Digital insurance start-up Naked secures R306m

Naked Insurance received more than R300m in its latest funding round backed by two major development finance institions, putting the digital start-up on a firm footing for possible expansion abroad. 

The SA-based insurance technology (insurtech) platform, which uses artificial intelligence (AI) to offer cover for cars, homes and other valuables, said it raised $17m (about R306m) in a Series B funding round.

Investors include World Bank unit the International Finance Corp (IFC), German development finance institution DEG, and Naked’s original investors — venture capital firm Yellowwoods and insurance group Hollard.

The backing is a clear vote of confidence in the business as investors have become more cautious in an environment of higher interest rates and costs of capital.

Co-founded by actuaries Alex Thomson, Sumarie Greybe, and Ernest North, Naked uses AI and automation that enables customers do all of their insurance business online — including claims management — a far cry from traditional phone and form-based business.

Customers can get a final insurance quote “for their home, its contents, their stand-alone items or their car in less than 90 seconds, and switch or pause their cover, all online, without speaking to a contact centre agent”, Naked said.

The firm’s automated operations means fewer staff and the lower costs that are passed on to customers.

“We are excited to bring new investors on board in this funding round as part of accelerating our growth plans,” Thomson said. “This investment validates our position as a pioneer of fully digital insurance in SA, and will enable us to grow our team, continue to invest in technology that puts customers in control, and to expand into new markets.”

This is Naked’s largest funding round to date. In 2021, Foundry — Naspers’s SA-focused tech investment fund led the firm’s $11m Series, offering $8.3m. 

The backing from the IFC and DEG is in line with their goals of investing in companies “that can make a social impact, increase competition in financial services in Africa, and foster financial inclusion”.

Naked said the financial backing signals strong investor confidence in its management, technology and positioning, “as well as in the significant opportunity to use AI and digital experiences to grow Africa’s insurance market in the years ahead”.

Insurtech is a growing segment in the already fast growing financial technology (fintech) sector. Besides the initial investment in Naked, Naspers has also invested R34m in Ctrl, an online company that provides short-term insurance advice. 

Sanlam and MTN are jointly building and developing digital insurance and investment offerings across Africa, using the mobile operator’s insurtech platform aYo and insurer’s financial services expertise. 

gavazam@businesslive.co.za