Michael – Let's face it; nobody jumps out of bed excited about life insurance. Well, unless you're my next guest. Josh Kaplan, founder and joint chief executive at OneSpark, is about changing how things are currently being done. Josh, great to have you on the show.
Josh - Thanks, Michael. Thank you for having me. Much appreciated.
Michael - Traditional life insurance companies are grappling with the value proposition, not just here in South Africa but worldwide. You've got digitally savvy customers. People are a lot less engaged, certainly at a millennial level. Now, you founded OneSpark because of this frustration with the state of the life insurance sector.
What were some of the biggest problems that you saw?
Josh - That's a long list of frustrations, I think, for a very long time, if I had to go through them in a lot of detail. But I will summarise them, at least from my perspective. There were three fundamental problems that we saw with traditional life insurance. I think the first one is a product.There's a mismatch between traditional product design and the modern consumer's needs. The second aspect is from an insurer's perspective; they are for themselves and profits first, and I think that from a life insurance perspective, which is meant to be there for you in your darkest and most tragic times. Insurers have forgotten that and prioritised the interests of shareholders and the demands of shareholders over the interests of policyholders, which is not right.
The third fundamental problem of frustration in that regard that you had was the process itself. You know, it's long, it's complicated, and quite painful, especially when you have to go through those medical tests and maybe just run through a few of those in a little more detail.
We've seen almost zero innovation coming out of the life insurance base from a product perspective over the past few decades. In the short term, there's been a lot of improvements and a lot of forward-thinking. But I think it has been left behind in the past, and what you see globally is almost like industry segmentation.
On the one perspective, you got the big traditional incumbent insurers, and I'm going to call them that, operating on the same model that's been done for the past few decades. And all they are doing is slapping on a new interface to make it appear like something new. I think on another interface. You've got the fintech players operating on the same old product in most cases, stripping away that vital protection to create that illusion of an upfront premium.
But all they are doing is allowing customers to access it in a new way. But I think that the modern consumer's needs are fundamentally different from consumers of 50 years ago. So you can't take that same old product and try and mould it in an augmented way to meet the modern consumer's needs.
One illustration of not meeting the modern consumer's needs – suppose you think about an old life insurance product, the traditional life insurance contract, where you take it out. In that case, you take it out today based on your financial needs at this point alone and regardless of how your financial needs change, you think to be getting that same contract growth in real terms if it's increasing by CPI inflation every year.
But the reality is that your financial needs are constantly changing. The modern consumer's debt levels, mortgages, new homes, selling old homes, family compositions, children being born, children finishing school, occupations, and incomes are constantly changing. So you can't take that same old model and try and mould and augment the needs of modern consumers.
You almost have to forget everything that has been done before and rebuild it from the ground up.
Michael - I agree. Those products were sold at a static point. In time, at a snapshot, they didn't evolve with you as your life evolved, and life evolves, as you say, in this is life insurance. And you know, I've come across many of the new fintechs to latch on to your last point there that pretend to be something new.
But it seems to be old wine and new bottles. They still don't help with how much coverage I need, what products to buy from, and who I should buy it from?! Where's at guidance? Where are those tools? I'm not seeing it in the marketplace. So how did you see it about doing things differently with one stock?
Josh - Great question. We placed the client at the centre of everything we did and prioritised the clients in the modern consumer's needs over profits. And I believe in doing it; we had to go back to the drawing board. You know, the old products don't meet the modern consumer's needs.
The long-term static contracts. If you look at it from a pricing or an actuarial perspective, you know, quite literally, is that misaligned in some instances between the insurer and what they need and the policyholder in that every grab at a traditional life insurer pays out for claim needs one reinvest for profit. So they were fundamental actuarial if I can call it, that product inefficiency that we needed to overcome.
We didn't want to take something that had been done before and try and mould it because it wouldn't meet the model's needs. We listed every flaw, both from a consumer perspective and ourselves as consumers. I wanted a product that fit me and, from an actuarial perspective, from across the spectrum.
We listed it and almost threw away everything we knew about traditional life insurance and practically rebuilt it from the ground up—creating a product that better aligns with what I would want as a consumer and how we want to protect myself and my family.
But it isn't an easy challenge. We needed almost to solve an impossible triangle.
You need a credit product that is at the same time comprehensive but also affordable, but also quick, and easy to take out. And those are conflicting forces that pull each other in different directions. You know, if you want something comprehensive in here, if your prices are going to be more expensive, you know, and at the same time, it's going to make the process a little bit more complex.
We solved it by developing and creating very smart technology, leveraging proprietary quality machine learning and artificial intelligence algorithms. Now, I think some incredibly smart consumers don't care about the tech. Consumers fundamentally want something good and affordable but are somewhat easy to take out.
And since the financial crisis, they're looking for an insurer with their interests at heart. You know, they are looking for a financial services provider that is honest and transparent and fit. I think that all our tech and world-first innovations and mechanisms that are embedded into our product's foundation will be that fit.
We created a product that is perfect for the modern consumer. That is dynamic and evolves with you. That's incredibly flexible and personalised, and you can get a quote in 10 seconds.
