“South Africa’s insurance market is ripe for tech disruption,” says Anthony Miller, CEO of Cape Town-based fintech start-up Simply Financial Services.
Miller, a technology and data entrepreneur, and partners, actuaries Simon Nicholson and Shaun Dippnall, launched Simply a little over six months ago. The goal? To provide people earning less than R30 000/month with a simple, easy to buy insurance offering that does not break the bank.
The market for life insurance in SA is big, competitive and profitable, with just under R10 billion in new annual premiums being written annually, according to the New Business Volumes Survey published by Swiss Re in 2014.
Around 18 million adult South Africans have funeral cover and roughly 40% of them have two or more policies, figures from the Finscope 2015 Consumer Survey show. Unfortunately, only 6% of South Africans have life cover and even fewer have disability insurance.
“A large percentage of the 14 million South African households earning under R30 000 per month do not have life insurance,” says Miller. “Thus when a bread winner dies in South Africa and many other emerging economies, his or her dependents are often consigned to poverty – that’s the harsh reality many face in our country.”
He adds that in many cases customers are poorly served, buying expensive, old-fashioned funeral and credit life policies that are sold by insurers who are aggressive in their collections methods.
“All of this in a market where 50% of people are in some kind of debt? Something has to give,” he says.
Simply believes it can succeed in this space by accurately targeting credit-worthy, tech-savvy customers earning more than R7 500 per month. While products are designed for individuals, Simply has developed a domestic employer and business employer offering as a way to serve lower income customers in a sustainable manner. “In this environment lapse rates can be high. We expect far lower lapse rates when the employer pays the premium,” Miller says.
By focusing on product design, data analytics, software development and marketing — it outsources ‘commodity’ services to partners — Miller says they can reduce the cost and complexity of mass-market life insurance and pass the cost benefits onto the customer.
In their favour, says Miller, is the fact that the market is dominated by ‘old school’ players whose legacy systems and business models limit their ability to innovate.
The model sees the fintech firm selling life, disability and funeral insurance “combos”. Depending on the cover selected, they are available for as little as R59 a month, he says. For instance a 30-year-old woman earning R4 500 a month can buy R100 000 life cover, R150 000 disability cover and R15 000 family funeral cover (covers insured life, spouse and up to five children) for R92 per month.
Signing up is simple. The entire online process takes less than 10 minutes, requiring the individual to fill in some personal details, answer three health questions and, should they qualify, receiving immediate cover.
The products are designed for a mobile environment. This was deliberate because most South Africans do not have access to the Internet other than on their phones. “South Africans are increasingly comfortable with buying online and confident about making their own choices, without the presence or influence of a broker,” Miller says.
He stresses that Simply is not some fly-by-night start-up business. Their policies are underwritten by Old Mutual Alternative Risk Transfer Limited and reinsured by RGA Reinsurance Company of South Africa Limited.
Its venture capital partner is Lombard Insurance, which in turn is backed by Yellowwoods, the venture capital firm spun out of Hollard Insurance.
So far the company has sold about 2 500 policies, which equates to about 600 policies a month and over R1.1 billion worth of life cover.