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What next for Naked after the recent Naspers Foundry investment

This week we reported on a rather significant piece of news in the local insurtech space, as the Naspers Foundry led a funding round in Naked to the tune of R120 million.

With the metaphorical ink still drying on the deal, which also happens to be the largest in this sector that Naspers Foundry has made to date, Naked’s co-founders explained that the investment was acknowledgement of the digital-first insurance platform‘s efforts in recent years and would provide them the runway to grow its team, along with expanding into new markets.

To gain a bit more insight into what the investment means and what the next chapter potentially holds for Naked, we spoke with co-founder Ernest North (pictured above). Here’s what he was able to share.

Hypertext: When we last spoke to you, Naked had just ventured into household insurance, then the pandemic hit. We have since seen the company look to offer services built around the pandemic. Do you foresee it as changing the insurance landscape for good?

Ernest North: It’s become a cliché, but COVID-19 has accelerated digital adoption in every sector, including those that were lagging like insurance. Although we were experiencing good traction before the pandemic, it has really boosted our growth because people have become more comfortable with purchasing even complex products via digital channels.

People who have used the internet for everything from banking online to conferencing with colleagues now realise that digital insurance is simpler, more affordable and gives them more control than buying from a call centre. They also enjoy the control of managing their policies themselves, for example, using our CoverPause feature to pause accident cover when not driving.

We may see other ripple effects for insurance in the years to come. With remote work becoming more entrenched, we could see many households downsize from two cars to one. We may also see more demand for standalone item insurance as people seek to protect work-from-home equipment such as computers. As such, the lines between personal and commercial cover could blur.

Hypertext: The recent funding round has yielded significant investment. That often comes with its own pressure, so what kind of approach will Naked be taking now that it has a lot more to work with?

EN: Now that we’ve proven our business model and built an enthusiastic tribe of customers, the funding will help us to expand our team, invest even further in our automated processes and technology backbone, expand our product suite and scale up our customer base.

We were first in South Africa to offer an end-to-end digital and automated process for quoting, buying and claiming, and we believe we have the opportunity to change how people interact with insurance and to lead the next generation of insurance. It’s a competitive industry, and the support and funding from our investors will help us to increase our visibility and footprint.

Hypertext: As far as current Naked customers are concerned, what, if anything, does this investment mean for them?

EN: Our mission is to build insurance that people love and to make insurance seamless, convenient and affordable. We’re looking to keep pushing the boundaries in how we transform the customer experience using technology and AI. Watch this space.

Hypertext: Your fellow co-founder Alex Thomson noted after the investment was announced that Naked would be looking at multiple areas such as expanding its team, investing in technology and entering international markets. Which of those will happen first?

EN: While we’ve come a long way, we want to keep finding ways to transform the insurance experience, so we will prioritise technology and customer experience investments that make insurance easy, convenient, more affordable and even enjoyable. An important part of how we do that is by growing our team of software developers and data scientists that build all the Naked software in-house.

Hypertext: Does this investment give Naked the momentum to challenge some of the bigger insurance players in SA?

EN: The backing of investors of the calibre of Naspers Foundry, Yellowwoods and Hollard gives us credibility and a strong profile. The sizeable investments they are making validates our business model and our view that a sea change is underway in the personal insurance market, reminiscent of the shift from broker-led insurance to direct contact centre sales 25 years ago.

We and our investors expect a rapid shift to digital insurance – which will change the market in fundamental ways.

Hypertext: Convenience, speed and a digital-first approach has seen Naked disrupt the insurance market to date. How else is the company aiming to reinvent insurance for current and future customers?

EN: We enable customers to buy cover online in seconds and to claim and manage cover on their smartphone – making it quick and easy for anyone to get insured. By using automation to drive down costs, we also make insurance more affordable. In this way increasing insurance penetration – the number of people who use insurance – is an important goal.

We’re also on a mission to restore trust in an industry that many consumers regard with a high level of scepticism.

Unlike conventional insurance providers, Naked charges a fixed percentage of customers’ premiums to do everything. This flat fee means that our income doesn’t depend on how much we pay out in claims. When claims are low, the surplus remaining in the collective claims pool at the end of the year goes to causes our customers care about.

Customers know we will not profit by delaying or disputing claims without good cause.

Hypertext: We have seen larger, traditional local insurers gamify the insurance experience for customers. Is that something that Naked would look into, or is the company wanting to do things differently?

EN: Finding ways to make users engage with the insurance product more regularly, for example on an app, is definitely a sound strategy. Our main focus, however, remains making the insurance experience as seamless, easy and convenient as possible, and not to add any unnecessary costs or complexities.

Hypertext: Lastly, in terms of social good, what objectives is Naked eyeing now that it has this investment to leverage?

EN: Insurance should be a safety net that gives people financial security when they suffer a loss – not a grudge purchase or something that is too expensive or inaccessible for most. If we get this right, we can dramatically improve our customers’ lives by protecting them from severe financial consequences when disaster strikes.

We are also proud of the Naked Difference: a win-win business model that drives social impact and customer benefit. The Naked Difference shares money left in the Naked claims pool at the end of each year with causes chosen by customers. This is not traditional corporate social investment, but a new business model where customers benefit from a company acting in their best interests.

Over the past two years, we have allocated more than R1 million in these pay-outs to causes and NPOs.

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