SA’s Simply targets mass-market life insurance space

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South African startup Simply Financial Services is looking to shake up the country’s mass-market life insurance space by serving as many people as possible.

The Cape Town-based Simply, launched in November of last year by technology entrepreneur Anthony Miller and actuaries Simon Nicholson and Shaun Dippnall, defines the mass-market space as people earning up to ZAR30,000 (US$2,300) per month.

An extremely competitive arena with high lapse rates and aggressive marketing, Simply is looking to gain as big a customer base as possible by using its online platform and call centre to sell insurance family cover directly to individual breadwinners, domestic cover via domestic employers, and business cover via SME employers.

Recognising that most adult South Africans do not have life or disability cover, Simply sells life, disability and funeral combos that provide what Miller calls “a good mix of cover at a great price”.  

“We believe the products are very well priced relative to our competitors,” he said. “We’ve made it super easy for people to get a quote on our website – it takes 10 seconds and there are no strings attached.”

Miller said he and his co-founders were encouraged to launch Simply by the huge size of the life insurance market in South Africa, where approximately ZAR10 billion (US$760 million) in new annual premiums are written annually.  

“Around 70 per cent of that business is in the small policy – mass – market, which includes funeral, credit life, life and disability policies providing lump sum cover,” he said.

“Around 18 million adult South Africans have funeral cover and roughly 40 per cent of them have two or more policies. We’ve seen a case in which a customer has 19. Unfortunately, few of these people have life cover and even fewer have disability insurance. Also, in many cases the products they have are expensive relative to the cover provided and insurers are aggressive in their collections methods. All of this in a stressed economy in which more than 50 per cent of credit active customers are “credit impaired”. Something has to give.”

Simply sees a “dire need” for easily understandable, affordable life insurance products in South Africa.  

“We believe we can use our combined experience – tech startups, life insurance business building across geographies, human-centred design – and strong industry networks to build a business that can cut through the noise and deliver super simple life insurance products at disruptively low prices,” said Miller.

So far, it seems to be working. Nearly 2,800 policies have been bought to date via Simply, which has a current run rate of over 600 policies per month. ZAR1.4 billion (US$106 million) in cover has been bought to date, with 50 per cent of online sales taking place via mobile devices.

“As a result of our respective track records and industry relationships we’ve been able to raise venture capital funding from Lomhold – the backers of BrightRock – and two private investors whom we know well,” Miller said.  

“We’ve also been able to establish close, fully integrated relationships with industry leaders like Old Mutual Alternative Risk Transfer Limited (OMART), the Reinsurance Group of America (RGA), IUA and CallForce.”

The startup earns income from three key sources. It operates a cell captive structure, meaning it owns preference shares in OMART and participates in the profits and losses arising within this cell. It also earns commissions for distributing and selling policies, as well as binder fees from the cell in respect of administrative functions performed on behalf of the cell, such as issuing policy documents, facilitating premium collection, and administering claims.

“These sources of income all depend on the cell running profitably in the long run.  If the cell runs at a loss it can’t afford to pay commissions or binder fees.  As such, Simply is in many ways exposed to the same revenue and profit drivers as an ordinary life insurer,” Miller said.

He said, despite some challenges, the team was happy with progress to date.  

“We feel we’re on track to achieve our business goals and make a meaningful difference in the South African mass market. We feel good about the products. We think they offer great value and we have great confidence in OMART as the underwriter,” he said.

“At this stage, we’re only operating in South Africa. We feel there is a huge need here and that the South African market provides a great environment in which to forge a robust business. If we can make it here, we think we can make it anywhere. We aim to have 5,000 active policies by the end of the current financial year and 50,000 within four years.”  

However, Miller believes Simply’s products and technologies are very portable.

“As soon as we have the South African business bedded down, we’ll commit some resources to exploring other markets. We think the structure of our business and our relationships with Old Mutual Alternative Risk Transfer and the Reinsurance Group of America set us up really well to enter new markets. Early candidates include Mauritius and Kenya,” he said.

“Our stated mission is “to secure the financial futures of millions of people”. While providing life, disability and family funeral insurance is our key method for doing so at this stage, we have plans to do much more in the future. Amongst other things, we intend developing and offering a suite of free online financial tools and learning modules. We also plan to add complementary products, such as a simple savings product in due course.”

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Passionate about the vibrant tech startups scene in Africa, Tom can usually be found sniffing out the continent's most exciting new companies and entrepreneurs, funding rounds and any other developments within the growing ecosystem.

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