The Johannesburg-based insurance startup has offered low-cost home, car and electronics policies since 2018. With climate change affecting its customers, the company is embedding protection against floods, hailstorms, wind and fire directly into its insurance policies.
The protection is automatic – policyholders don’t need to opt in or undergo additional underwriting. “The key themes for insurance over the next decade are the increasing need for climate-related coverage and the use of digital tools to lower costs and increase access to insurance,” said Richard Hardy of BlueOrchard, which invested in Naked via its InsuResilience Investment Fund, an impact fund that invests in climate insurance solutions.
International Finance Corp., German development finance institution DEG, South African insurance company Hollard and Johannesburg-based private equity firm Yellowwoods also backed Naked in the extension to its Series B financing, bringing the round to $38 million.
Impact incentives
Naked links insurance customers to policy providers, offering online quotes in less than 90 seconds. The company collects a flat fee from policies sold, and pools premiums to settle claims. To remove financial incentives for denying claims, leftover money is donated to nonprofits and charitable organizations.
Bypassing brokers and agents enables Naked to offer lower premiums, starting at just $3 rand per month. “As a result, insurance products become more affordable to lower-income segments of the population who previously could not afford these products,” said Hardy.
In other African markets, where insurance penetration is much lower than in South Africa, brokers with community relationships are key to insurance adoption (see, “Inclusive fintech ventures cut in the middlemen and women“).
Resilience finance
Climate resilience and adaptation solutions, especially in climate-vulnerable emerging markets, struggle to attract private capital. BlueOrchard. which launched its first InsuResilience Investment Fund in 2015, has blended catalytic and commercial capital. Now on its second fund, BlueOrchard sees a pathway to fully commercial financing (see, “Blend, derisk, scale, repeat: BlueOrchard’s recipe for moving capital to emerging markets“).
“We have developed a market for climate insurance in emerging markets where very often insurance doesn’t even exist,” BlueOrchard’s Maria Teresa Zappia told ImpactAlpha in a video interview. “The entire livelihood of these communities is impacted. So the impact that you can have is incredible.”
