Insurance is used to hedge against the risk of financial losses, big and small. More than a tool for financial planning, insurance is a driver of economic growth and development in emerging countries. It has the power to improve financial stability for businesses and households, encourage trade and entrepreneurship, and improve social living standards.
According to a 2018 McKinsey study, insurance penetration in Africa is only 3 percent compared to the global average of 7.23 percent. Traditional insurance distribution models have contributed to low penetration rates. Customers rely on brick-and-mortar channels to purchase policies, which have lengthy processing cycles and poor customer satisfaction.
With people across the continent shifting to digital channels for food, transportation, and banking, African consumers are developing greater service delivery expectations, and the insurance industry is no exception.
Well-positioned to meet the need for digital insurance solutions is the Kenyan insurance-as-a-service platform Lami. Founded in 2018, Lami’s Insurance API enables insurers, banks, and other B2C companies to offer more flexible digital insurance to consumers.
I spoke with Jihan Abass, the co-founder and CEO of Lami, about what led her to create Lami, the insurance landscape, and what it takes to build successful software solutions for Africa.
How did your journey lead you to create Lami?
My name is Jihan Abass, and I'm from Mombasa, Kenya. My background is in financial services. After graduating from Bayes Business School, I worked as a commodities futures trader in London. I did that for a couple of years before leaving to start Lami.
I became obsessed with the insurance space after someone mentioned to me in conversation that they didn’t have medical insurance. I began researching to understand the driving force behind the huge gap. That's when I learned that less than 3% of people have access to insurance products in Africa.
As I thought about the problem, it was clear that the traditional distribution method of insurance wouldn't change the statistics. That's why Lami is an infrastructure company. We built the technological infrastructure to facilitate the easy and simple distribution of insurance products. Anybody can use our platform to create and distribute any insurance product they want to sell.
What compelled you to leave your job to start Lami?
It was my perspective on life and the impact I wanted my life to have on the world. I worked in a job where making money was the dominant motivation. For me, that didn't seem like enough, and it’s also not what I wanted to stand for as a human being.
Also, the opportunity to revolutionize the insurance business presented itself at the right time. I was thinking about going back home, and the more I learned about the problems within the industry, the more it became obvious that this was what I needed to do.
It was quite scary because I had only recently graduated from university and was still getting my bearings in my career, but I was not fulfilled. I never felt connected to what I was doing. And I didn't want to be disappointed with where I ended up in 5 or 10 years if I stayed.
In my transition I was fortunate to have a safety net. I could go home to my family and have the space to build from the ground up without any looming pressure. For others who may find themselves in a similar situation of not being fulfilled by their career and want to start something, I would say work until you don't need to work or can't balance both because entrepreneurship is difficult.
But entrepreneurship wasn't that difficult of a choice for me because my whole family is entrepreneurs, my dad, my grandfather, so it's something that I saw a lot of growing up. It was something that I knew I wanted for myself as well.
The landscape of insurance before Lami entered the market?
Kenya has more than 50 insurance companies and about 8,000 agents and brokers that operate in the market. This may come as a surprise, given the level of penetration. But the problem isn't a lack of insurance companies, penetration levels are low because insurance companies don't have an effective way to sell products to end consumers.
And honestly, the 3% number doesn't tell the whole story. The majority of sales come from corporates who buy policies and plans for their employees. Outside of corporate sales, the distribution channels are boots on the ground, agency models, and branches.
During our research, customers shared how long and frustrating the end-to-end process was. Getting a quote might take two to three days, and buying a policy might take another two days. And in some instances, people didn't receive their policy documents or policy information.
This distribution model also didn't meet the educational needs of consumers. People shared with us how they often didn't understand what their insurance covered because the policy was 50 pages documents with a bunch of fine print.
These challenges created one of the core problems in insurance, trust. Most people don't trust insurance companies. They don't trust that their claims will be paid on time. So we've been intentional about having a fast turnaround time when customers submit a claim.
Studying the end-user and how it informed Lami's business model?
The main research that we did was around the customer journey — what is the process of a customer buying a policy, and how can we make it more efficient. How do we cut the process from two to three days to a couple of minutes? That was our focus.
That led us to digitize the whole value chain — KYC, pricing, underwriting, claims, processing. We made the end-to-end process fully digital. Customers can go into an app, get a quote, buy the policy, receive all the policy documents, and file claims through the same channel.
Our first product was Griffin, Kenya's 1st digital car insurance app. Once that solution worked, we said let's use the technology to embed products in platforms that customers are using on a daily basis.
