Naked Insurance has raised R290 million in its most recent funding round

Naked, a South African insurtech business, has announced that it has secured $17 million (approximately R290 million) in its most recent funding round.

The International Finance Corporation (IFC) of the World Bank Group led the Series B fundraising round. It is the world’s largest development organisation focusing on the private sector in emerging nations.

The German Development Finance Institution (DEG) and Naked’s initial backers, Yellowwoods and Hollard, have also contributed cash.

Naked co-founder Alex Thomson expressed excitement about bringing on additional investors to assist speed the company’s expansion objectives.

“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,” Thomson said.

Thomson told MyBroadband that the investment was the largest ever made in a South African insurtech startup, as far as Naked was aware.

The investment follows a previous round of fundraising in 2021 spearheaded by Naspers Foundry, another important investor, in which Naked earned R160 million.

Thomson, Sumarie Greybe, and Ernest North established Naked in 2016 with the goal of making insurance more accessible, simple, and transparent.

After more than two years of development, the firm formally presented its service in 2018.

Thomson stated that Naked has been swamped by client excitement for its offerings and has consistently exceeded its growth projections.

To automate insurance sign-up and policy administration, the insurer’s mobile app and website use artificial intelligence (AI) and machine learning.

It enables customers to purchase auto, home contents, building, or single-item insurance without communicating with a call centre representative.

Rose, Naked’s chatbot, handles the whole sign-up process, asking users a series of questions that can be completed in less than two minutes.

Another breakthrough is the ability for policyholders to suspend and resume accident coverage for automobiles parked at a safe “sleeping” address for numerous days.

This is perfect for circumstances where a customer may only be driving with another automobile for an extended period of time, such as on a vacation or business trip.

Naked also allows customers to cancel their purchases with a one swipe on the app, with no retentions department attempting to persuade you to change your mind.

Naked said that their AI-powered technology provided unrivalled consumer ease while also providing cost savings that it can pass on to clients in the shape of cheaper premiums.

Apart from its strong technology focus, the company employs an unusual business strategy in the insurance market.

“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,” Naked said.

“In years when claims are lower than expected, the surplus goes to communities and good causes chosen by customers.”

The insurer has named this strategy the Naked Difference, and claims it eliminates the inherent conflict of interest in traditional insurance.

“Naked isn’t thinking about profits when it processes claims,” the company added.

Providing insurance to the general public

IFC and DEG are investing in Naked as part of their commitment to making a social impact, increasing competition in financial services in Africa, and fostering financial inclusion.

According to Adamou Labara, IFC’s national manager for South Africa, boosting access to insurance products is a crucial driver of financial inclusion in South Africa since it may possibly preserve assets, improve earnings, and minimise 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,” said Labara.

Naked, according to Ingo Schulz, Vice President at DEG InsurTech Global Markets, is ideally positioned to foster digital transformation and inclusiveness in the South African insurance market due to its unique technology and creative business strategy.

“We recognize the enormous commercial potential in increasing access to insurance through the use of smart technology,” Schulz said.