Transforming the Insurance Landscape in Southern Africa

Ever wonder what it takes to change the course of a whole industry? We're honored to host Arun P. Iyer, the Founder and CEO of Alpha Direct InsurTech, who is doing just that in the African insurance landscape. Brace yourself for an inspiring journey from a small-town upbringing, to a young boy investing in stocks, to a CEO transforming the insurance industry in Botswana.

Revolutionizing the highly regulated insurance industry, Alpha Direct is challenging the status quo with their disruptive approaches. Arun shares the story of Alpha Direct's genesis, discussing their innovative solutions that address the root cause of low insurance penetration in the lower middle class of Botswana. From the game-changing 'insurance in a box' initiative to leveraging mobile money platforms, expect to be enlightened by the ways Alpha Direct is making waves in the industry.

But what lies ahead for the future of insurance in Africa? Arun casts a spotlight on Alpha Direct's plans and their strategy for maintaining their standing in the underwriting market, optimizing the claims process and enhancing customer experience. 
 
Tune in and join us in exploring the future of insurance in Africa from the city of Gaborone in Botswana.

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Transcript

Arun: 0:00

Hey everyone, this is Arun Iyer, founder and CEO of Alpha Direct InsurTech, based in Botswana, and I'd like to welcome you to this episode of InsurTech Business Series that covers insurance innovation, insurtech innovation and improving the state of insurance on the continent of Africa. I'm very excited to share my story with you today and I hope that this can be one of the inspiring stories that will inspire you to do great things in the world.

Damola: 0:36

Welcome to the.

Damola: 0:36

InsureTech.

Damola: 0:37

Business Series podcast. I am Folumy and I am Damola and together we host the most exciting podcast on insurance and insurtech related topics in Africa. Stay tuned.

Damola: 0:58

Arun welcome.

Arun: 0:59

Thanks, Damola. Very kind introduction. It's my pleasure to be here and share my story and, hopefully, some insights that your listenership can gain from my experience.

Damola: 1:15

Great. We were speaking earlier, before we started, and I mean so. Much has happened within your space and, like I mentioned, botswana is not one of the big three Nigeria, kenya, south Africa when you talk about insurance or even innovation around financial services. But before we go into all of that, who is Arun? How did this all come about?

Arun: 1:42

Wow, that could take up this entire podcast. So let me just think back as to how I should summarize this well so that it fits in nicely with the format here. So look, I'm a kid that grew up in a town called Lubaatsi. It's about 70 kilometers south of the capital city of Botswana, khabaroni. Khabaroni is where I'm currently located and where my company, alpha Direct, is headquartered, and Lubaatsi is a very small town, but very vibrant town and a very old town. And as a kid we didn't have a lot of things to do in Lubaatsi. We used to climb up a lot of hills. The town is filled with, surrounded by a lot of hills, and so we used to climb hills. We never had television. Even when we did have television, we had two channels. So there wasn't a lot of things to do and I was naturally inclined as a child towards entrepreneurship.

Arun: 2:44

My father himself was an entrepreneur. He was a professional. Initially, he was a chartered accountant, one of the first chartered accountants in Botswana, and he set up the Botswana Institute of Accountants and so on and so forth. So growing up in Lubaatsi, I was very fascinated with entrepreneurs and business people in general, and I read I happened to read when I was a kid, a biography of Warren Buffett and I was very fascinated by Buffett's story. And then later on, when I was very, very young, nine or 10 years old, I started investing in the stock market as a means to try and learn more about businesses and how they operate, the means of saving. So I was very frugal, I naturally had savings even at that young age. And then I just started reading annual reports of companies, and one of the companies that I invested in when I was a teenager was a subsidiary of Sandlam called Botswana Insurance Holdings Limited. It was a listed company, still is a listed company, and I used to religiously read their annual reports. I have this friend of mine who went to college with me called Pex Ella Kello, mui Kisa and him and I used to invest in companies all the time, but we used to do a lot of very deep fundamental analysis on companies. And he told me something when we were invested in Botswana Insurance Holdings and we were remarking about what a great business insurance is, and he said Warren Buffett actually got the capital to make all the investments that he made from the insurance business. And so I kind of tied two and two together to say, oh, I really liked reading Buffett's biography and I really enjoyed and found a lot of similarities in the way he did things and the way my thought process also was, and so I maintained this fascination for insurance.

