Local insurtech start-up Simply Financial Services is eyeing African expansion after recently signing a multimillion-rand funding deal with private investment group Yellowwoods.
The Cape Town-based start-up says the multi-year commitment, worth "tens of millions of rands", will assist it to achieve its growth aspirations and development plans.
Simply was founded in 2015 by three partners: engineer Anthony Miller and actuaries Simon Nicholson and Shaun Dippnall, and started operating officially in 2016.
The start-up provides life insurance products, including life, disability and funeral cover, through its online platform.
The insurance products, underwritten by Old Mutual Risk Transfer, are targeted at local markets that are underserviced by more traditional insurance players, such as domestic workers and employees within small, medium and micro enterprises.
Simply says after signing the deal with Yellowwoods last month, the company is in discussions with potential partners in Africa, and is looking into expansion by early 2019.
"We are in discussions with two established South African traditional insurance businesses that are based in Namibia and Kenya. Our intention is to initially create a proof of concept in both markets prior to further expansion," CEO Miller told ITWeb.
"The idea is that we would bring our platform, digital/actuarial product development and digital marketing capabilities, and the partners would bring their established brand, existing back-end infrastructure and capabilities. While we have not yet committed to anything, we think the model makes commercial sense and we are thinking carefully about how to prioritise our efforts."
Ongoing growth
Kenya would be an interesting market because of the high Internet penetration and online banking usage, while Namibia is very small and would be great for a proof-of-concept, he continues.
Simply has seen an encouraging growth trajectory in the last two years, having sold almost 10 000 policies worth about R6.5 billion in total cover, according to Miller.
In August, Simply partnered with cleaning services start-up SweepSouth to provide its domestic workers with accidental death and disability cover.
"We have a dedicated in-house marketing team that focuses mainly on digital marketing across multiple platforms, helping to bring in between 40 000 to 50 000 unique visitors to our platform each month."
The start-up's primary focus, adds Miller, is to turn the business into a success story by growing organically in SA and positioning itself as the digital insurer of choice in specific niches that are likely to opt for a simple digital product.
"The Yellowwoods funding will be further used to build our platform and product set, and invest in marketing and sales. We've just released a chatbot which provides users with accurate quotes online. The world is moving online at an exponential pace and South African customers are going digital faster than most existing players realise," notes Miller.
Yellowwoods has interests in insurance ventures around the world, and has also invested in Hollard and Clientele in SA.
At the end of the three-year funding period, Yellowwoods is expected become a significant minority shareholder alongside Lombard Insurance Company.
Yellowwoods has estimated the South African individual life insurance market is around R110 billion in annual premiums, with the online and digital portion of the market expected to grow to more than 15% of the total market over the medium-term.
Touchy subject
However, Miller believes the amount of life insurance currently being sold online in SA is only a minuscule proportion of the total amount being sold, a hurdle that the industry is yet to overcome.
"If you look at other industries such as banking, most South Africans utilise online services, so it should be equally easy for consumers to shop for insurance online and compare products in the most transparent way. But they still prefer to deal with agents and brokers because the topic of death and disability is a difficult one.
"Insurance has to be 'sold' and not just 'bought' in SA. Other challenges faced by smaller insurtech players are gaining trust and brand-building."
The growing prominence of local insurtech start-ups is leading to more collaboration with traditional, larger insurance firms globally.
According to a report by S&P Global, insurtech deals tripled in value month-to-month, rising to $216.1 million in February 2018, while the total number of fintech deals across all sectors fell about 10%.
"Some of these traditional model businesses are investing in smaller insurance start-ups, not so much because they are threatened, but because they see potential and want to be part of the successes of these innovative start-ups," says Miller.
"Customers are increasingly seeking simple products and convenient access to products and services. In the next five years, there will be a significant increase in the number of locals who buy insurance online."
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