The insurance market in Africa shows a penetration rate of 3%, per year McKinsey Study in 2018 by comparing six insurance regions on the continent. If the South African market is excluded, that number drops to a paltry 1.12%.
Unlike other parts of the world, most African insurers overlook the importance of suitable and affordable insurance products for the average African consumer.. Lami Technologies, a Kenyan start-up with $ 1.8 million in seed capital, is looking to change that.
Round was led by Accion Venture Lab, an early stage investment firm supporting financial services for underserved markets. Other venture capital firms that have participated include AAIC, Consonance, P1 Ventures, Acuity Ventures, The Continent Venture Partners and Future Africa.
Low insurance underwriting in Africa is partly due to the traditional distribution of insurance policies. They habitually rely on physical channels to sell and process policies. It takes a long processing cycle and has low customer satisfaction and higher distribution costs.
Sequentially, the ways in which the bonuses are paid is affected. According to the 2018 McKinsey report, the total gross written premiums (GRP) in East Africa was $ 3.3 billion. By comparison, South Africa generated $ 48.3 billion in GWPs in the same year.
For this reason, the CEO Jihan abass founded the company in 2018 to democratize insurance products in Kenya.
âFor us, the main problem we wanted to solve was that 97% of Africans don’t buy insurance. We were trying to figure out the methodology behind that, especially in Kenya where there are over 50 insurance companies but the penetration level is 2.4%, “she told TechCrunch.
“The driving force for us was to make insurance widely available. We estimated that the construction of the technological infrastructure for facilitate insurance distribution was the best way to increase the level of penetration in Africa. “
but sell directly to consumers would be a meticulous process as they rarely purchase insurance from trusted organizations, let alone a third party company. Lami has therefore adopted a B2B2C approach to take advantage of the trust already built by the platforms that dialogue with customers on a daily basis and innovate around it..
Via an API, it allows companies like banks, startups and organizations to offer digital insurance products to their users. The product can also be used by partner companies to manage their own insurance needs.
Some clients like Stanbic Bank in Kenya use Lami’s API to perform insurance transactions; The HR WorkPay platform makes insurance products available to companies using its platform. With more than 20 insurers, the company is also launching an insurance marketplace on Jumia e-commerce platform.
Users can get a quote for custom car, medical or other insurance products through its API. They can also customize the benefits and adjust the premium according to them, get their police documents and access requests.
Typically, it takes approximately 90 days for claims to be Processing for an average African insurer. Abass said Lami reduced that time to one week – it’s one way the three-year company has built trust with customers..
Jihan Abbas (Founder and CEO). Image credits: Lami Technologies
Another challenge that Lami has managed to overcome is to involve insurance companies. According to the CEO, the transition from a traditional insurance offering to digital distribution channels only worked because Lami started to show the value of customer experience and journey that requires taking out the right insurance for the right customer at the right time.
That’s what sets Lami apart, Abass continued. It co-designs products with its subscribing partners. And approaching design in this way helps businesses deliver unique insurance products to their underlying customers..
It illustrates an offer with a bus reservation platform where passenger insurance points are calculated per trip. It counts when they get on the bus and stops when they get off. She believes an innovative process like this will bring the continent’s insurance game to a more desirable place..
“I think there is huge potential in the insurance industry. Despite the low penetration, the annual market is worth over $ 60 billion per year. I think people are starting to open their eyes to insurance as opposed to other financial services. “
Since its start, the insurtech startup has sold more than 5,000 fonts. It has partnered with more than 25 active insurers including Britam, Pioneer and Madison Insurance. These insurers help distribute more than 30 products ranging from medical and fringe benefits to auto insurance and devices..
Lami will use the seed investment to hire more people, improve its technology and increase its presence across Africa.
Accion Venture Lab bets on Lami’s integrated financial game. Here’s what its African director, Ashley Lewis, said about the investment. “… By integrating personalized insurance into businesses that customers know and trust, Lami makes insurance accessible to underserved populations in Africa and enables them to strengthen their financial resilience.. “
Lami’s investment is also a spark in a Kenyan tech ecosystem where being both an indigenous founder and a woman is an incongruous mix.. A study in 2019 showed that Kenya had the highest presence of expatriate co-founders of any Big Four tech ecosystems. While the country has a better representation of co-founders than other countries (1 in 4), the percentage of those in Kenya is around 12%.
There is fair a handful of founders who have raised millions of dollars. Although Abbass is seated comfortably in this illustrious club, it took thick skin and confidence in its product to enter.
“The funding landscape in Kenya is generally skewed in favor of male founders and in East Africa, especially for foreign founders. It was therefore much more difficult to get investors excited and join us. For us, we’ve built something pretty exciting, even if it took a long time. One of the reasons we wanted to make this known is that other foundresses can see that there is an opportunity to do the same,” she said.