Insurance technology startup Democrance has partnered with Appui au Développement Autonome (ADA), a finance specialist NGO and the International Fund for Agricultural Development (IFAD), a United Nations (UN) specialized agency, to develop a sustainable microinsurance model that provides insurance protection to low income group migrants working in the UAE.
With remittances being key to financial inclusion for a large part of the global population, the project involves the usage of money transfer operators (MTOs) as insurance delivery channels.
The project aims to achieve greater financial inclusion of migrant workers, with a focus on UAE-Philippines and UAE-India remittance corridors. Following the launch of a Call for Proposals by IFAD, the funding, which includes contributions from IFAD, the EC, ADA and Democrance, was awarded at the end of a highly competitive selection process.
“At Democrance, we use technology to make insurance accessible and affordable: by digitizing the value chain, we substantially reduce the operational costs of insurance providers, passing on the benefits directly to the end customer while creating value for all those involved. Through this grant, Democrance will be able to draw on the invaluable support and wealth of microinsurance expertise from both, IFAD and ADA, allowing us to further develop a user friendly and well defined product, which for the first time will use remittance houses as the insurance medium to the benefit of migrant workers,” said Michele Grosso, Co-Founder and CEO, Democrance.
Democrance will act as the technology and implementation partner for this project with ADA, a non- government organization dedicated to increasing the financial inclusion of populations excluded from conventional banking channels in developing countries.
Among the Gulf countries – with 20 million migrants – the UAE, with an estimated 8 million migrants, has been selected as the right country to pilot this project. It has a favourable payments system environment and a well-developed remittance industry, with more than 139 registered and authorized foreign exchange and remittance companies, with 835 branches across the UAE. Within the UAE, the target groups will be the represented Indian and Filipino communities with 2.3 and 0.9 million people, respectively.
“The migrant workers in the UAE have access, through governmental plans, to basic health insurance coverage, but this is still a limited offering. If they are affected by a mishap and cannot send remittances for a period of time, their own families can descend rapidly into poverty. The objective of this project is to reduce this gap in risk coverage by leveraging on an already established financial transaction, the remittance, and providing insurance to the migrant workers,” said Arnaud de Lavalette, Senior Digital Finance Officer, ADA.
The UAE is one of the largest remittance-sending countries in the world. According to IFAD figures in 2015, USD 30.1 billion was sent from the UAE to other countries, with India being the largest beneficiary with USD 12.6 billion (#1), and the Philippines with USD 3.5 billion (#3). Insurance, together with credit, savings, remittances and, in general, payment systems is an instrument to achieve financial inclusion among unbanked persons.