In terms of digital technology adoption, insurance lags behind other financial sectors. Although a few unicorns have emerged from the modern digital insurance market, such as Tractable and Lemonade, this industry has not progressed at the same rate as, say, payments or lending. Despite the existence of huge incumbents, there are several possibilities to exploit in the global insurance business, which is valued at over $5 trillion.
One firm in Africa is carving out a space for itself. Root uses APIs to let businesses and developers establish insurance products more quickly than they could otherwise.
The South African startup has acquired $3 million in early capital to help it expand outside of the country and establish the infrastructure for the global digital insurance sector.
The round included venture capital companies Invenfin, Base Capital, Savannah Fund, P1 Ventures, Luno, and FireID, as well as several high-impact angel investors. Many constraints, including compliance and funding, impeded software developers and organizations from creating and innovating around insurance, according to Root. While other financial institutions began to leverage APIs effortlessly, allow developers to build solutions suited to their offers in 2015, nothing developed around insurance, according to CEO Louw Hopley.
“We have a strong suspicion that insurance is stuck in the early 1900s.” Even if consumer behavior has shifted to digital real-time, there is still a lot of paper utilized. Every sector has a tailored environment, but insurance is lagging behind,” he added.
“And that’s kind of what we’re trying to find out, how to break down those barriers and bundle it behind simple APIs so people can start solving for this new contemporary digital tailored age.” Hopley founded Root in 2016 to meet this need. In 2018, Jonathan Stewart joined as a co-founder and director of sales and partnerships.
Root’s original product was programmable bank accounts and cards, but it currently focuses on insurance APIs. Root sits on top of insurance firms, which underwrite the products that developers and business analysts construct and integrate into their current customer experiences, which might take the form of a website, a chatbot, or a mobile app.
The five-year-old firm focuses on non-insurance firms with a consistent client base, as well as enterprises that offer insurance as a supplementary product. For example, telecommunications companies, merchants, and banks. It does however, power affinity insurance players, including some of the largest in South Africa. Mr. Price Money, FinChoice, Telkom, Metropolitan, Sanlam, and Guardrisk are among these clients. These firms have handled millions of policies and thousands of claims each month using Root’s insurance infrastructure. The South African firm earns money by charging subscription license fees based on the size and complexity of its clients’ requirements.
Root not only assists developers and businesses with the development of insurance products, but also offers ways for these companies to reach additional customers and manage compliance difficulties. Root plans to use the additional capital to develop its flexible low-code digital insurance platform in other countries, particularly Europe.
Hopley did not specify which nations Root would enter; but, based on the degree of insurance play in the area, the United Kingdom, Germany, and France might be among the first. While Root intends to acquire more technical and business expertise in Europe, Hopley claims that a significant portion of the company’s workforce will remain in South Africa.
However, the company’s primary goal, especially as it grows into new territory, is to create the global insurance industry’s operating system, according to Hopley.
“We believe that there should be a common platform on which individuals may develop, produce products, and integrate.” Essentially, we aim to be the platform where all product innovators, actuaries, and developers will log in to create and market insurance solutions.
We believe that by doing so, you will be able to accelerate innovation by allowing sub-economies to emerge and other individuals to begin developing unique insurance solutions. It effectively ties the entire business together.”
Root’s APIs, according to Base Capital’s Paul Rutherford, provide simplicity to the complicated business of insurance and enhance the experience of both customers and insurers. P1 Ventures’ Mikael Hajjar, on the other hand, believes Root is the best-positioned African insurtech business to capture market share in Europe and the United States.