But our research showed that consumers don't know how much cover they need. So we embedded brilliant tech that does all the work for you. It tells you exactly how much you need, not just now but throughout your life as your financial needs change.
We created an intelligent product, but as an iPhone, it's brilliant in the background, but you don't know how it works; it's just effortless to use.
Michael - That is the best way to get the best out of this new technology from first principles. I think that's where many incumbents are still constrained by legacy systems, legacy thinking, and all that invested in that layer. So you want to try and augment and improve rather than just scrap and start again and say, right, what could we build?
It sounds like you build the ideal life insurer. Take me through some of those core products and services because that sounds like something that I admire.
Josh - As a starting point, you know, you have to be focused. And so we do everything in life insurance, life cover, disability cover, income protection, critical illness cover. We do all of that but in our world-first way.
We also do other forms of life insurance focusing on areas that haven't been innovated. If you look at the main market, you know, dominated by the funeral cover, and I call it cookie-cutter funeral products, every bank, telco, you see introducing a new funeral product, really just money-makers.
You know, there is no real innovation, a complete lack of understanding that these are consumers with their own complex financial needs.
So we ultimately augmented that market and brought that up to date with new main market products that offer better protection. Products that protect transport, grocery, and daily living expenses. Offers a more comprehensive cover by embedding smart and powerful features that don't just protect in a more socially responsible manner but uplift and empower them to better lives.
Beyond that, we've got a group of corporate insurance offerings and many other products. So, despite being relatively young and only a few months old, we brought world-first innovation to market, which I'm incredibly proud of.
Michael - You won't believe it, but there's a major life insurer who still sends me text messages, not even WhatsApp messages, trying to sell me a Kaizer Chiefs funeral policy. And with big data, the big buzzword, if they knew me, they'd know I'm a Pirates fan; it just shows you.
You're one of the fresh new startups on the block. What sort of success has OneSpark had so far since you began?
Josh - Thankfully, many successes, despite our relatively short livelihood.
We've won and been fortunate to win numerous international awards, from the World's Most Innovative Company in Life Insurance to being selected by global giants like Google as one of six Middle Eastern African companies to join the exclusive Google Growth Program.
In the two months since our life insurance products went live, we've managed to ensure over 10,000 happy customers and cover over R1 billion in life cover.
Not only was it the peak of a global pandemic, but we also had enormous unrest, which placed financial strain on the South African consumer. Despite those challenges, we've been able to thrive, and I'm incredibly proud of everything the team has achieved today.
And there are some incredibly exciting things to look forward to over the coming month.
Michael - If you can launch and run a business through what we've experienced over the last couple of years, I think you're set to take on any market.
Speak of the world. What are some of the big insurance trends, life insurance trends that you expect to see this year and beyond potentially having changed from pre-COVID to post-COVID?
Josh - COVID forced insurers to think about the processes and how they went about doing business. As tragic as COVID has been, it has accelerated all of the consumer-centric innovations that are incredibly important, particularly when it comes to digitisation.
If you think of the big old traditional insurers, you couldn't activate policies. You had to go for medical underwriting, which is incredibly challenging to meet with people face to face. So there's been an enormous push worldwide for a more digital life insurance approach. So very much focusing on the process itself. How do you make life insurance quicker and easier to transact?
It's also a push towards a more personalised approach. The pulling in different directions between shareholder interest and consumers interest will make it extremely difficult for traditional insurers to achieve that. And that's compounded by the legacy systems and issues that manifest throughout these companies. Everything that we've done at OneSpark has been all about how to solve the modern consumer's needs.
Not only make it quicker and easier but make it completely personal and make it completely flexible, make it completely dynamic, allowing an omnichannel approach and not just advisor and not just online, really enabling consumers to take off and interact with an insurer in multiple ways. And I think that everything that we've solved, I think a lot of insurers will be grappling with that because of the inherent challenges with that over the next decade or so.
And I think that insurers are waking up and I think they're starting to see it. But I think a lot of work still needs to be done to kind of bring life insurance into the 21st century like other industries that have achieved so far.
Michael - How are you grappling with or solving that issue of shareholder primacy? And their demands for high returns on the other side versus providing value to the end-user? Because surely you've got shareholders to satisfy as well if you're going to confront similar challenges.
Josh - I think it's a great question. We did it because we changed the life insurance model if I can call it that. If you think of a traditional life insurance model, I mentioned previously that every rand that I pay out for a claim means one rand less for-profit. So the fewer claims and appeals, the more profit gets the traditional life insurance.
So is that inherent, the tug of war between, you know, paying out claims and protecting your clients and meeting the needs of the modern shareholder and the independent? Yeah. Ensure that that risk profit that insurers take from a large part of, I guess, meeting the demands of shareholders. So the way that we went about doing it is that's not how our model works.
The way that we priced our product we simply take a fee to administer your policy. The rest of the premium that you pay is put into a risk pool, which is used to pay out claims in times of need. And what is left at the end of the year after we pay our claims and cover our expenses, is simply returned to you as a policyholder.
