A South African technology business, Naked, which aids people in assuring their vehicles, houses, and possessions, has acquired a Series B funding of $17 million, mainly funded by the International Finance Corporation (IFC).
This round of funding saw support from the German Development Finance Institution (DEG), as well as the backing of existing investors Yellowwoods and Hollard. This comes just a few weeks after the South African Insurtech announced a $11 million Series A round, which was spearheaded by Naspers.
In a statement, it was stated that this investment in Naked gives them the opportunity to develop their AI and utilize it to grow the African insurance industry which is worth over 68 billion dollars yearly in gross written premiums. South Africa is responsible for 70 percent of the market share with a gross written premiums of around 47 billion dollars yearly. Despite this, only a very small amount of personal insurance is sold without any human involvement.
COVID-19 has revolutionized the way in which South African millennials acquire and use insurance products. 28% of them are looking for insurance, with the majority expressing a preference for digital interaction with their provider. This shift to automated communication methods can reduce costs related to the claims process by 30%.
Founded in 2018 by Alex, Sumarie and Ernest, Naked is an electronic insurance service that covers vehicles, housing, possessions and individual items. According to their statement, by using AI technologies, it enables customers to use streamlined procedures and experiences, without having to contact an operator. Moreover, businesses may take advantage of automation to save money, translating into reduced rates for their customers.
Naked states that their technological and business model make them unique compared to other African insurtechs, such as Turaco, which received $10 million in funding last September.
The traditional business structure of insurance companies relying on profits from payouts to customers is not applicable to Naked Insurance’s model. Rather, they charge a flat percentage of premiums as payment – any surplus generated in claims when they are lower than the predicted rate is given to charitable causes and initiatives that are chosen by the customers. This is expressed in the company’s official statement.
Adamou Labara, the IFC Country Manager for South Africa, commented on the investment proclaiming that it has the possibility to maintain possessions, enlarge profits, and diminish timidness by reinforcing access to insurance products. Additionally, he noted that the investment in Naked will aid in raising the reach of tech-driven insurance in South Africa and support employment and economic growth.