South African insurtech Vaai.co launches on-demand cover
An innovative insurtech startup could solve the problem of uninsured drivers in South Africa. has launched cost-effective cover-on-demand product, where an estimated 70% of drivers operate without insurance cover.
It is hoped the affordable, flexible cover will encourage a much higher uptake of the service, as traditional insurers in South Africa only offer expensive plans.
Vaai.co officially launched in January 2021 and enables consumers to buy prepaid insurance cover that is valid for 24 hours. The insurtech startup took part in the AlphaCode Incubate programme - an incubation, acceleration and investment vehicle for early-stage financial services businesses, powered by Rand Merchant Investment which aims to identify, partner and grow innovative financial services entrepreneurs.
To make use of the cover, customers buy a 'once-odd data logger' for R350. The telematics device then runs diagnostics on the vehicle to save users money on expensive mechanical and electrical damage.
The box can detect if a user has been in a major accident and dispatches a towing service if an accident happens. Vaai.co also provides roadside assistance.
Right now Vaai.co's services are only available in Johannesburg, but the company has said there are expansion plans to extend the insurtech nationally.
Customers can select insurance according to their budget and access all the services offered by the insurtech startup on the user-friendly Vaai.co app. Payments for the insurance can also be made via the app or with a cash payment that is accepted at FNB ATMs.
Vaai.co's services are not a replacement for traditional car insurance as the insurtech offers affordable basic cover on a 'per day basis only' for car accidents and is therefore applicable when driving to a location that is considered high risk.
i, Co-founder of Vaai.co, said he hoped Vaai.co would provide lower-income households with an option to insure their vehicles, rather than driving without cover. He explained, "Insurance companies penalise you if you live in a poorer area and drive a cheaper car – they charge less to insure fancy cars in fancy areas.
"It just makes no sense to me that those South Africans who need better prices are quoted more. Plus, most of us are hardly driving our cars during Covid-19. Vaai.co developed the answer for those who can't afford ongoing car insurance and those that have had enough of the great car insurance rip-off."
Buthelezi said the low-cost cover would enable more drivers to have cover. "For less than the price of two, 2 litre cold drinks, you get R13 000 cover. If you have more money available, you can buy up to R120 000 worth of cover."
Zero fees from Vaai.co
Compared to incumbent car insurers, Vaai.co provides car insurance with zero excess fees from the day of purchase, with no debit orders.
Duncan Barker, a fellow co-founder of Vaai.co, explained, "We don't care about your claims history. We keep things very simple – you select the amount of cover you need for the next 24 hours based on what you can afford."
Meanwhile, Dominique Collett, a senior investment executive at and the head of AlphaCode, said, "Vaai.co is right on trend with its insurance on demand concept. We believe that there's a tremendous need for innovation in the insurance space, particularly during Covid-19 when finances are stretched to the max and existing models are no longer affordable.
She added, "Vaai.co has developed a compelling solution for South Africans with cars who want cover, but can't afford traditional insurance."
Insurtechs are winning the race with legacy system companies
Nestled in its own place within the world of financial services, insurance is arguably more unpopular than retail banking.
That’s hardly surprising given that, from a customer service perspective, insurance is something of an off-kilter transaction. You pay a sizable premium in exchange for a service you hope you will never have to use. This image problem is exacerbated by ubiquitous tales of insurers not paying out when it is time to make a claim.
The insurance sector has long been due to an overhaul, and this is where the disruptive force of insurtech comes in - one of fintech’s most upwardly mobile subcategories. Accordingly, last year, insurtech in the UK alone attracted £262m in investment, a growth of 60% on 2019, according to Tech Nation. Insurtech’s momentous growth has been captured in a new report by The AI Journal exploring this burgeoning sector.
What exactly is insurtech?
Put simply, insurtech refers to technological innovations that seek to make insurance cheaper to buy and more efficient to use. In a similar vein to fintech, the large, established institutions have been dipping their toes into insurtech, but it’s the disruptors who are genuinely looking to shake up the status quo, diving into and exploiting those areas that traditionalists have little imperative to explore.
Examples are price comparison sites (one of the earliest forms of insurtech that was eventually snapped up by the insurers it initially sought to disrupt), claims software, customisable policies, or even smart-tech-enabled dynamic policies whose premiums can fluctuate depending on changing circumstances.
The latter, for instance, could use someone’s fitness tracker or smartwatch to monitor fitness levels, thus reducing the premium of a life insurance policy; or track a GPS system that records the location of a car and assesses risk levels accordingly.
Most consumers tend to shop around for their insurance needs and perhaps end up buying their contents insurance with one provider, their car insurance with someone else, and their pet insurance with yet another underwriter. Managing all these different policies, with their varying renewal dates and payment terms can be complex. This has led to the increase in apps that pull everything together.
More prosaically, insurtechs are developing AI that uses machine learning to act as an insurance broker, eliminating the need for a human intermediary and therefore offering more cost-effective and impartial advice.
Insurtechs and risk
But there are some obstacles in the way of insurtech’s continued evolution.
Insurance companies are averse to risk. Understandably so, as at the crux of the industry is the role of the actuary, whose job it is to analyse and measure the probability and risk of future events. So it’s little wonder that there’s a reluctance among the traditional players to welcome the disruption that insurtech brings.
Insurance is heavily regulated, a minefield of legality and labyrinthine jurisdiction, which means the idea of shaking it up can be anathema. And why would they, when their old-school business models are working perfectly fine?
There’s an understandable nervousness and unwillingness to work with startups, who themselves need to work with the bigger firms in order to underwrite risk.
While it seems like a catch-22 situation, there is growing, if cautious, interest from insurance companies, who can see the benefits of insurance with a friendlier face, innovative solutions, and a competitive edge through differentiation. As that tentativeness dissipates, the growth of insurtech will gather even more momentum.
Tom Allen's analysis is based on the findings of a new report on the fintech and insurtech industries produced by The AI Journal.