Fintech Naked raises R290m in third equity funding round

The International Finance Corporation (IFC) and the German Development Finance Institution (DEG) are both backing Naked in line with their goals of investing in companies that can make a social impact, increase competition in financial services in Africa, and foster financial inclusion.

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

The innovative insurer, which runs off an 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 ever needing to speak to a dreaded contact centre agent.

In contrast to the traditional model where insurers’ profits depend on how much they pay in claims, Naked only takes a flat fee from premiums to cover expenses and running costs. The rest of the premiums go into a “pot” to pay claims. 

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

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

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

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“This means we have removed the link between profit and the amount paid out in claims. Our profit is dependent on getting people to join Naked and keeping them happy on our platform – just like any other tech company,” North says.

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

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

“This investment validates our position as a pioneer of 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 to 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 incomes and reduce uncertainties. 

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

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

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