A doubling of warranty market business and rising medical tourism is driving appetite for extended coverage options
By Ronan Conboy, CEO, Carrow Insurance
The market for micro-insurance coverage will likely grow significantly in 2025 as demand surges in response to the launch of new technology products and growth in medical exposures, driving the need for a more varied supply of coverage options to meet customer needs.
In particular, we expect to see increased interest for short-term cover in relation to the warranty and accident and health (A&H) markets to fill existing insurance gaps in standard annual policies and meet broker demand for more nuanced products and coverage options.
All the indications are that the warranty market will double in premium value over the next five years as the range of technology products requiring extended warranty cover expands significantly.
A&H premium growth
In the A&H market, we are seeing growth in demand for micro-insurance coverage for condition- and circumstance-specific extensions to health insurance policies, to cover policyholders for risks which aren’t typically included in standard A&H wordings.
Where we expect to see substantial demand, however, is in relation to the exponential growth of so-called ‘medical tourism’, where people travel abroad for medical services ranging from dental veneers and implants to lip fillers, gastric bands and other more complex cosmetic and elective procedures.
With standalone A&H cover unlikely to cover the outcome of such procedures and with state healthcare services continually challenged in terms of staff, funding and public health crises, customers seeking medical procedures abroad are increasingly likely to need extended cover that protects them against complications, but without the significant expense of purchasing a full annual health insurance policy.
Tech warranty appetite
The increasing need for short-term coverage, which can be purchased for significantly less money than a large annual premium, can also be seen in the warranty market.
With customers acquiring a greater number of expensive tech items – from portable and wearable smart devices to electric vehicles – they have the option to purchase extended warranty products beyond the standard warranty cover that comes with the purchase.
However, while extended warranties from manufacturers or retailers typically cover replacement or repairs for faulty parts, customers are increasingly seeking coverage for accidental damage, theft, water damage etc.
In a warranty market awash with new capacity and providers, brokers are nonetheless keen to find risk and coverage specific solutions for clients that fill in the gap left by standard warranty coverage.
As more common items like smartphones, tablets, smartwatches and wireless headphones become increasingly expensive, customers are keen to protect themselves against potential loss. Meanwhile, the growing availability of novel, high-tech products coming to market – ranging from electric vehicles with sophisticated onboard systems to virtual reality (VR) headsets and smart glasses – is making these complex and costly items more affordable. This increased adoption of advanced technologies is expected to drive demand for more bespoke coverage.
Meeting demand for micro-insurance
The key to articulating the value of any of these emerging markets for micro-insurance coverage lies in carriers’ efficiency – specifically, their speed to market for new products, the simplicity of the purchasing process, and the timely handling of claims when they arise.
Within the warranty segment of the insurance sector, there is an ongoing challenge in improving its claims offering to make it as fast and cost-effective as possible.
Customers seeking to purchase short-term cover instantly via an app should expect any subsequent claims to be a submit and pay claim process – a standard that the market as a whole has some way to go in being able to deliver.
The uptick in demand for micro-insurance and the corresponding increase in solutions and purchases of those products will necessitate an evolution of sales and claims processes to better meet client needs and expectations.
Micro-insurance and the cost of living
With inflation, high energy prices and rising costs of goods and services continuing to drive up the cost of living for customers, insurers are facing their own financial challenges. These pressures are increasing the costs of acquiring business, conducting operations and handling claims, ultimately driving the need to raise premiums.
At the same time, society’s increasing reliance on smart devices means their loss can be debilitating, potentially disenfranchising users from activities ranging from making bank transactions and receiving micro-payments for work in the gig economy, to using public transport, accessing GP appointments, and receiving pensions or welfare payments.
Awareness of this growing alignment between the wealth gap and the protection gap is driving regulatory and government pressure for products that address customers’ needs across every demographic to secure them against losses they can ill afford.
As an industry, we need to respond to the challenge of expanding the choice and availability of micro-insurance products and evolve our offering to make them readily available via non-traditional, app-based distribution while improving our processes so that claims are processed quickly and efficiently.