Arun: 4:32

However, as life often does, it took me in a completely different direction. I went to the United States because my dad felt that I would be able to accomplish a lot more in the US than I would in Botswana, and so I went out and I started a chain of CPA firms. I purchased a couple of CPA firms in the state of Florida, expanded them for a couple of years, but I was never truly passionate about practice and as a result I enjoyed sort of very limited success. You could even say that I wasn't really very successful at my first career. But somewhere along the lines I met a guy in Florida. I purchased his firm and he said Aaron, you should really consider getting licensed to sell insurance, because I've made more money selling insurance in my career than I ever have in my CPA firm. This was right around the time that my dad passed away as well, and so I was like okay, you know what this insurance thing seems interesting.

Arun: 5:31

I was a little bit lost and I went out and I got my insurance license in Florida and I started selling insurance and I was fascinated by it. But I would attend all these conferences of insurance companies in the US that would invite me over and I was always fascinated with how their business model worked and I wanted to learn more about it. And along the same time I met a guy called Dr Kiran Patel, who today is very famous. You know he's built and sold to billion dollar insurance companies in the US. But we shared a couple of similarities in the sense, even though he was from a different generation. He was also, like, born in Africa. He was born in Zambia, grew up in Zambia and lived here for a while and then immigrated to the US in the 70s and he's a cardiologist by profession and so on. So we had a lot of similarities. He's also Indian origin parents.

Arun: 6:20

So I met Dr K and I literally instantly knew that I wanted to be something like him in the sense that he was very successful in the insurance business. But he also was a philanthropist of note and I always had aspirations to give back. You know, I never believed that wealth is really possessed by you. I believe it's something temporary and you. You're a custodian of it for some time, but you're always a custodian of wealth for the benefit of others, and he shared that philosophy.

Arun: 6:52

And so we were very aligned and for five years four or five years I literally I didn't really discuss much business with Dr K. We just I just used to call him once in a while and talk to him, find out how he was doing. And then finally I decided to sell my firm in the US and then decided to move back to Botswana because I felt that Africa is where the future was going to be and I felt that I wanted to play a role in that future. And when I decided to move back, I went to Dr K and I said I'm thinking about starting an insurance company because it's been a lifelong dream of mine, ever since I read Buffett's biography. So would you like to invest in my insurance company? And five seconds later he said yes, and the rest is history.

Damola: 7:37

Wow, wow, how do you get that that much support even early on? I think there's something there that you mentioned, but it's good to highlight. It's the place of learning, understanding someone, amazing stuff and starting off doing insurance right and then starting off an insurance company in Botswana. How did that? Yeah, it's crazy.

Arun: 8:04

It's crazy, it absolutely is crazy. And you know, this is where I believe in many things in life, and more so in the business world, in the world of entrepreneurship. We are successful not necessarily because of our own actions, because there are many people also working just as hard as us and doing all the things that we're doing, but we're also successful more because of other people's faith and trust in us. So, just like Dr K decided to lend me credibility that he had accumulated over his lifetime, just on the basis of my personality it's not that I brought anything special to the table, but just on the basis of the conversations and maybe something that he saw in me. You know I was able to build on my dream, and so I think oftentimes these things happen by chance. But chance is also a function of what we, what we put into it and what we feel in our hearts right that we can accomplish.

Damola: 9:01

Yeah, yeah, and that journey to building an insurance company in Africa. What was the strategy? Because I mean, you are today is an insurer, but yeah, and in short, as well. So that's.

Arun: 9:15

That's interesting because that kind of happened as an evolution. So when we started our business, I knew that a we had to do things differently in order to realize, you know, higher than normal returns. I knew that we had to have a different approach to distribution. So my initial idea was I'm going to start a direct insurance underwriter.

