VIDEO: COVID-19 has forced insurance companies to go digital in the UAE
Insurance companies in the UAE lag far behind the banking sector in digitization
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Getty Images/ Boonchai Wedmakawand
By Disha N, ZAWYA
The insurance sector has been ripe for disruption for some time. Most insurance companies in the UAE have yet to automate key tasks across the value chain, including claims verification and processing payments. When COVID-19 struck, several insurance firms found that the heavily manual nature of their work hit business continuity hard.
According to PwC’s global FinTech survey, 22 percent of insurance, asset and wealth management business is at risk from disruption from fintech, with insurers ranked highest at risk.
“Unfortunately, a lot of insurance companies in the UAE are not as digitally savvy as their banking counterparts. The banking industry is at least 15 years ahead in comparison with the insurance industry vis-à-vis digitisation. So, when the UAE went into lockdown, it was a big problem for insurance companies, since a lot of them had a lag before being ready to work from home,” said Walid Daniel Dib, co-founder and CEO, Addenda Technologies.
The Abu Dhabi-based InsurTech uses blockchain technology to connect motor insurance companies in the Middle East. The distributed platform helps to cut down time to reconcile motor insurance claims and thereby disrupts the way insurance companies deal with each other.
As a result, insurance companies using the Addenda blockchain faced zero business interruption during the COVID-19 lockdown because the workflow between them and other insurance companies vis-à-vis reconciling claims was already set on the blockchain, Dib explained.
“Before Addenda, insurance companies used to reconcile payments between each other via fax, courier and e-mail. There are about 2,000 motor accidents per day in the UAE. Each accident requires approximately 20 documents. We have digitised the entire process for our 10 clients (nine in the UAE and one in Kuwait),” the CEO said.
Formed in September 2018, Addenda was part of the DIFC FinTech Hive Accelerator and is financed mainly via angel investors and a few venture capitalists. These include Arab Bank, 500 Startups, Beyond Capital and angel investors from Saudi Arabia. The InsurTech platform raised over $600,000 in its seed round and another $250,000 in a bridge funding round involving Arab Bank earlier this year.
“Financing was not easy at the beginning,” said Dib. “The problem was to find the first investor who believed in your idea before you sign any clients. Once we found our first investor, we signed our first client. We are a team of nine now.”
Finding an investor wasn’t the only roadblock Addenda faced in its early stages. It also took a lot of convincing to get an insurance company to join the blockchain platform. The startup signed its first client up in July 2019.
“Usually, a solution like Addenda is a network solution, and it’s very easy to see a use case. But if you don’t have anybody on board, then it’s very likely that no one will join. Once you have a few players on board, it becomes a de factor network solution for these insurance companies. You get to an inflection point where insurance companies start communicating with you to join from regions even outside the UAE,” Dib added.
Addenda has helped reconcile motor insurance claims worth Dh30 million on its platform since October 2019. The overall UAE motor insurance industry processes claims worth Dh1.6 billion on average per year.
BUYER’S MARKET FOR VENTURE CAPITALISTS
For entrepreneurs looking to raise funding in the current market, Dib said it is a buyer’s market for venture capitalists. He suggested that startups should not turn down funding even if the valuation is slightly less than what they want.
“In the current circumstances, startups and founders specifically need to avoid any extra expenditure,” he said. “They should also look at that one aspect that makes money for the venture. Before taking a decision, ask yourself this question: ‘Is what I am doing generating revenue for my company?’ If not, steer clear of it.”
Highlighting the need to hire the right talent, Addenda’s CEO said that every entrepreneur is only as successful as the people around him. “If you want to be a successful entrepreneur, you need to hire the best people. You have to trust them with the capabilities to do what you think they should be doing.”
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