Insurance lags behind other financial services in the adoption of digital technologies. Granted, a few unicorns have appeared in the modern digital insurance space like Tractable and Lemonade; yet, this sector did not run to the stage because quickly like, for example, payments or loans.
With a global insurance market worth over $ 5,000 billion, there are different opportunities for to be exploited despite the presence of large incumbent operators.
In Africa, a startup is carving out a niche. By using APIs, Root helps businesses and developers launch insurance products faster than the traditional way. The South Africa-based company has raised $ 3 million in seed funding to expand outside the country and build the infrastructure for the global digital insurance economy.
VC firms Invenfin, Base Capital, Savannah Fund, P1 Ventures, Luno and FireID participated in the round, including high impact angel investors.
Root assumed that many barriers, including compliance and capital, prevent software developers and businesses from creating and innovating around insurance..
CEO Louw Hopley told TechCrunch he noticed in 2015 that while other financial services began to use APIs to it’s clear help developers create products adapted to their offers, nothing was built around insurance.
âWe have a pretty strong feeling that insurance was stuck in the 1900s. There is still a lot of paper. used even as consumer behavior has gone digital in real time. There is a personalized environment in pretty much every industry, but insurance is struggling to catch up, âhe said.
âAnd that’s kind of what we’re trying to figure out to break down those barriers and consolidate them behind easy-to-use APIs so people can start solving this new, personalized, modern digital age.. “
Hopley launched Root in 2016 to address this need. Jonathan Stewart joined as co-founder in charge of sales and partnerships in 2018.
Root’s first product was bank accounts and programmable cards, but it has moved on to providing insurance APIs which are now its core offering.
Root plugs above insurance companies, which underwrite the products that developers and business analysts, using Root, build and integrate into their existing customer experiences, which may exist on a website, chatbot, or mobile app.
The five-year company principally targets non-insurance companies with a stable customer base; companies offering insurance as a secondary product. For example, telecommunications operators, retailers and banks. But it also feeds the players in affinity insurance; some of the biggest in South Africa in fact.
Some of these clients include Mr Price Money, FinChoice, Telkom, Metropolitan, Sanlam and Guardrisk. With Root’s insurance infrastructure, these companies processed millions of policies and thousands of claims every month..
The South African company makes money from subscription license fees based on the size of its customers and the complexity of their needs..
in addition to help developers and businesses launch insurance products, Root provides channels for these businesses to reach more customers and supports compliance issues.
With this new funding, Root intends to roll out its flexible, low-code digital insurance platform as it expands to other markets, particularly in Europe.
Hopley does not mention the countries in which Root will grow; yet, judging by the level of assurance in the region, the UK, Germany and France could top the list.
As Root plans to hire more technical and sales talent in Europe, Hopley says much of the company’s team will remain in South Africa.
That being said, the company’s goal, especially as it expands into new ground, is to create the operating system for the global insurance industry, Hopley said..
“We feel there has to be a standard platform on which people innovate, build their products and fit into it. Essentially, that means we want to be the platform that all product innovators, actuaries and developers will connect to to create insurance products and bring them to market.. We feel that if you do that, you can generate a lot more innovation faster because you are kind of allowing sub-economies to grow and other people to start integrating insurance specific solutions. This essentially integrates the entire industry.
In a statement, Base Capital’s Paul Rutherford said Root’s APIs simplify the complex world of insurance and improve the experience for consumers and insurers.. Mikael Hajjar of P1 Ventures, on the other hand, notes that Root could be the African insurtech startup best positioned to gain market share in Europe and the United States.