In a country where the insurance industry is shrinking every passing year, largely due to low insurance uptake and high cost of premiums that has locked many from accessing insurance, one startup is betting against the odds.
For Turaco, the need to disrupt Kenya’s Insurance sector is just too great to ignore, even if the risks appear to outweigh the rewards. They are offering small insurance policies as little as Ksh 100 ($1) a month and hoping that they will be able to make money in the long run.
In an interview with Bloomberg, Ted Pantone, the co-founder and chief executive officer of Turaco said they are keen to tap into the opportunities the micro-insurance presents in Kenya.
“To date most micro-insurance has been supported by grants and are really not viable business models,” Ted said.
“With the changes that our business is implementing, it shows there are clear opportunities to turn it into a commercial enterprise.”
Turaco is a Fintech startup based out in Nairobi offering basic insurance solutions to help cover everything from medical costs to accidents and life. The company uses technology to distribute its products and verify claims and currently boasts 40,000 customers. It is also looking at partnership opportunities with other consumer-services businesses to help boost its customer base.
Africa’s InsurTech space is worth $60 billion but remains largely untapped, according to BaoBab Network. This provides a wonderful opportunity for InsurTech companies like Turaco to tap into, though the focus is on developing innovations that suit the Africa market.
Turaco is leveraging micro-insurance to boost the general uptake of insurance in Kenya, which stands at a staggering 2.93 percent. By comparison, the current insurance penetration in South Africa is 17 percent while the average rate in Africa is 3.5 percent.
The company is backed by the U.S based GAN Ventures as well as Mercy Corps Ventures, Musha Ventures, and several angel investors. Pantone said that they have already started talking to potential investors for new funding opportunities.
“The investors that we have to date have still been a little bit philanthropic-minded because it is a risky business, it is not a proven business model at all,” he said, adding that the margins from the business are “pretty low”.
Investment in InsurTech reached US$972 million globally in 2018 with a five-year compound annual growth rate of 45 percent. However, the share of disclosed funding going towards Africa InsureTech start-ups reduced from 0.6 percent in 2017 to 0.2 percent in 2018