Naked, a South African artificial intelligence (AI)-driven insurtech company that offers a fully digital way for consumers to insure their cars, homes, and valuables, raised $17 million (about R290 million) in series B funding.
International Finance Corporation (IFC) – a member of the World Bank Group and the largest global development institution focused on the private sector in emerging markets – is leading the funding round. The German Development Finance Institution (DEG), and Naked’s original investors, Yellowwoods and Hollard, are also taking part in the funding round.
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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.
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.
Naked was founded by actuaries Alex Thomson, Sumarie Greybe, and Ernest North, with a vision of creating a more accessible, convenient and transparent insurance experience. They started developing the concept and systems in 2016, launched in 2018 and are now scaling the business fast. Naked has built an end-to-end digital platform that enables customers to manage their entire insurance experience online from an award-winning app.
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. Naked’s AI-based system offers unmatched customer convenience, and also enables the company to reap significant cost savings from automation and pass them on to customers in the form of lower premiums.
It is not just the technology that makes Naked different, but also 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.
This revolutionary approach is called the Naked Difference. 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.
Alex Thomson, co-founder of Naked, said: “More than five years ago, we set out to create an insurance platform that people would love for being fair, convenient, and transparent, at game-changing prices. Since our launch in 2018, we have been overwhelmed by customers’ enthusiasm for our offering and have exceeded our growth targets every year.
“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.”
Adamou Labara, IFC country manager for South Africa commented: “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.”
Ingo Schulz, vice president at DEG InsurTech Global Markets, added: “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.
“We recognise 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.”