Arun: 9:38

This market was largely intermediated I'm talking 80 to 90% intermediated when we started our business. There was two brokers that essentially control the entire Botswana market they control about 80% of all the short term insurance premiums in this market and so I needed a strategy that would ensure that a I could survive long enough to actually change things and be that I could have a base with which I could, you know, lever that I could have a base that I could leverage to create something special. So initially I said, okay, I need premiums in order for me to afford a team and afford technology and so on and so forth. So I'm going to start a direct insurance underwriter which will give me the capital base that I need to go out and actually solve the bigger problem, which is insurance penetration.

Damola: 10:32

I used to sell insurance, and so I'm very proud of that. I mean, that's what. That was my first entry into the insurance space. I'm coming from outside as well, right Looking at the market at the time. What year was this?

Arun: 10:45

I moved back in 2012. It took a good amount of time for me to get all the pieces together to apply for a license, so I finally got the license in 2014. Thanks to the support of another gentleman who you know, I met randomly through some of the charitable work that my dad had been doing and he agreed very graciously to help me establish Alpha Derek because I knew nothing about insurance.

Arun: 11:11

I had no contacts. I'd never, I'd never dealt with reinsurance in the entire history of you know, the talent and run and this gentleman, his name is Mr Chari. He had spent 40 years, four decades, in the insurance industry at all levels of insurance companies, from the lowest level in the underwriting department, right up to, you know, deputy general manager of Gulf insurance group, which is, you know, billion dollar operation in 14 countries in Middle East and North Africa. So, you know, he brought a lot of contacts to the table and he again, you know, believed in me for some reason and said you know what? I'm going to put my name and my reputation on the line so that you can accomplish this dream. So that's how it also came about.

Arun: 11:54

And then, you know, you asked me the question about how did we evolve from? Okay, we wanted an insurance company. How did we evolve into becoming an insure tech? So my brother was always, you know, more oriented towards technology. Both of us studied accounting. So we we never, neither of us, had a background in insurance or in technology from an academic perspective, but my interest was always in insurance and his interest was always in technology. And so, after I had gotten the concept of Alpha Derek off the ground, you know. He came in and said you know what? Let me figure out the technology side of this, how we can leverage technology to make things work better. And then he went out and built Graphite, which is our proprietary insurance platform that we developed from scratch. It's as good as any world-class insurance software platform that you can buy for a lot of money.

Damola: 12:48

What was the market like currently at that time? And then you come into the space. What were you bringing and how was the reception like? Yeah, so it's very protective, you know.

Arun: 13:23

Oh, of course insurance is. You know, I like to say it's the biggest mafia business on earth because everybody is really protective of their territory and that's, and that's fine. I understand why the thing is. You know, there was a conversation that I had with the CEO of one of the biggest brokerages in the country and again, this was long before I had actually launched Alpha Derek, but I'd wanted to do it for a number of years and you know, I went up to him and I said you know, I want to start an insurance company in Botswana.

Arun: 13:56

And he said, you know, that's the dumbest idea ever. And I said why? And he's like, well, he's like there's two brokerages us and another brokerage that control 80% of this market and we have no need to send our business to you like, we actually would rather send our business to the established players, the incumbents, because we already have relationships with them and you might get a little bit of support from us will send you all the rubbish business and then you'll burn through your capital and after a couple of years, if you're still alive, then maybe we'll think about supporting. So I walked away from that conversation both heavily dejected and also insanely motivated to become a disruptor of the status quo rather than to fit in with the mold of the business. So that's kind of how there was a lot of these moments that seemed like sort of negative outcomes at the time, but then they all contributed to us developing and building this business to what it is today.

Damola: 14:59

So the other alpha direct, starting off in space, what was the business model? I mean as that evolved to what you are doing today? Or what was the business model? I know when you talk about brokers, it means that you're dealing. You're talking about corporate businesses. Yeah, so many you want to know, so even even personal lines was intermediated.