Now, what that means is that we as a company are profits are not dependent on how many claims are repaid. Our profits are simply determined by that small amount of an administration if you take to effectively administer your policy. Right. So our profits and our incentives as a company are not dependent on how many claims you pay-out for you.
So we wanted to align our expenses as a company and the incentives of our consumers which I think makes it a far more sustainable model. I can go into a bit more complexity and talk about how life insurance is priced maybe a little bit more complex. And you can obviously second separate discussion on that is quite long and but the model itself is different. You know, we understand that we are a company and we have to make a profit. We are not naive it's just an understanding that is a socially responsible way in which to do that.
Michael - Absolutely. I think talking about how life insurance underwriting works is something that only other actuaries would understand at the end of the day. But I do think that that model, that model rejigged kind of solves that problem quite nicely in terms of aligning the incentives more behind the policyholder than there have been in the past.
Can you divulge anything that you're working on at the moment? Any exciting plans that you've got in the pipeline for the South African market?
Josh- We have a lot on the go at the moment, and we are busy completing a multi-million dollar raise we secured tens of millions of dollars in funding and which we will disclose over the coming weeks, which is incredibly exciting. I think to date we have been deliberately small get your model working, prove that it works, and once you get your metrics met sustainably, then you can scale.
I think we are finally at that point where we are ready to accelerate and rapidly grow. I think over the next few months you'll be seeing a lot more of OneSpark. But I think beyond that, our entire culture is driven by innovation and consumer, consumer-centric innovation. So if we see something that's inefficient in any industry, we'll go in and we’ll innovate and I think to that end, we have multiple product lines in the pipeline.
They specked they design, they ready it to go. Unfortunately, there is a massive skills deficit, in the tech and developer space. So bringing those products to market as much as we can design them as actors incredibly frequently and incredibly quickly, takes a little bit longer to bring them to market. But we've been working on this, so we've got a bunch of products and kinds of suites opening up to the public over the course of the next few months.
So incredibly exciting things to look out for from OneSpark.
Michael - Remarkable. On that tech skill shortage, I was chatting to the CEO and founder of Tech Intel, Peter de Villiers, and they recently raised over a billion in a Series C round and he really said it and he raises the Medusa hat as well. It's one of his passion points, building the tech skills in that ecosystem because yes, we've got an unemployment crisis, but we've also just got a skills crisis and we can start better matching. Then we can start to make inroads into that record-high unemployment.
As a business leader and just digging up for this interview, I see that you've been recognised as one of the top ten most inspiring global CEOs to watch out for, that's quite something.How do accolades like that drive you to new heights at one spot? Do you pay much attention to them?
Josh- Thanks, Michael it is always incredibly humbling, you know, to be selected out of the quite literally millions of businesses out there and millions of incredibly impressive people is always incredibly humbling. You know, do I pay attention to it? Yes. Not for me. It's actually for my team. Greg and I founded OneSpark with the belief that if you can surround yourself with people who are better than you, you can only have great success. This is a testament to the enormous amount of work time and effort that our team members have put in. For me, what's incredibly exciting about that award is that it speaks to the core of why OneSpark was founded.
Yes. It's about innovating in the life insurance space. It's about better meeting consumers’ needs. But fundamentally, we started OneSpark, not just for that, but really to kind of push the ball forward to change the world, you can call us naïve millennials, I guess, in that respect. But that's why we started it.
We want to push the world forward. And I think that this award galvanizes our core philosophy and our core ambitions. You know, our internal ambition is to be the world's most valuable insure-tech within the next five years why not? Because we care about the money or the valuation attached to it. At the core, we want to be able to demonstrate that a company is built on social responsibility, really, both on uplifting and empowering societies better life can achieve global status and achieve great success. Those awards pushed me forward. It inspires me and the rest of the team to achieve greater heights. I am incredibly proud and humbled.
I think going back to your point, South Africa has had a lot of challenges. I think, you know, specifically in the main market, really innovating. That's one of the things that we want to solve, you know, understanding the trajectory that's that Africa is being faced with and using our innovations and using actuarial smarts and unique skills is that we have as a team to try to solve some of those problems through the products that we bring to market.
That's really everything that OneSpark stands for. Let's see what we can do to push the world forward. Let's bring the skill sets that we've managed to accumulate as a team and try to solve some of those massive societal problems.
Michael- That’s a big, hairy, audacious goal. If I have heard one, that internal objective of being the biggest Insure-tech out there. You've got to take the victories and celebrate them. I'm a firm believer that if you have done well you’ve got to celebrate it, but then get on to the next victory.
It’s like in sports whenever you hear Jurgen Klopp after we've won yet another trophy say, “well the team is going to celebrate this ff course but then we got to put our feet back on the ground” and that's how you drive the team forward.
It is fantastic to be able to share some of your insights and some of your early steps on what promises to be a long and successful journey. So thanks for sharing it with me on Business Talk with Business tech. Take care
Josh- Thanks, Michael much appreciate it. Thanks for having me.