Enthovens bet on insurance disruptor
The investment in Simply is part of the plan which saw Yellowwoods put R20m into Naked, an online car insurer
Not all investment companies would fund a potential competitor to their core businesses, but this is exactly what Yellowwoods has done by taking 15% of insurtech firm Simply.
Yellowwoods is the secretive SA holding company of the Enthoven family. Its main interests are Hollard, with about R24bn in premium income across short-and long-term insurance licences, and Clientèle, a highly profitable but niche life office with R2.1bn in premium income. Neither has been a slouch when it comes to innovation — Clientèle, in particular, was an innovator in the direct-to-consumer market through its cheesy but effective TV infomercials.
But the Enthovens are always looking to the next generation.
The founder of the dynasty, Robert, made his name in insurance broking. His son Patrick moved into underwriting when Hollard was formed in 1980. And more recently the family have moved outside their insurance comfort zone by financing Nando’s, run by Robby Enthoven in the UK — which has been highly profitable — and the Spier Wine Farm, which, given the economics of that industry, looks like more of a fun project. It is run by Robby’s sister, Mariota. The third sibling, Adrian, runs the serious side as executive chair of Yellowwoods and chair of Hollard.
Scott Gilmour, an investment manager at Yellowwoods, says the investment in Simply is part of the same strategy which led to a R20m investment in Naked, a start-up car insurer, which has chosen to work from part of the Hollard campus in Parktown, Johannesburg.
Simply, which has been going for two years, will stay in Claremont, Cape Town.
"By investing in early-stage businesses we can be alert to the changing landscape," says Gilmour. Hollard and Clientèle have retained an entrepreneurial culture but still have legacy systems and practices which make it hard to stay at the cutting edge.
Gilmour says Yellowwoods can keep its eye on the ball as it is exclusively focused on insurance. Nando’s is run through the Enthovens’ offshore family trusts, and even the interest in the Budget Group is based in the UK: this is the family’s joint venture with Douw Steyn, and it owns Telesure and a number of insurers and comparative websites in SA, the UK and Australia. Gilmour says the long-term insurance market is worth about R110bn a year, and he would conservatively expect digital players such as Simply to make up 15% of this over the next five years.
"And Simply already has the leading products for domestic worker cover, group assurance and SME insurance."
Simply CEO Anthony Miller says that unlike established direct-to-consumer businesses such as Outsurance Life and 1Life, Simply relies on social media such as Facebook and Instagram for communication. It does not have the high expenses of heavy TV advertising and with its digital-savvy client base it can get by with a much smaller call centre.
Miller, a former McKinsey consultant, has adapted the use of data science, which he built up when he ran the Lightstone property research engine, to the life market.
He founded Simply with two actuaries, Simon Nicholson and Shaun Dippnall.
Miller says Simply has limited underwriting, which means that a confirmed (and not an indicative) quote can be generated within five minutes. This contrasts with the fully underwritten model at competitors such as Instant Life and Different Life. Simply does not ask for medicals for cover below R2m for life or disability, or R500,000 for funeral cover.
Miller says Simply and Naked have a good relationship and exchange ideas as fellow insurtech disruptors, but there are no plans to put them together. And they are also unlikely to compete for some years to come. He says Simply will start offering savings and investment products long before it considers the short-term insurance market.
Miller says that even though Simply would like to be known as a digital business it is more than happy to distribute group products through independent brokers, provided there is no difference to the price the client pays.
Gilmour says that even though Yellowwoods is a long-term investor it isn’t scared to change its mind. It owned an interest in CoreShares, which lists exchange traded funds, but after about a year sold this on to Outsurance when the group scaled down its ambitions in the investment field.