Arun: 15:17

in this country there was literally a small sliver I would say it was under 10% of this market was insured on a direct basis, that is, without having a broker in place. The first idea or first innovation was to change the distribution model and we said, okay, we are going to go after direct business, whatever it is, whether it's corporate and commercial, whether it's personal lines business, we're going to go after it on a direct basis and we're going to effectively save the customer money by eliminating the need for a middleman. And the thesis there was that the middleman had become sort of fat cats for lack of a better word and they were earning a lot of money without adding a lot of value to the customer at the end of the day. And I felt that by adding value to the customer and working harder than my competitors that I could effectively compete with them by giving a better value proposition to the end customer. So we started out with that and we started out with you know very important tagline of massive savings on car insurance and this and that. So we went out and we promised a lot of savings to people who came in and wanted to get a better deal on their insurance. That was the initial model, and then what we did is we innovated in terms of claims, were the first to build our own supply chain for auto parts in this country, and we have fortunately succeeded in changing the entire industry. Today, all of our competitors in this market also have gone out and built their own supply chains for auto parts to the first to do it, and we we succeeded in getting them to change their way of doing it.

Arun: 16:53

When we started in this market, there was only general underwriting, which means you know everybody kind of gets the same rate within a certain category. We were the first to do individual underwriting in this market. Today, most underwriters have done some form of individual underwriting, which never used to do before. We changed the game in a lot of ways and most of the time we were leveraging two key things. We were leveraging some form of technology, ict in particular and we were leveraging a young talent pool that we believed in unconditional, whereas most of these young people would never have had an opportunity to work for one of our competitors. Today, we are the prime recruitment ground for our competitors. They love hiring our staff because our staff are deep in the world.

Damola: 17:42

That's interesting and I mean it's what innovation brings right and you bring something new to the market and being able to see that it works and then is impacting the whole industry. The insurance industry is highly regulated and, starting off an insurance company, not an inshote, it means that there's a lot of engagement and conversation with the regulator in the license. Insurance business is, yes, it's very well regulated, highly regulated, but then also it's capital intensive Early on, you know, being able to get that kind of funding and that backing. I mean, how did that come about right? And then, even for the regulator themselves, what's the mindset around doing things differently?

Arun: 18:23

differently. It's actually a great question. So once I got Dr K to write me the first check, I then went to two other you know sort of ultra high net worth individuals that I knew here in Botswana, and I went to them and I said, look, you know. So, remember, I have zero credibility because I've never worked in an insurance company, I've never run an insurance company. I have zero credibility. So I go to them and I say you know what? I've got this guy from the States who has built a billion dollar insurance company and he has agreed to be my first investor. So if you want to be part of this journey and you know sort of believe in me then this is your opportunity and this is what I'm willing to offer you. And another five and five minutes later I had two more backers. So I leveraged Dr K's endorsement to raise the money that I needed to apply for the license.

Damola: 19:23

So Alpha Direct is up and running now and you're now in competition with every other insurer within that space. What was it like building, or has it been building, the business not like the conventional insurer, but like a digital insurance company?

Arun: 19:42

Yeah, it's in Botswana, it's been really unique because the first three years everybody broke us, hated us. Our competitors obviously hated us, but they were all also quite dismissive in the sense they said these guys are not going to survive one year. And then we survived a year. And then they said they're not going to survive two years. We survived two years and then they said, oh well, even if they survived two years, no startup in this country has ever made it past the three year mark. And we said well, we're going to have to be the odd one out.

Arun: 20:17

And so we kept going, and some very tough moments, obviously in that time period, because we're competing against people that have been in the business for a long time. But I think we always had a belief that we could do it. We always had a belief that we were working on something special, something beyond our own necessities and our own ambition. Even so, I feel our competitors were kind of, to some degree, sleeping at the wheel, but, more importantly, I feel like they didn't clearly have a strategy, because things were going so good before we came into the market. Everybody was making double digit, healthy net underwriting margins, pricing was sort of operating like a cartel and that sort of a thing and I think this is where I must compliment our regulator here NBFERA they, despite us maybe not having those credentials of being a foreign company, like we were a Botswana startup, the regulator has always been very encouraging for us to try new ideas, and to me that's what really good regulation is about.

Arun: 21:26

It's about enabling people who've got ideas and are able to raise capital to go out and to try their ideas out with a backstop that prevents policyholders from getting hurt should those ideas not materialize.

