This South African AI-based insurer allows you to ‘pause’ your insurance when not using your car

Insurance startup Naked officially launched on Tuesday (10 April) with its first product set to be an AI-based car insurance offering.

Notably, the start-up (which received funding through a R20 million investment from Hollard and Yellowwoods) plans to use a unique businesses model and cutting edge technology to stand out from the crowd.

This includes the use of automation and AI-based fraud algorithms which permit certain claims to be approved instantly, reducing inconvenience and frustration for clients and further reducing premiums through lower costs.

This instantaneous technology is also available to existing customers, and the Naked app allows customers to change their cover instantly at any time.

An example of this is ‘Naked CoverPause’, a world-first for car insurance which gives customers the ability to pause their accident cover if the car won’t be used for a day or more– reducing the premium for that time.

Speaking to BusinessTech, co-founder of Naked, Alex Thomson, explained that Naked does still have a help desk which customers can contact via email or telephone when dealing with issues submitting claims or signing-up.

“I think the big difference is that its a help desk and not a call centre,” he said.

“Where a claim is not automatically approved, in the beginning it will go through to a claims handler. This is where it also helps to have a claims background with Hollard who will also assist in this area.”

AI judging your claim

In some areas Naked is very similar to other insurance products, with factors like ‘how long have you been a holder’, ‘the type of claim’, and ‘how long ago was your last claim’ all factored into how successful you will be when submitting.

However, Thomson said that Naked also plans to build out data profiles over time (based on claims that they receive), making it easier for their AI-algorithms to automatically analyse claims.

“The the application process is I think a lot quicker than a lot of similar phone or app-based submissions, and we gather a lot of data from single details, which we can then use to fill out the claim exactly,” he said.

An example Thomson provided was the use of the eNatis system to quickly gather your driving information, upon simply filling in your ID number.

In this way he states that customers can receive a binding quote within 90 seconds of starting the app, and can be fully insured after keying in your credit card details a minute later.

“The primary thing that we have tried to do here is take a lot of the pain out of the process,” he said.

Charity

Besides its unique technology, Naked also plans to stand out through its unique business plan.

Unlike existing insurance, Naked takes a fixed portion of premiums to run the business, with the balance going into a pool to cover claims. At the end of each year, money left over in the claims pool goes to charities nominated by customers rather than towards company profits.

However even Thomson admits that the idea is not completely altruistic and hopes that it can be used to clear any perception problems surrounding the insurance industry.

“The big problem I think that we are trying to tackle is that people dislike insurance companies, and that they are trying to do them wrong” he said.

“The problem is that when a claim comes in it comes out directly out of an insurance companies bottom-line, – leading to a clear conflict of interest.

“That’s why we opted to take a flat fee and donate left over to charity,” he said.

Thomson explained that the amount that is given to charity will differ based on the amount of money left in individual pools of clients each year.

All the clients who selected a specific charity (such as the Nelson Mandela foundation) will be pooled together and claims are deducted from this on a group basis.

“If we extrapolate that over the long term it should be between 7%-10% that goes to charity (after premiums),: Thomson said.

However it could be 20% or 0% he said – depending on the claims that year, he said.

Currently users can select a pre-approved list of charities when they sign up, while Thomson said that Naked will also allow customers to apply for other charities, should they meet the qualifying criteria.


Read: New insurance startup launches in SA

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This South African AI-based insurer allows you to ‘pause’ your insurance when not using your car