Africa’s Disrupt Story: The Case of Insurtech

Overview of Insurtech

If you have an insurance company and are looking for an area where it will receive as most patronage, Africa should do. Africa is one of the world’s hot regions for insurance due to its underdeveloped insurance sector. In Africa, bulk of the insurance comes from pension and individual life insurance. But over the past decade, there has been a shift to the digital channel in Africa which has allowed tech startups deliver greater expectations of service delivery and meet rising demands for digital solutions. While we are seeing a number of insurers trying to meet these demands, Insurtech have been able to step in and bridge the gap between Africans and provision of insurance services while also creating a disrupt story for Africans.

Insurtech has been able to accelerate startup growth in Africa by creating Disruptors in the African insurance market and insurers are leveraging these disruptors to target specific segments or service and cut cost for themselves. There has been more innovative partnership between insurers and online platforms. For example, Blue Wave in Kenya is servicing the individuals and making micro-insurance products accessible via common mobile phone.

Insurtech platforms such as Bismart, Wazlnsure and Kakbima connect customers to insurers, providing services such as quote comparisons, direct sales, and the tracking of policies and claims. Naked, a fully digital player focused on motor and home insurance in South Africa, is offering competitive prices to customers by reducing its operational costs through automation—boasting a three-minute process to get a quote and to sign up. There are over 40 platforms in Insurtech which have served Africans by providing services to bear financial risks on behalf of African startups.

Insurtech had just 17 startups after it came on in 2017. This was a slow start for them as startups in the continent were slow in adopting the tech. But Insurtech soon started making headway in its field as technology-led startups began adopting its services in increasing numbers. With more pressure to provide tech solutions to customers as an alternative to face-to-face contact, there has been urgency in the demand for the benefits Insurtech brings. Insurance Business recently published its Special Report: Insurtech 2020 in which it stated: “If the Covid-19 pandemic has demonstrated anything, it’s that almost anything can be done online, including insurance transactions”.

Although Insurtech poses a threat to incumbent insurance companies in Africa, there is no doubt that it has also presented an opportunity for insurers to partner with startups and ensure that their offerings are aligned with the needs of a changing world.

Disrupt in Africa

Everyone else probably thought it wrong or foolish when the first man sharpened a stone into a tool. It must have disrupted their way of life. Overtime, disruption has become a way of life for man with new technologies creating innovative ways of doing things and displacing the old ones. Joseph Schumpeter called this “creative destruction”. The term encompasses both the benign and harmful dimensions of economic disruption: when the forest burns, many trees are destroyed, but new growth is enabled. The key to progress is ensuring that there are more winners than losers from disruptive change and that the latter benefit from the broader gains in prosperity.

Africa has not been left out in the disrupt story. This decade has seen disruptors from Africa’s tech space and has allowed for more enhanced methods of carrying out services. Tech startups have delivered unhindered economic progress on the African continent, driving momentum and positioning Africa as significant component of the World’s market. Individuals are turning at an increased rate to digital adoptions rather than carryon with the initial trends. We see tech startups playing the disruptive roles in almost every macroeconomic sector in Africa from manufacturing and financial services to retail and hospitality. These startups are transforming the business models of firms and reshaping the skills needed for work. For example, Binance is competing with the traditional stock exchange markets in Africa, the likes of Jumia are competing with the traditional retail companies in Africa. African tech startups design their technologies to meet the productive needs of African in such a way that barriers that accompany the traditional methods do not come in play.

Africa’s disrupt story has been characterized by a range of challenges which have been factors preventing the adoption of these technologies as the norm. New technologies pose threats to the relevance of current technologies. Policies from African governments have struggled to keep institutions relevant by making policies that stunt the growth of these disruptors in the region. Government policy choices skew the balance disruptors can provide. If governments intervene too much, disruptors might fail to efficiently create economic opportunities they intend to create.

That we can now achieve more simply with our smartphones, does it make the retail stores, banks, insurance companies and other traditional means of commerce irrelevant? Disruptors have never had need to force individuals to request for their services, commercial trends in the world has been changing and individual will seek efficient and effective means of carrying out tasks, and this is what disruptors offer.

The traditional insurance industry is being disrupted by innovative strength of Insurtech. Several platforms have come from Insurtech which have concentrated rendering efficient services to Africans at subsistence rate and reaching them through the most enhanced ways. With Insurtech, insurance is not just about payment of premiums but a way of rendering services to Africans.

Now let us talk about disruptors. Specifically, we will review Insurtech’s disruptors in South Africa.

Insurtech’s Naked

According to the Naked “The Naked Difference ensures that when claims are lower than expected, we don’t benefit – communities do”. This statement from Naked is sugarcoated. Naked is one of the flourishing platforms that emanated from Insurtech. It one of the disrupts in South Africa that providers financial cover for partners. Naked Insurance launched its product in 2020 after it had secured a $1.66million funding from Yellowwoods. Naked offer South Africa’s first end-to-end AI-driven car, home and buildings insurance, underwritten by Hollard at the convenience of the client. The Insurtech also offers a range of short-term insurance options in addition to car insurance, including buildings and home contents insurance (plus liability cover), and covers individual items like a laptop or phone.

Insurtech’s Pineapple

Pineapple uses an AI-enabled app to deal with her clients. All the client has to do is take a picture of what they want to protect and the company handles the rest, easy right? Maybe these Insurtech startups just think of ways to make regular commercial activities a lot easier for clients. Pineapple has developed over the past few years and has more than 30,000 users. The app allows users negotiate business terms offsite. According to Pineapple Co-Founder Matthew Elan Smith, those preferences create a stark contrast with the barriers inherent in most insurance today. The idea for Pineapple came together as Smith and his colleagues participated in an innovation competition in 2016 that focused on applying customer-first design principles to the insurance industry.

Insurtech’s Lumkani

According to the founder and CEO of Lumkani, “destructive fires are a regular, and potentially devastating, occurrence for the approximately 10 million South Africans that live in informal settlement communities…” Lumkani means  ‘be careful’ in Xhosa, started off as a hardware company in 2014 and experienced great success in business as its product was able to reduce the spread of a fire outbreak in South African homes. To meet the demand of more services from them, Lumkani, partnered with Hollard, a South African-based insurance company, to develop the world’s first hardware-enabled fire insurance. The company offers efficient premium packages that are low enough for its low-income customers.

Insurtech Yalu

Tom Jackson described Yalu as an Insurtech startup is offering transparent access to credit life insurance. Yalu do not just offer insurance related services to clients, they also educate their clients on insurance products like benefits, premiums and speedy claims processes so as to enable customers get affordable and transparent financial services. Yalu even pays a client’s debt if the client is not able to pay due to retrenchment, disability or death. Credit providers in South Africa usually insist that borrowers have Yalu’s insurance cover before they are deemed credit worthy. Think of Yalu as the friend who can help you repay a debt when you can’t.

Insurtech’s Simply

Simply’s insurance is designed for people in small businesses. It is the company’s believe that businesses are unique and every business should be able to afford insurance premiums. With Simply, small businesses have insurance policies tailored for their needs. Insurers get to pick from public liability insurance for injury and property damage, to employers’ liability insurance for your staff. And there are options for different risks, like professional indemnity insurance, or protection for your business equipment.

There is the belief that the traditional methods of insurance are costly and susceptible to changes in policies. Insurtech has been able to develop new products and have allowed companies to increase their operational resilience across the business. Disruptors has always existed to improve the levels of services that customers receive, these improvements are what has prompted the acceptance of disruptors over incumbents.