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A South African startup company involved in the digital insurance space believes that there is a better way of doing insurance that puts the consumer first.
Insurers have an incentive to deny claims in order to make more profit. Instead, Pineapple charges only a fixed fee and returns unutilised premiums every year. This is meant to avoid the real or perceived conflict of interest between insurers and their clients.
The company was founded in 2016 and went live this year. Its central principle is that the insurer should have nothing to gain by not paying a claim.
“Where we believe the [traditional] insurance model needs a bit of help, is that at the moment there is this conflict between the policy holder and the insurer. This conflict arises because the insurer keeps all the money that isn’t used to pay claims, and this creates a conflict of interest when claims are assessed. In the eyes of the consumer, even if it really isn’t the case, when claims are denied the perception is created that the insurance company is doing that to maximize their profits,” said Marnus van Heerden, one of Pineapple’s three co-founders.
While the company acknowledges that there are mechanisms in place to protect the policy-holder at traditional insurance companies, more could be done to alleviate the mistrust that exists between insurers and their clients.
“I don’t think insurance companies do that enough. They focus hard on making the sale instead of ensuring the consumer fully understands what’s going on,” Ndabenhle Ngulube another of Pineapple’s co-founders told City Press.
The pair were speaking on the recent news that insurance company Momentum rejected a client’s life-policy claim of R2.4 million because the policy-holder, Nathan Ganas, did not disclose a pre-existing health condition, even though his death was completely unrelated to the non-disclosure.
The company believes that the model they have adopted towards insurance allows them the benefit of being completely impartial when assessing claims.
In the traditional insurance model, members pay their premiums into a central pot. This pot is used to pay claims and the funds that are still left are the profit of the insurer.
In the Pineapple model, members still pay a standard premium. This money goes into each member’s Pineapple wallet. This wallet forms a network of wallets – the wallets of all other Pineapple members. When a claim occurs, this network pays for the claim and the money that is left in each members’ wallets at the end of the year can be kept by the members.
Pineapple also allows you to create your own network in a method that is similar to Facebook friends where you set up a group for your family or the employees of your company. The bigger your network is the more protected your wallet is from the general community.
This is all done to mitigate the perception that insurance companies will deny a claim because it is profitable for them to do so.
“What the Pineapple model does is that it aligns this conflict of interest by only taking a fixed fee from the premium and returning all unused premiums to the policy [holder’s wallet]. What this means is that we don’t maximise our profits by accepting or rejecting claims. This puts us in an independent position to do these assessments in the best interest of the insurance community,” Van Heerden asserts.
As good as this may sound, Pineapple unfortunately has not yet delved into life policies or big-ticket items like motor vehicles and houses. They currently only accept cover for personal items such as cellphones, laptops or drones. However, the company has already started the process of opening their books to motor vehicles and life-insurance as their model – “with a bit of tweaks” – will be able to cater for these policies.
This fully digital new entry into the insurance industry, which has its roots in the Stokvel system, hopes to change how the insurance industry is viewed and to make the system a lot more client focused.
“At the end of the day it’s not machines that run companies it’s humans, and humans can understand humans in times of loss and grief,” Ngulube says.
Find out more about Pineapple and other startups that are doing great things in the tech industry this weekend in City Press.
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