SA trio builds world’s first fully functioning decentralised insurer

Pineapple secures R5.2 million in seed funding, to rollout offering in coming weeks.
Picture: Supplied

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.”

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Well done guys. Amazing how much scope there is with insurance.

Quite an interesting concept, seems like the aim is something close to the current cell captive methodology. I like it a lot when the young generation comes up with total new approaches and get the backing to implement. May the fair wind keep their sails bulged.
It would be nice to follow the progress of these lads and see if they get their client pooling, risk pricing, etc right. If Pineapple can deliver the value it intends to offer the consumer, it will become a niche disruptor in the short-term insurance space.
The article though, requires some editing, what is the sponsor funding now – R5,2b or R5,2m? The difference is huge and with R5.2m the trio is not going to get far.

Prinesha, can you help us out here? What is the correct amount of seed capital that the trio has secured?

Hi France,
It is in fact R5.2 million.
I’ve updated the piece to reflect this – apologies for the confusion.

R5.2m for seed funding is very impressive, not sure why you think they won’t get far with that

Interesting concept indeed but there are quiet some flaws.

Taking out the middleman while actually using an underwriter (and probably a reinsurer at some point) to write the business in addition to yourself? Pineapple is the middleman. This is a traditional broker business. The only difference is that unused claims money is paid back. So seen with a number of other companies in Europe e.g. Friendsurance and Inspeer

Compared to these two they don’t even do claims themselves because that’s outsourced to one of the most traditional claims administrators on the country.

So, they are paid to acquire customers and organise the payback. That’s very little value for the customer for 20% of premium cost, don’t you think?

Will they actually be able to offer cost savings on scale while staying transparent with an expensive and old fashioned setup like that?

End of comments.



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