Is this platform API the game changer that will disrupt SA’s insurance industry?

A Cape Town-based fintech startup has launched an insurtech platform API that will enable developers to speed up development, prototyping and launching of digital insurance products in the country — at no cost.

Insurance is a complex space, one requires a slew of initial expertise and resources, says Louw Hopley, the CEO and co-founder of Root, the startup behind the developer-focused insurance platform.

“Upfront costs and capital requirement involved in securing an insurance license are massive, often leaving insurtechs in the mercy of incumbents,” adds Hopley.

The platform API — Root Insurance — aims to disrupt this.

Hopley says it will make the development of insurtech “seamless” by helping developers focus on “solving customer’s problems and on providing value-for-money product — instead of spending the majority of their time meeting and negotiating with insurance companies.

Here’s how it will change the game

By working with financial services company MMI, Root has packaged “all the hard things” in insurance behind simple to use APIs.

“Most of the compliance requirements, that you normally need to take care of when launching an insurance product, are built into the platform, meaning you have those boxes ticked from the get-go,” he explains.

This, he says, includes everything from controls that ensure that customers will be treated fairly, to carrying out appropriate regulatory reporting.

The Root Insurance platform API has its origins in a programmable bank account for software engineers that the fintech startup has been developing over the last two years

“Aside from the API, we also provide expert guidance throughout the entire process,” he adds.

“The platform is accessible at no cost to developers who would like to build and prototype ideas on the platform. Once an insurance product built on the platform has launched, we take a small percentage of each premium collected,” he explains.

In an earlier statement, Root stated that the platform will allow developers, startups and brands to develop insurance products “in a matter of days” and that overall this would lead to consumers getting “more choice and better value for money”.

Country-agnostic platform

Hopley says the startup, which is currently hiring across a range of roles, is looking to grow the country-agnostic platform abroad.

“However we’re working on solving for South Africa first as the compliance requirements in each country are unique. The intersection between the two products becomes quite interesting when you start bringing programmable bank cards into the insurance space,” he explains.

‘Financial services black-boxed’

Hopley founded Root in 2016 alongside Malan Joubert and Philip Joubert. The platform’s founders have between them experience founding and running other startups including FireID, JournetApps, Offerzen and an iPhone app development studio in the US.

Given this collective experience — building products in the payments and financial services space — Hopley says it was “clear to us that financial services is one of the most black-boxed environments with the highest barriers to entry for developers who want to innovate and solve real problems”.

“We looked at the financial services industry and decided to start with the fundamental building block, money itself — being able to control money programmatically,” he adds.

Origins in a programmable bank account

Root Insurance has its origins in a programmable bank account for software engineers that the startup has been developing since 2016.

The bank account enables developers to lower the barriers for building and prototyping new concepts in the banking space.

Last year, as part of its API-first strategy, MMI approached Root to explore the possibility of jointly creating a digital insurance-as-a-service platform.

“The Root platform has since been extended into the insurance industry enabling developers to launch their own insurance products fast, with no upfront costs,” Hopley says.

He says on meeting with MMI Exponential Ventures, the startup learnt that the company was looking for a way to leverage its assets in insurance expertise, licenses, capital base and distribution and open up to innovators.

“This was extremely well aligned with our fundamental mission at Root — to make it easier and more affordable for people to build and create new products in financial services — so we started exploring what programmable insurance could look like,” he adds.

‘Platform constantly improving’

He also adds that the platform is being developed in an iterative fashion, with the Root team constantly improving it as they “explore and learn more about the intricacies of the industry”.

“We spend a lot of time optimising the interface between our developer-first APIs and the historically paper-based insurance world behind it. We’ve been working with everyone, from our developer users to re-insurers, as well as MMI and their subsidiary, Guardrisk, to help shape the platform,” he notes.

Interested developers have two ways of accessing the platform, by applying for access on Roots website or attending OfferZen’s Make Days forums.

Insurance-as-a-service becoming a reality?

South Africa already has a big insurance industry, with a lot of new startups entering the space.

In the past six months a couple of new startups have launched insurance offerings, these include Naked, Fo-Sho and Hero Life. But, is there space for more entrants?

MMI Exponential Ventures head Jonathan Stewart believes so.

Stewart claims that by “dramatically” lowering the costs to enter and operate in the insurance market, Root will make it possible to “profitably service smaller niches in the market, to provide more value for money on smaller premium products, and for larger established brands to very easily embed insurance offerings into their current customer value propositions.”

“We therefore expect more, rather than fewer new products entering the market in future, as insurance-as-a-service becomes a reality,” he says.

So, is this then the game changer that will truly disrupt the South African insurance industry?

“History shows that when industries are opened up to the power of software, there is a profoundly positive change in the value proposition to consumers,” says Stewart.

He says that by opening the industry up to the “vast creative potential of the software developer community”, MMI’s intention is to “help unleash a step-change in innovation in the sector”.

“This will benefit all those consumers who for so long have been clamouring for a better deal,” says Stewart.