Fintech Naked raises R290 million in third equity funding round…

The International Finance Corporation (IFC) and the German Development Finance Institution (YOU) both support Naked in line with their goals of investing in companies that can have a social impact, increasing competition in financial services in Africa and promoting financial inclusion.

The funding round signals strong investor confidence in Naked’s leadership, technology and positioning, as well as the significant opportunity to use AI and digital experiences to grow Africa’s insurance market.

The innovative insurance company, which runs a end-to-end digital platform, was founded by actuaries Alex Thomson, Sumarie Greybe and Ernest North in 2018. It enables customers to manage their entire insurance experience via an app, without having to speak to a dreaded contact center agent.

Unlike the traditional model where insurance companies’ profits depend on how much they pay in claims, Naked only takes a fixed fee from premiums to cover expenses and operating costs. The rest of the premiums go into a “pot” to pay claims.

At the end of the year, what is left in that pot is not taken as profit, but paid to social causes that Naked customers choose to support through Naked Difference.

In 2022, the insurer gave R700 000 to around 20 causes, including Surfpop, which gives children in foster care – or referred by social workers – a stable environment where they are taught surfing skills, get help with school work and get nutritious meals.

Other causes that Naked Difference supports include Cotlands, Door of Hope and the dog adoption initiative, Oscars Arc.

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– This means that we have removed the link between profit and the amount of compensation paid. Our profits depend on getting people to join Naked and keeping them happy on our platform – just like any other tech company,” says North.

Thomson says the goal more than five years ago was to create an insurance platform that people would love for being fair, convenient and transparent, at different prices.

“Since launching in 2018, we have been overwhelmed by customer enthusiasm for our offering and have exceeded our growth targets every year. We are excited to bring on new investors in this funding round as part of accelerating our growth plans.

“This investment confirms our position as a pioneer in fully digital insurance in South Africa and will enable us to grow our team, continue to invest in technology that puts customers in control and expand into new markets.”

Adamou Labara, IFC Country Manager for South Africa, commented: “Improving access to insurance products is a key driver of financial inclusion in South Africa, as it has the potential to preserve assets, increase income and reduce uncertainty.

“IFC’s investment in Naked will help increase the spread of technology-driven insurance in the country and contribute to job creation and economic growth.”

Ingo Schulz, Vice President of DEG InsurTech Global Markets, adds that investors believe Naked is well positioned to drive digital transformation and inclusion in the South African insurance industry due to its unique technology and innovative business model.

“We recognize the huge commercial potential in increasing access to insurance through the use of smart technology. We are excited to partner with Naked, not only as a leader in this space, but also as a business that will have a significant positive social and developmental impact.” BM/DM