A trio of twenty-something South Africans are said to have built the world’s first fully functioning decentralised insurer, Pineapple Insurance.
The fully functioning decentralised model means that policyholders will get similar benefits and coverage as those offered by traditional insurers but the middleman or insurance company is removed from the equation.
Pineapple – which will launch short-term offerings in beta next month and to the market in the October – is based on the concept of peer-to-peer insurance. It will provide consumers with a platform to interact with each other and form pools of funds, from which claims will be paid out. Policies will be underwritten by specialist insurer Compass and Pineapple will earn a fixed fee, payable as a percentage of premiums, for its services.
Marnus van Heerden, a co-founder of Pineapple, said it will be regulated by the Financial Services Board (FSB) as it intentionally built a product that would fit in with the domestic regulatory framework.
He said Pineapple’s fees would compare favourably with the FSB disclosed industry fee structure as it removes the middleman and has successfully automated around 80% of its claims administration structure. The remaining 20% is to be administrated by Brolink, which provides claims administration solutions to a number of large insurers. Citing FSB data, Pineapple said that insurance companies only provide around R36 in value for every R100 paid in premiums, with shareholder profits, inefficient legacy systems and fraud detracting from consumer value.
“An incorrect structure and lack of transparency is destroying the traditional insurance business model. And there’s also a moral issue because people find it acceptable to defraud insurance companies. We want to change the way insurance is done,” he said.
He and fellow co-founders Matthew Elan Smith and Ndabenhle Junior Ngulube say Pineapple will the revoutionalise the industry by removing what they term a conflict of interest in insurance. “Currently, every claim an insurer denies adds to their bottom line. This is an inherent conflict of interest whereby the provider of the service is actually incentivised to not follow through on their promise. Pineapple completely removes this conflict by returning all unused premium back to the hands of the consumer,” the trio said in a statement.
Pineapple also aims to provide transparency by showing policyholders how their premiums are used. It also wants to reintroduce affinity into insurance by allowing consumers to connect with trusted acquaintances in a bid to stop policyholders from paying for “fraudsters and bad risks risks” currently ruining the traditional insurance value chain.
The trio came together last year, having participated in a Hannover Re competition aimed at unlocking consumer-focused ideas to disrupt the insurance market. The trio presented the Pineapple concept to Hannover Re executives in Germany late last year and have recently secured R5.2 million in seed funding from Hannover Re Africa’s investment arm Lireas Holdings. As part of the deal, Lireas will take a minority stake in the business and has committed to help rollout Pineapple. Prior to this, the trio self-funded Pineapple and were assisted with office space and stipends from Hannover Re.
Van Heerden said Pineapple derives its name of the fruit. “Each node is a single berry and they all come together to form a single fruit. [Just as] with Pineapple Insurance, many will come together to protect the few.”