Fernando Araya told BNamericas that "distribution channels have been much slower than reality," highlighting that the financial industry faces the challenge of having to be more transparent when communicating its products and services.

“We are used to speaking [in a difficult language] believing this favors confidence, but it is quite the opposite,” he said.

MercadoPago and Tenpo, for example, offer the possibility of charging claims directly from the application. "We invest a lot [in technology] so that users can have this dialog with insurers digitally," added Cernadas.

MercadoPago has more than 5mn users in Argentina while Tenpo has 1.8mn users in Chile, which corresponds to about 12% of the country's adult population. About 40% of Tenpo's clients are underbanked.

COVERAGE

Rising crime rates in Chile offer Tenpo increasing opportunities to sell theft insurance. According to a survey by the company, 30% of the 1,000 participants said they had been victims of crime, although 75% had not taken any protective measures.

Crucially, 60% of respondents do not feel protected with the current insurance offer in the country. But “we aim to deliver very massive coverage,” Araya said.

A survey among MercadoPago’s user base found 85% of respondents never had life or personal accident insurance.

The company started offering this type of insurance in Argentina this month. Coverage includes telemedicine services and pharmacy discounts and is provided in partnership with Prudential, reinsurer SwissRe, and local insurtech Klimber.

The same offer was successfully launched across Brazil in June, with clients in all federal states, according to Cernadas.

“The interest is clearly to bring this type of product to the rest of the countries. We will see in what timeframe we can do it,” said Cernadas.

MercadoPago has nearly 2mn insurance certificates issued in Latin America, covering life and personal accidents in Brazil and Argentina, offering credit and debit card insurance in Brazil, plus theft and extended warranties.