Insurtech startup Naked Insurance has launched to market in South Africa, offering an artificial intelligence (AI) powered car insurance solution.
Disrupt Africa reported in October last year Naked Insurance raised ZAR20 million (US$1.66 million) in funding from Hollard, South Africa’s largest privately-owned insurance group, and private investment firm Yellowwoods. The startup secured the funding before launching any product to market.
Naked Insurance has now launched its car insurance solution in South Africa, promising to give consumers control of their insurance and save them money.
Potential customers can request a quote, and if it’s accepted, receive cover in three minutes on the Naked website or app; while existing customers can also change their cover instantly at any time.
The use of AI-based algorithms allows the startup to bring down the cost of insurance, by removing the need for inefficient business processes such as call centres. The fraud algorithms permit certain claims to be approved instantly, reducing inconvenience and lowering the cost of premiums.
In addition, Naked has created the “CoverPause” feature – giving customers the ability to pause their accident cover if their car won’t be used for a day or more – reducing the premium for that time.
“Having been involved in insurance from the inside, we knew we needed to build Naked from scratch, avoiding legacy systems and thinking. We are proud to kick off a new generation of insurance that offers unprecedented user-control, value for money and customer fairness at its core – all the while making a positive change to society,” says Alex Thomson, co-founder of Naked Insurance.
The startup is based on a different model than traditional insurance companies. It takes a fixed portion of premiums to run the business, with the balance going into a pool to cover claims. At the end of each year, money left over in the claims pool goes to charities nominated by customers rather than towards company profits, meaning Naked’s income doesn’t depend on whether claims are paid or not.
“We saw first-hand how insurers’ focus on underwriting profits overshadows claims handling, premium fairness and customer service. We realised that to fix these problems we needed to change how we make money, to remove the inherent conflicts of interest,” says Thomson.