Naked, the artificial intelligence-driven car insurance provider, has grown its user base by an average of 20% a month since its launch one year ago – and without embarking on any large mass media advertising campaigns. Around 80% of its new business comes via word of mouth from existing customers, showing that it has established a viable customer acquisition model for the future.
The company has consistently beat its monthly and quarterly customer acquisition and retention goals since it was founded. Naked is now looking to build on this early success by expanding into new short-term insurance product categories, growing its car insurance customer base, and continuing to expand its team.
“When we opened our doors in April 2018, we knew we wanted to do a lot more than just add another option to the overcrowded insurance market. We believed we could use technology and an unconflicted business model to improve customer experience and value for money in insurance,” says Alex Thomson, co-founder at Naked.
“What we are most of proud of is the fact that an independent research report found that over 80% of our customers refer at least one other person to Naked based on the online self-service experience, convenience and prices we offer. Customers are embracing what we do, and we have achieved a product-market fit that shows we have a sustainable business model.”
Naked’s offering has gained traction with tech-savvy young adults who want to be able to do everything online — more than 80% of customers are aged under 40. Its typical customer is a digital native who wants a quick and convenient digital experience, from getting a quote to signing up, to managing their policy and claiming.
The power of word-of-mouth means Naked has lower advertising and customer acquisition costs than most insurance companies, enabling it to pass its cost savings on to customers in the form of lower premiums. Use of digital channels rather than call centres also helps the company to keep operating costs – and hence premiums – low.
In terms of profitability, Naked has paid numerous claims over the past year, meeting its target of using 80% of premium income to pay claims. This compares favourably to the loss ratios of most international car insurance and insurtech startups in their early years. The ratio is expected to improve as Naked’s algorithms for fraud detection become ever more sophisticated.
Unlike traditional insurers, Naked takes a fixed portion of premiums to run the business, with the balance going into a pool to cover claims. Money left over in the claims pool goes to charities nominated by customers rather than towards company profits. Naked will be making the first such Naked Givebacks in the new financial year.
AI at the core
The core of the Naked customer experience is its AI-driven business process and mobile app. With Naked, customers can go online and get a final car insurance quote in less than 90 seconds, rather than spending hours phoning around for quotes and doing the paperwork with a call centre agent. Customers also use the app to manage their policies and claim after an accident.
The app includes functionality such as Naked CoverPause™, which gives customers the ability to pause their accident cover if the car won’t be used for a day or more – instantly reducing the premium for that time. New app features include the ability to generate a confirmation of cover letter on the app in seconds.
Once the customer has generated and accepted a quote, they can get the proof of insurance by using Naked’s mobile app to scan the car’s licence disc. This innovation means that someone buying a vehicle on financing can get it insured in as little as five minutes total, from getting a final online quote to presenting the certificate to the dealer so that they take possession of a shiny new car.
Naked was co-founded by respected actuaries Sumarie Greybe, Alex Thomson and Ernest North, who all have backgrounds working for leading insurance companies in South Africa. Yellowwoods and Hollard were the founding investors in Naked and both companies increased their investment in the company during the course of the year.