Globally, more than 1.4 billion people are living in informal settlements, and unfortunately, that number is rising rapidly. These communities are prone to overcrowding, they lack even the most basic amenities, and they fail to comply with regulations meant to protect inhabitants from fires and other threats. Natural disasters, conflict, climate change, and lack of affordable housing are among the factors driving more and more people to live in informal settlements. Among the other challenges they face, most community members can’t access high quality, affordable financial services and insurance coverage.
Formal housing allows, and often requires, homeowners and renters to purchase insurance to protect them and their property. But families living in informal settlements have difficulty accessing the same type of coverage because providers can’t quickly locate their homes, assess the value of their assets, and validate and pay claims.
Lumkani, one of our latest investments at Accion Venture Lab, leverages proprietary hardware and a tech-enabled agent network to provide consumers living in informal settlements within South Africa with insurance that protects against loss of life, shelter, and assets in the case of a home fire. Lumkani bundles this insurance product with an Internet of Things (IoT) connected heat sensor that detects fire in and around homes, reducing damages from the flames by providing an early warning system that alerts residents and neighbors. Lumkani’s IoT device and proprietary agent network generate data on household value, customer’s location, and demographics that Lumkani can use to underwrite, service, and pay out claims.
At Venture Lab, we’re most excited about the innovative way Lumkani is delivering microinsurance and their use of technology to reach underserved populations such as:
Using IoT to provide financial services to the underserved: Lumkani’s hardware can significantly change the way low-income consumers view insurance. The Lumkani’s IoT heat sensor serves as a reminder of the protection received when paying monthly premiums, resulting in a stickier insurance offering and an increase in retention. Existing clients view the Lumkani heat detector as a way to stay safe in their homes, and it helps create a tangible connection to the insurance product, thus driving customer retention.
Leveraging data for effective underwriting and claims management: On the insurance end, the IoT device and the data received present a new way to underwrite, service, and administer claims by accessing information such as household value, location, and demographic data. Lumkani has distributed nearly 13,000 IoT units and works with their partners to leverage this data when designing new products. They are continuously evolving as their dataset becomes more robust.
Applying a “tech and touch” model to reach into informal settlements: While we are excited about Lumkani’s technology approach, we also believe that for communities that are apprehensive about the value of long-term insurance, a human touchpoint is critical. This model not only builds trust with customers, but it also serves as a constant reminder of the value of the heat sensor and the accompanying insurance. The software they supply their agents and the mobile communications they maintain with their customers allow Lumkani to efficiently manage their clients, ensuring they can scale their operations.
Centering customer needs when developing and updating products: We have been impressed with the Lumkani team’s thoughtfulness and dedication to low-income consumers living in informal settlements. They have purposefully designed this product with the financially excluded in mind, and they have made the necessary adjustments to continue to serve this group better. We envision that the team will keep developing new products to deepen their clients’ overall financial health, and we look forward to seeing how they leverage their network of agents and IoT devices to expand access to financial services throughout South Africa.
We couldn’t be more excited to be working with the Lumkani team on their mission to keep people safe and protected in their homes. David Gluckman, Paul Mesarcik, and Francois Petousis have been building this solution since 2014.
While insurance penetration rates in South Africa are some of the highest globally, insurance companies have struggled to offer insurance solutions that reach low-income individuals, creating a massive market opportunity. Lumkani is dedicated to designing, delivering, and servicing some of the hardest to reach communities in an innovative way.
We at Venture Lab are looking forward to working with Lumkani and our co-investors, 4Di and Lireas, to bring insurance to the underserved and help to create thriving and secured environments for those who need it most.