- IFC, DEG, Hollard, and Yellowwoods Invest $17 million in Naked to Boost Access to Insurance in South Africa
- The IFC – Led equity Investment is aimed at increasing access to quality insurance products and services in South Africa
- The combined investment will also support Naked’s strategy to expand its digital insurance offering, including to more first-time insurance buyers, and allow it to continue innovating to improve customer experience.
The International Finance Corporation (IFC) has partnered with the German Development Finance Institution (DEG), Hollard, and Yellowwoods to invest $17 million in South African insurtech company Naked to expand access to vehicle, home, and other insurance products.
The IFC-led equity Investment is aimed at increasing access to quality insurance products and services in South Africa
The combined investment will also support Naked’s strategy to expand its digital insurance offering, including to more first-time insurance buyers, and allow it to continue innovating to improve customer experience.
Hollard is South Africa’s largest privately-owned insurance group. Yellowwoods is a private investment group with interests in insurance ventures around the world.
South Africa has the largest and most mature insurance market in Africa. However, the most widely sold insurance products in the country are life and funeral insurance. Naked is increasing access to other insurance products, removing the need for costly distribution or sales channels, and passing a significant portion of the savings on to consumers through lower premiums.
Naked co-founder Alex Thomson says the funding round signals strong investor confidence in Naked’s management, technology and positioning, as well as in the significant opportunity to use AI and digital experiences to grow Africa’s insurance market in the years ahead.
“We are excited to bring new investors on board in this funding round, as part of accelerating our growth plans,” said Thomson. “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.”
IFC and DEG are both backing Naked in line with their goals of investing in companies that can make a social impact, increase competition in financial services in Africa and foster financial inclusion.
“Improving access to insurance products is a key driver of financial inclusion as it has the potential to preserve assets, provide protection and risk-sharing, and reduce uncertainties,” said Adamou Labara, IFC Country Manager for South Africa. “IFC’s investment in Naked will help increase the penetration of tech-driven insurance in the country and support the growth of the insurance sector to enhance economic growth.”
Naked’s AI-driven online sales system allows the company to increase efficiency and convenience, offer lower prices, and serve more customers than more traditional insurance companies.
“We believe that Naked is well positioned to drive digital transformation and inclusion in the South African insurance industry because of its unique technology and innovative business model,” said Ingo Schultz, Vice President at DEG Insuretech Global Markets. “We recognize the enormous commercial potential in increasing access to insurance through the use of smart technology. We’re excited to partner with Naked, not only as the leader in this space, but also as a business that will have a significant positive social and developmental impact.”
Naked was founded by actuaries Alex Thomson, Sumarie Greybe and Ernest North to create a more accessible, convenient and transparent insurance experience.
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.
It removes the conflict of interest at the heart of traditional insurance from Naked’s business model — it means Naked isn’t thinking about profits when it processes claims.
The founders started developing the concept and systems in 2016, launched in 2018 and are now scaling the business.