Innovative view to insurance creating a ‘win-win’

Automation and artificial intelligence (AI) have impacted the South African insurance industry, and this has only been amplified during the COVID-19 lockdown. The conventional ‘call centre’ approach to providing short-term insurance is being challenged by digital innovators.

Naked Insurance, overall winner of the 2019 MTN Business App of the Year Awards, is thriving at a time when COVID-19 is testing the traditional services of mainstream insurers.

At the base of Naked Insurance’s growth and success, says co-founder Ernest North, is the use of bots and systems that can deliver insurance options to prospective customers – in 90 seconds. The process of getting cover can be completed within just three minutes. Cover is also customisable, and many customers have been able to save up to 90% on premium costs during lockdown.

“The insurance industry has, over the years, had a reputation for being an ‘adversarial’ industry. Profits are determined by what remains after claims have been settled. Understandably, this puts pressure on traditional insurers to minimise claims, which ultimately sits at the core of the strained relationships between providers and their customers,” says North, one of three actuaries who founded Naked Insurance three years ago.

Searching for a solution to this impasse saw the three, all consultants within the industry, leaving their day jobs to form their own company. Through technology, the ‘adversarial’ tag was removed by changing the emphasis on profit-generation to one that relies on flat fees from premiums rather than the history of claim settlement.

“We were determined to deliver something fundamentally different, and it was technology that inspired us to take a new view on insurance,” says North.

“Traditional insurers, even those with some digital tools, mainly interact with clients through human intervention. The solution that we created was an app that allows automation to undertake end-to-end interaction with customers. This interaction includes quoting, the selection and buying process, making changes to policies and facilitating the claims process.”

“Everything is completely self-service. There is no need to spend about 40 minutes with a call centre agent. Because the process is completed quickly with a chatbot, on the app or Web site, savings are made and this benefit is felt by the customer through lower premiums.”

Customers can also make real-time changes to policies as needed. During lockdown, says North, customers have used the ‘pause’ function on the app to avoid paying for accident cover while vehicles have been parked at home.

“A second press of the button reverses this action, and the customer is covered immediately for being back on the road. Post-COVID, we expect users to still use this feature and reduce their costs by about 50% a month,” says North.

Besides the cost-saving benefits for customers, this ‘new view’ to insurance has helped Naked Insurance weather the negative impact that COVID-19 has been having on businesses and the South African economy.

Naked Insurance reflects on the path from idea to fruition. The business journey involved the use of seed capital through a venture capital supplier. Since then, Naked Insurance has been backed by Hollard Insurance, one of South Africa’s largest insurers.

North admits that the rapidly changing AI and automation landscape means that Naked Insurance could face challenges in future. However, the approach of competition will likely be held off if Naked Insurance remains committed to developing new technology that leads the pack in serving its customers through cost savings and convenience.

“They are specifically created end-to-end systems. Other companies have existing legacy systems that hamper their digital entry into the market,” says North.

Weighing in on the success of Naked Insurance, Kholo Magagane, Head of Marketing at MTN Business, says: “The face of business is changing rapidly. Customers are driving this change by expecting to be able to interact with providers and the products they use. Flexibility, immediacy and simplicity are becoming non-negotiable. Delivering on these expectations means going digital.

“Local app developers have recognised this and are using tools like the cloud, bots and automated systems to fill gaps in local service delivery by building world-class applications. It is for this reason that MTN Business has, over the last decade, been encouraging entrepreneurs and innovators to find unique solutions to meet local demands. We are proud to have taken this even further by providing platforms, like the MTN Business App of the Year Awards, for these techpreneurs to showcase their solutions.”

This year marks the ninth edition of the MTN Business App of the Year Awards and is not only aimed at encouraging the efforts of local developers, but on further building an industry that will contribute to rebuilding the South African economy.

“At the heart of everything we do lies our belief that we need to keep pace with change, so that we are in a position to continue enabling innovation and entrepreneurship in SA. We look forward to seeing the new apps that will be submitted this year. We are always excited to see brand new, unique ideas – solutions designed to address a broad range of real-life challenges. This year includes SA’s youth, who have been invited to participate in our new MTN Business App Academy. The best solutions coming out of the academy, and subsequent hackathon, will be entered into our all-new youth category of the awards,” says Magagane.

The overall winner (or winning team) of the MTN Business App of the Year Award will receive a trip to a tech-related destination, valued at R 200 000. The top three ‘Best Youth App’ entrants (18 to 26 years of age) will each receive a share of R 100 000 to further their tech journeys.

To enter, app developers can submit their entries before 29 September 2020 by going to: appoftheyear.co.za. The awards ceremony will be live-streamed on 29 October 2020.

Updates on the competition will be posted on @MTNBusinessZA on Twitter. Anyone interested in participating in the conversation can follow #mtnappawards.