The business model of the African start-up Turaco

The business model of the African start-up Turaco

Insurtech start-up Turaco offers medical, life, asset and auto insurance to mass market consumers in Nigeria, Kenya and Uganda at an average premium of around US$2 per month. Turaco integrates its insurance into the products and services of third-party companies such as Sun King (residential solar energy systems), One Acre Fund (seed and fertilizer financing for small farmers), Tugende (motorbike taxi financing) , M-KOPA (paid access to smartphones, solar lighting and solar-powered appliances) and VisionFund (microfinance provider based in Uganda). Turaco does not underwrite policies; it acts as a broker, connecting insurance companies to end customers through its technology and partnerships.

Turaco recently raised a $10 million Series A funding round led by the Cathay AfricInvest Innovation Fund and Novastar Ventures. Jacques Maritz interviewed Turaco CEO and co-founder Ted Pantone about the company’s business model and demand for insurance in Africa.

Using M-KOPA and VisionFund as examples, explain how Turaco’s insurance is integrated with offerings from other companies.

When an individual purchases a paying asset from M-KOPA, they receive a call from M-KOPA’s call center to find out if they want insurance. If they enroll, Turaco is notified and we can contact the customer to enroll them in insurance and activate coverage. M-KOPA adds the insurance fee to the payments the customer makes to M-KOPA and remits the premium to Turaco.

If a person takes a loan from VisionFund Uganda, the loan officers inform him that hospitalization and life insurance are included in the loan. Borrowers have the option to upgrade to family coverage for an additional fee. When this loan is disbursed, Turaco is informed and we activate the cover.

The technology we’ve built is a policy and claims administration platform that integrates via APIs with our partners’ platforms to do sharing of know-your-customer (KYC) data, enabling policy, billing, etc. a transparent process. It provides backend support and generally does not need to be adapted by a partner.

Are most insurance purchases done online or offline?

The decision to purchase insurance is usually made through channels that mimic how our partners sell (eg through partner agents) or through our call center. Due to the nature of our customer base and a large number of people without access to technology and bank accounts, offline purchases of our products are more common than online purchases.

So Turaco essentially connects existing insurance companies to customers, through your technology? Turaco does not get involved in the claims process etc. ?

Yes. We spend a lot of time designing bespoke insurance product bundles which we source from different insurers to underwrite. Our approach opens up a new market for insurance companies and makes insurance accessible to customers for whom it was not before. This is done in part through technology, but also relies on effective product design; most of the product sets we offer are not insurance company “off the shelf” products.

Our role in the claims process varies by product. Our technology-based approach – using WhatsApp integration, fraud scoring algorithms and mobile money payment – ​​enables fast claims payment execution. In all cases, we act as the claimant’s advocate, supporting the consolidation of information to enable us to guide them through the claims process as quickly as possible.

How does Turaco generate revenue?

Income is generated by commissions.

Insurance penetration in Sub-Saharan Africa is less than 3%, one of the lowest rates in the world. Share your thoughts on insurance demand in the region. Are there certain types of insurance that are in greater demand than others?

While many believe there is low demand for insurance in Africa; we have debunked this myth. When we receive customers on the phone, we have conversion rates above 50%. It is precisely because our clients at the base of the pyramid are so vulnerable to financial shocks that they see the value of insurance.

Our innovations that have driven high conversion rates are aimed at making insurance purchases easier, leveraging our partners’ trust in the brand, and designing products that make sense for our customers (affordable, simple and valuable in to the extent that they cover the most risky events).

We primarily sell forms of medical and life insurance with some asset coverage for productive assets or assets purchased on credit. It is important to note that most of our medical insurance does not only focus on reimbursement of bills, but also on loss of income, as many of our clients are informally employed.

Insurances that don’t sell as well in the market are products where companies have just cut prices and benefits to try to target them to underserved customers, but no further consideration has been given to s ensuring that the larger design is tailored to their unique needs. customer segments. Similarly, any insurance where someone has to make an active decision to make their premium payment (e.g. reach monthly in their pocket and send the money to the insurance company) has not had as many hit.

What are the biggest challenges of running this business?

Disrupt the traditional insurance industry. We consider ourselves a technological disruptor but it’s hard! We’re constantly engaging with the regulator and underwriters to collaborate on new ways of doing things, but unsurprisingly, they’re not as nimble as we are as a 100-person startup.

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