South African insurtech start-up Naked has raised $38m (R700m) in a Series B2 funding round, the largest investment in the African insurtech sector to date, underscoring growing investor interest in the continent’s burgeoning technology landscape.
The round attracted global impact investment firm BlueOrchard, alongside existing investors Hollard, Yellowwoods, the International Finance Corporation (IFC), and Germany’s DEG. The capital injection is earmarked for accelerating Naked’s expansion, enhancing its technology platform, and meeting regulatory capital requirements.
Founded in 2018 by former Ernst & Young executives and actuaries Alex Thomson, Sumarié Greybe, and Ernest North, Naked distinguishes itself through a fully digital, AI-driven insurance platform. The company offers car, home, and single-item insurance policies entirely online, claiming to provide final quotes in under 90 seconds. Customers can manage their policies, including purchasing coverage, submitting claims, and pausing coverage, directly through the app without human interaction. This streamlined approach has resonated with a digitally savvy customer base, contributing to the company’s rapid growth.
Naked’s business model, dubbed the “Naked Difference,” aims to address perceived conflicts of interest within traditional insurance. The company operates on a fixed percentage of premiums, donating any surplus from unclaimed funds to customer-selected charities. This model seeks to align the company’s interests with those of its customers, removing the incentive to deny valid claims to boost profitability. This approach has been a key differentiator in a market often perceived as opaque and driven by profit maximisation.
The South African insurance market is characterised by a mix of established players and emerging digital challengers. While traditional insurers maintain significant market share, the increasing penetration of smartphones and internet access has created an opening for insurtech companies like Naked to disrupt the status quo.
The latest funding round will enable Naked to invest further in automation and AI, expand its product portfolio, broaden its market reach, and increase marketing efforts. The company also faces the challenge of navigating a complex regulatory environment. The capital will help it meet the rising regulatory capital requirements associated with its rapid expansion.
While Naked’s model has proven successful in its home market, international expansion presents both opportunities and challenges. Adapting to different regulatory frameworks, consumer preferences, and competitive landscapes will be crucial for its future growth.
The investment in Naked highlights the growing interest in Africa’s technology sector, particularly in fintech and insurtech. Investors are increasingly drawn to the continent’s large, young population and the potential for technology to address long-standing challenges in financial services. While challenges remain, including infrastructure limitations and regulatory complexities, the success of companies like Naked suggests a promising future for insurtech in Africa.