This piece was co-authored by Christimara Garcia, a volunteer at the Christensen Institute and founder of Catalyze Innovations Initiative, a Brazilian market-creating innovation action tank.
Imagine you’re an Uber driver and depend on your car or motorcycle as a primary income generator. You’ve had an accident that’s resulted in a health emergency, and you need to spend a couple of days in the hospital and send your vehicle to a body shop. This would be a major inconvenience for most people, but with insurance, you’ll hopefully get your life back to normal. However, for billions of people across the world who don’t have access to insurance, this could be financially devastating and ultimately life-altering.
It seems cruel that those who need insurance most are those least likely to have it, but the reality is that traditional insurance is too expensive for many people living in low- and middle-income countries. In Brazil, for instance, only 15% of the population has life or health insurance, and more than 30 million cars on the road are uninsured. The barriers to gaining traditional insurance for would-be consumers are many and often require copious amounts of paperwork, provision of identification, and demonstrating an ability to make payments with a bank account. Because many Brazilians struggle with one or multiple barriers, the majority opt for what has long been the only alternative: buying no insurance at all.
What we’ve just described is what we call “nonconsumption”: when a majority of people would benefit from purchasing a product or service, but cannot because it is too expensive, complex, time-consuming, or inaccessible. Research from the Christensen Institute reveals that where there is vast nonconsumption there is significant opportunity to create new, profitable markets for simple and affordable products. Because the new markets address an unmet need, the new consumers have a vested interest in seeing the markets flourish. It is through the process of market creation that consumers not only gain access to needed products and services, but that regions (and the organizations behind the new markets) ultimately become more prosperous.
But targeting nonconsumption requires creativity. Oftentimes, to profitably serve new consumers, innovators must completely reconceive traditional business models that were designed with other consumers in mind. To see how this is done, we spoke with the founders of Thinkseg, an innovative automotive insurance company that is working to create a much-needed safeguard for millions of people in Brazil.
Reconceiving automotive insurance
Thinkseg was founded in 2016 by a group of professionals who worked in automotive insurance. As they observed the digital revolutions spurred by tech giants including Uber, Netflix, and Spotify, they were inspired by the idea that a new business model combined with technology could create impactful new markets. Recognizing the need for change in each of their respective companies, the founders agreed that traditional automotive insurance needed to be democratized, with fairer prices, and without small print and asterisks.
To reach customers for whom traditional insurance is prohibitively expensive and costly, Thinkseg conceived of an entirely new model for insuring its customers, powered by a novel technology.
Traditional Brazilian insurance companies charge consumers as much as US$ 800 per year, in part because of difficulty accurately assessing risk. Thinkseg was able to lower its average yearly price to one-sixteenth of that by developing its own telemetry technology that enables the company to better assess customers’ risk.
It works like this: the business employs a simple, “pay-per-use” model in which customers only pay a few cents per mile when they use their own cars or motorcycles. To verify when customers use their vehicles, Thinkseg’s telemetry technology uses customers’ mobile phones to detect whether they are driving or moving by other means, such as by bike, scooters, bus, or by app car and taxi. The end result is an affordable, transparent, and user-friendly experience that shows little resemblance to traditional options on the market. Thinkseg’s model of offering simple, affordable insurance has already proved so successful that it’s been able to expand to other Latin American countries. Soon it will offer shares of the company to US investors, enabling further expansion in Latin America. In countries like Brazil, expanding access to insurance is life-changing for millions of people that could not afford it before.