Describe the tech solution and why you decided to use an API?
The main idea for the Lami API is to be a one-stop-shop for the entire insurance ecosystem. If a partner uses our API, they don't need to think about anything that aids the process of buying insurance.
How it works is that we have insurance companies that plug into our platform. Right now, we have about 25 insurance companies. On the other side, we have businesses that can create products that these insurance companies underwrite.
Businesses can then plug our API into any point of sale. It can be an app, website, PoS machine, or whatever distribution model works best. We have a portal for partners and for agents to manage insurance sales. In this portal, they can see how different products are performing.
The reason why we decided to go the API route is that we saw a huge gap. We have a lot of digital platforms that cannot digitally sell insurance products. For example, for one of our banking partners in Kenya, 94% of their transactions are done online, but to buy insurance, customers had to call the bank or go into a branch to get a quote.
The process was quite long and didn't fit in with the aesthetic of the bank. They wanted to be able to plug products into their platform to cross-sell more effectively. Because when you think about distribution, banks are best placed to sell insurance products since they know so much about you. Lami gave these banks the opportunity, which ultimately allowed them to grow their revenue.
What are some of the challenges you've faced building Lami?
One of the main challenges we've faced is getting insurance companies to create the products customers want, not what they think customers want.
My background is not in insurance so how I think about products is completely different from an underwriter or an actuary. I thought about products from the perspective of the customer's needs, not risk, which is what insurance companies focus on. Their process of creating products is an actuarial team sits down, designs the product, and then forces it onto the market.
To increase insurance penetration our perspective is that before a product is created insurers should first learn people's needs and determine the distribution channel they want to buy the product.
Another challenge is getting them to understand that risk has changed. If a digital platform has access to your wallet, a company can automatically deduct the premium, so insurers are less likely to default on a payment. So the risk is completely different. Getting insurance companies to understand that has been a considerable challenge, but the pandemic has helped change some perceptions.
We had 3–4 underwriters at the start of last year, and now we have more than 25. While they are not as progressive as we may like, they realize the distribution methods need to evolve.
Share the impact Lami is having?
With our car insurance app Griffin, we've done more than 10,000 policies and have more than a million dollars in premiums underwritten.
After our fundraising, we started doing B2B2C and B2B products, and so far, we have 12+ partners. Many digital platforms are looking for additional ways to make revenue or sell goods and services that insurance is complementary to. That segment is growing, and we have some exciting use cases.
One of our partners is Sendy, the tech-logistics company whose platform simplifies end-to-end logistics for businesses by connecting them to hundreds of transporters online. Most transporters move commodities, goods, and cargo across the country without business-specific insurance, so they have no protection from the risk of potential loss. There was a huge need for insurance on a per-trip basis given Sendy's solution, but there was no efficient way to do it.
Traditionally, transporters have an annual policy covering a specific limit per trip, but that doesn't fully protect them because a trip's goods may cost upwards of $60,000. And Sendy didn't want to create insurance for each trip because they would be expected to file claims, which they didn't want to do.
With the insurance product we created for them, it's the owner of the good's responsibility to file the claim, and they can purchase insurance on a per-trip basis. They receive all the policy documents and file claims through the Sendy application.
How do you see Lami evolving in the next 3-5 years?
We have a first-mover advantage in the space that we're in, insurance APIs, so the goal is to dominate the space and be the leaders in digital insurance distribution, whether in Africa or in other developing countries, which face similar challenges.
We want to reach a billion dollars in premiums and underwrite policies for millions of people because not having insurance can devastate the life of an individual or family. We aim to provide that safety net and use technology as the driving force behind it.
What does it take to build successful software solutions for Africa?
It's about understanding people's needs and your market. Discover what products exist, and if it's something new, spend time learning if people would buy the solution. Personally, I don't think startups spend enough time conducting in-depth research to understand what people are looking for.
Also, coming from Africa is an advantage and has played a big part in our success. I saw many of these challenges growing up, so I have a deeper understanding of how society operates and how people view things. This perspective provides an edge when building solutions for the continent.
Last but not least you need a good team. We have people who worked in insurance, at other startups within the tech ecosystem, all within the continent. So they understand the industry. They've seen the distribution partners that we're targeting and understand the inner workings of how they operate and the problems they're facing daily.
Built In Africa. What does that mean to you?
The first thing that came to my mind was built at home — built here for the people who will use it. Unfortunately, we often see in some instances founders that are far removed from the country or the place where they're creating a solution. I think having homegrown solutions is important.
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