Premium-Free Insurance to Democratize HealthBy Miriam Bello | Fri, 02/18/2022 - 07:00
Q: How does Zenda.la’s business model fit into Mexico’s insurance system?
A: We wanted to change traditional insurance. Insurance penetration is 2.4 percent in Mexico, which is very low compared to other OECD countries. At Zenda.la, we believe that this has been caused by the industry’s offer of complex, expensive products that are hard to scale to the general public. Traditional insurance distribution depends on insurance agents, which also limits the reach of the products. Moreover, the value of an insurance product is perceived only when an accident occurs, associating it with a bad experience.
We wanted to offer a product that would respond in the best possible way to a person’s needs, leading to a friendly, free insurance product that can scale as much as the user wants it to. Free insurance coverage is possible for Zenda.la because we reduce costs by going digital and by not having a broker. Our business model would not be possible if we expected the same commissions that insurance agents receive. Free plans are also covered by the payments from premium plans. We can offer a better portfolio with solutions that truly adapt to our customers’ needs. It is similar to Spotify’s subscription model, in which some users choose to pay for the premium plan while others stay on the free plan.
Q: Mexico’s traditional insurance penetration is significantly low. How could your business model change this panorama?
A: Our main strategy is to offer a free product, which is different from a free trial. This is attractive to the general public and follows our aggressive growth plan. Zenda.la is also consolidating alliances to reach more users. For example, we work with fintechs and other tech companies that believe in digitization. Working with us, these companies will not necessarily increase their expenses because they can use our free subscription. We are actively looking for strategic allies.
Q: How is the company able to cover chronic diseases, such as diabetes and cancer?
A: We have a partnership with Swiss Re Group, the largest reinsurer in the world, which co-designed this product with Zenda.la. The alliance addresses financial health inclusion regardless of the patient’s condition. Insurance products are based on risks, not on certainties. To make a claim for a chronic disease in traditional products, the patient would have had to be insured for at least two years before diagnosis. At Zenda.la, this period was shortened to three months.
Zenda.la has a dynamic coverage for critical illnesses: the first three months are not covered, the next three months are covered up to MX$9,200 (US$449.66), the next three up to MX$18,000 (US$879.76), then the next three up to MX$26,400 (US$1290.32) and so on until reaching the limit of the patient’s coverage. Our maximum is MX$240,000 (US$11,730.20).
Q: What alliances have made your product possible?
A: Our alliance with Swiss Re to co-design or product, we work with Prevem Seguros in order to have the operational capabilities that allows us to offer end-to-end digital processes, also we have an alliance with Salud Digna, which also aims to democratize health. This partnership allows us to offer blood tests that analyze 30 different indicators.
Q: Zenda.la collects a significant amount of delicate information. How do you make patients the owners of their information and how do you protect this information from cyberattacks?
A: We fully comply with the personal data protection law. As a free service, we have made a commitment that we will not sell the users’ data. That data is only used to create better strategies and products. All information is encrypted and we ask patients what they want to share, keep or delete from our databases.
To protect the data from cyberattacks, we are part of IBM’S Hyper Protect Accelerator. This accelerator targets sensitive data startups in health, finance and insurance, among others. IBM offers Hyper Protect to support these companies and promote tech enabling them with solutions to effectively protect sensitive data.
Q: What is Zenda.la’s investment and funding situation?
A: In 2021, we had a seed investment round led by Angel Ventures and other international funds that amounted to US$2 million. These funds were used to strengthen our development team, ensure the platform is properly hosted on IBM’s network and create new products.
We are also developing Balanze, a solution that will provide a broader scope of our user’s health. Depending on the growth of our user base in 2022, we might expand to Latin American countries that have a health system and insurance industry similar to Mexico’s.
Q: What does the Insurtech Association focus on?
A: We are strongly pushing for close communication with regulators to influence decision-making and promote the industry’s development, the biggest challenge for the regulators is to be innovation friendly without putting users of financial services at risk. The association also works closely with AMEDESEF and AMIS. To date, regulations do not distinguish between traditional insurers and insurtechs, so the authorization to become insurance carrier takes about 20-24 months and requires economic reserves between MX$30 million (US$1.5 million) and MX$50 million (US$2.5 million), plus the capital to survive the two-year approval period. This has driven insurtechs to work as intermediaries, such as brokers, promoters and MGAs, as these positions have a narrower regulatory barrier. We are allying with traditional insurers to innovate and comply with regulation.
Regulations need to respond to the different needs of insurtechs because at the end of the day, these companies aim to protect the final user. Additionally, some insurtechs’ business model needs smaller financial reserves than traditional insurers so requirements should reflect that, one solution can be proportional regulation.
Zenda.la is an insurtech that offers insurance for illness or injury that offers monthly plans without deductible or co-payment fees.