The rise of cybersecurity threats in Southeast Asia is creating new opportunities for technology-enabled insurance providers, particularly for the growing number of retail customers looking for cyber coverage. Insurtech company Igloo is betting that technological expertise including the potential for new modular cyber insurance products will help fill this demand.
“I believe Southeast Asia is one of the most vulnerable areas when it comes to cybercrime,” says Raunak Mehta, Igloo’s Co-founder and CEO. “We need to come up with insurance products that the end consumer understands, modularise them so they cover for electronic fund transfer, fraud, identity theft and a bunch of other things, and really make them mainstream.”
The 19 July software incident from cybersecurity firm CrowdStrike highlights the importance of cyber coverage. The update inadvertently disabled 8.5 million Windows devices globally and disrupted various industries, including finance, travel, and health.
Part of Igloo’s ambitions to get cyber into the hands of more individuals and small businesses is to break down coverage of complex cyber risks into more digestible, standalone products. To this end, it is building on its background providing microinsurance to underpenetrated populations in Asia Pacific.
Raunak Mehta
Co-founder and CEO at IglooThis approach has helped it win backers. The company closed a $36m in pre-Series C funding round in December last year that allowed it to expand insurance access in Vietnam through new partnerships with Zalopay, Lotte Finance, FE Credit and digital insurer OPES.
The insurtech operates a B2B2C model, working with insurer partners like Etiqa, Sompo and Chubb and serving as a distributor of insurance products to enterprise clients such as Lazada and Shopee. The firm is on track to double the annual total of gross written premiums this year.
According to a DealStreetAsia report, it facilitates over 200 million policies a year and, in 2022, it posted a 44% year-on-year increase in revenues to US$5.13 million.
Parametric is the future
In March 2023, Igloo started developing a blockchain-based parametric Weather Index Insurance solution for coffee farmers in Vietnam’s Central Highlands, following earlier success with rice farmers. The aim of these products is to provide cover for underinsured groups.
Mehta now envisions moving into bigger products — like crop insurance — as a natural evolution for parametric insurance.
The simplicity of the parametric product makes it very convenient to develop and distribute, Mehta says.
“The parametric nature of such products in a way takes out the bias from the overall system, and cuts down on training, management cost and all that,” he adds.
Igloo appears to be tapping into a gap in the market.
“If you take the example of weather index, the parametric weather index product we are doing in Vietnam, I don’t think anybody’s doing that in the whole of Southeast Asia, given that four out of ten countries in the Global Weather Risk Index are in (the region),” Mehta said.
Insurers have found it extremely difficult to make sense of the weather data available, in large part because of the sheer amount of data that needs to be processed. That has led to weather-related insurance products having a reputation for losses.
With that said, there might be potential for porting this solution to other product lines, like micro-SMEs and SMEs, because smaller businesses may also be impacted by adverse weather patterns.
Raunak Mehta
Co-founder and CEO at Igloo“There’s a lot of depth, if you think of it, right in that segment itself,” Mehta says. “First, it’s a function of what kind of weather index you are choosing. Second, it’s a function of what you are trying to cover for, and then what kind of product.”
But it could take at least three to five years before parametric P&C products mature enough to diversify into lines beyond crop or agriculture.
“There is a massive accident and health aspect that is relates to changing weather patterns,” Mehta adds. “So, there is still a lot of depth in this, in the P&C aspect of it.”
Mehta also believes that technology can be used to further improve parametric offerings, with other data sources like satellite imagery having the potential to reduce the need for costly manpower.
“Satellites can give you a fairly decent idea of how a farm is being looked after, or the crop in the farm has been looked after, and hence the yield impact in the future,” Mehta said during an exclusive interview with (Re)in Asia. “So, if we are able to move in that direction, I think that could really be a massive breakthrough in my view.”
Modular cyber
With around 40% of its team comprising data and engineering talent, the insurtech has managed to grow and now serves nearly 75 partners.
“I think the technology part is extremely central to our growth, central to our story, and is one of the standout features of what we’ve done,” he says.
The firm conceptualises its products in-house, pitching them to insurers who then become underwriting partners.
Raunak Mehta
Co-founder and CEO at Igloo“Most of the insurers have the capacity to underwrite the products we do,” he adds. “Our involvement is then in managing the value chain, while they provide the underwriting support.”
The company has also worked to identify and tap into gaps for cyber insurance products which, Mehta notes, have typically been designed for enterprises and do not meet the needs of individual consumers.
“There are too many bells and whistles attached to most of the cyber products that’s available online,” he adds. “Most of the cyber products that were formed were actually formed for enterprises.”
Igloo’s approach involves breaking down complex cyber risks into more digestible, standalone coverages. The company aims to “modularize, mix and match, and come up with what’s really important for the retail customer,” Mehta says. This strategy could allow consumers to select specific protections relevant to their needs, potentially making cyber insurance more accessible and understandable.
And such a product can be sold in an embedded value proposition, he adds, with the right context and right price. “We are definitely looking at some opportunities in the future where we could potentially distribute them in an embedded value proposition,” he says.
Cracking the distribution code
Mehta, who has had past stints at Zalora and Flipkart, has always wanted to join industries that have reached a certain critical mass.
Raunak Mehta
Co-founder and CEO at Igloo“I believe in the idea that you shouldn’t do things that you’re passionate about — you should do things that you’re good at,” he says. “The one thing I would say I have a lot of interest in is finding those areas in established industries that are probably taken as the universal truth, that nobody wants to challenge.”
Insurance has many of these myths that he wanted to bust, Mehta says.
“Earlier, the idea was, let’s solve for distribution, because the real problem in Southeast Asia was a massive underpenetration you have. You had a good part of the population that was either uninsured or underinsured, and all the metrics were pointing towards that something needs to be done,” he says.
As his understanding of what works and what doesn’t has evolved, Mehta has since moved into “the product innovation side of things.”
“It’s kept me interested in this industry,” he adds.
Igloo recently expanded its digital platform, Ignite, to the Philippines, following its success in Vietnam and Indonesia. Ignite, which is designed to streamline the sales process for agents, offers over 42 insurance products over nine categories from insurance carriers.
The platform’s expansion to the Philippines is aimed at enhancing productivity among intermediaries and contributing to increasing insurance penetration in the country.
Igloo also announced a new microsite, which provides content for people interested in full-time or part-time careers in insurance.
Still, solving for distribution has been key in some lines of business, like the MSME and SME market.
“A massive segment of the population today works in MSMEs and SMEs in Southeast Asia, which are not known for being able to provide employee benefits programmes and thereby not being able to cover their employees in the event there’s a health emergency,” Mehta says. “If you’re able to crack the distribution code for these kinds of products, you can come up with really good, bite-sized employee benefit programs for these segments of our industry.”
