South African insurtech startup Naked has announced a $17 million Series B round led by the International Financing Corporation (IFC). The German Development Finance Institution (DEG), and Naked’s original investors, Yellowwoods and Hollard are also taking part in the funding round.
Naked’s product offering is an artificial intelligence-based end-to-end digital platform that enables customers to manage their entire insurance experience online. From getting a quote and buying insurance to managing their policy and claiming, Naked customers can do it all without speaking to a contact centre agent.
The startup claims that apart from offering convenience, the system enables the company to reap significant cost savings from automation and pass them on to customers in the form of lower premiums.
Additionally, Naked claims that its business model, in contrast to the traditional model where insurers’ profits depend on how much they pay in claims, Naked charges a fixed percentage of customers’ premiums. In years when claims are lower than expected, the surplus goes to communities and good causes chosen by customers.
Naked called the initiative the “Naked Difference” and alludes to the fact that it removes the conflict of interest at the heart of traditional insurance from Naked’s business model as it means Naked isn’t thinking about profits when it processes claims.
“We are excited to bring new investors on board in this funding round as part of accelerating our growth plans. This investment validates our position as a pioneer of fully digital insurance in South Africa, and will enable us to grow our team, continue to invest in technology that puts customers in control, and to expand into new markets,” said Alex Thompson, co-founder of Naked.
Speaking for the IFC, the country manager for South Africa, Adamou Labara stated that, “Improving access to insurance products is a key driver of financial inclusion in South Africa as it has the potential to preserve assets, increase incomes and reduce uncertainties. IFC’s investment in Naked will help increase the penetration of tech-driven insurance in the country and contribute to job creation and economic growth.”
According to the Financial Sector Conduct Authority (FSCA)’s 2022 Financial Sector Outlook [pdf] study, about 60% of South Africans alluded to having an insurance product, and penetration of insurance, measured using premiums as a percentage of GDP, was 13.7% in 2020 —one of the highest in the world.