Arun: 21:41

But the solution is not to say don't try your ideas. The solution is to say try your ideas, and here's the framework which you try your ideas with. So we've been fortunate in the sense that our regulator does want to encourage local companies to set up and start up and grow from here, because at the end of the day I mean you know the way I see it is like this all our competitors if they make a diamond profit, you can rest assured that 50% of the profit is leaving this country, whereas with us, if we make a diamond profit, it's staying right here, it's being reinvested. So a dollar of Alpha Direct money goes a lot further in bettering the lives of Botswana than our competitors and I think that's a very powerful thing and I'm happy, I'm fortunate, that our regulator actually sort of supported that, saw that that hey, this company can add value to what we're trying to accomplish as a country, and supported that, that notion.

Damola: 22:38

We like to hear stories around. You know, regulatory, supporting innovation, supporting new initiative within the space Again, these are suspects. You know South Africa, Kenya, Nigeria. You know Ghana we are seeing the regulators most especially in Kenya. You know, supporting innovation, new people, players in short text, coming into the space and really just having direct engagement with this in short text, and not saying that we don't know you, we don't care about you. As long as you're not insurer, don't come into our space, Right, so, so it's very interesting. And so, going back to your strategy, right, we talked about your distribution strategy, right, but in terms of, because you're an insurance company, you bring products to market, yeah, the products that you distribute. How did you go about that? What was the intention from day one and how has that journey been?

Arun: 23:32

So there was an important time in our journey where we made the conscious decision to say we are going to pivot from being an innovative insurance company that's driven by technology to we are going to be a technology company that develops insurance products Right. And the change happened around 2018 or 2019 when we did what's called the Stanford Seed Transformation Program, and it completely changed our thinking about what we should be doing, who it's impacting and where we want, where we can take this business model. And so we went. We decided to go from being an innovative insurance company to being a company that really has a chance to change the game as far as insurance penetration and uptake of insurance on the continent of Africa is concerned, and our vision became much bigger. It became bigger than just Botswana. It became bigger than just doing insurance better, cheaper, faster. It became about solving the root cause of why people in Africa, particularly in lower middle class, lsm so you know, living standard four to six why it is that they don't have insurance, and we went about trying to solve that problem using technology. That was the key, pivotal point. So we went out. We said, okay, we want to solve this problem. How do we solve this problem?

Arun: 24:59

So we went out and spoke to a lot of people who are living in this, in this living standards measure four to six, and we quickly gathered that you know, the problem of insurance penetration wasn't necessarily one of. You know, I don't have money to buy this product or I don't believe I have a need to buy this product. I know that there's a need and I do have the resources for it. But, number one, the products are not accessible to me. So a lot of people in that living standards measure don't have full time access to mobile data. Mobile data, relative to their income, is very expensive. And then the second thing was the products were not. The products are currently available in the market that our competitors were selling were not fit for purpose in the sense they weren't designed with the needs of people in living standards measure four to six in mind. They were designed around more educated, higher income consumers in mind, because there was this perception that they had more money, more disposable income. And then the third thing they said was there was no flexibility in terms of how you could pay. So we still are the first company in Botswana to be able to process and one of the first few in Africa to be able to process recurring payments on mobile money platforms, for example.

Arun: 26:14

We wrote the code, we wrote the software to be able to process recurring payments on credit and debit cards in this market. So previously to us, you can do single transactions, single authorization transactions, with us. Now, having built the software platform, the middleware, we are now able to process recurring transactions. And those recurring transactions are very important for an insurance business to be able to run effectively, because essentially what you're doing is you are spending money upfront to acquire an annuity stream and that annuity stream eventually generates a return on the capital that you put up front.

Arun: 26:50

And so we had to overcome a lot of those hurdles. But overcoming those hurdles also became our competitive advantage. So we've built not only the products from the ground up that meet the consumers needs in that market segment through our retail distribution model. We sell insurance in a box which you can pick up in a retail store, you can activate at the till and you have instant, immediate insurance cover when you walk out of the store, and we were the first to bring that to market. We learned and developed very quickly and reiterated very quickly in order to arrive at where we've gotten to today, at the junction that we are today, I did come across the insurance in the box initiative and I wanted you to talk a little bit more about that.

Damola: 27:36

What is that? What product is it? How do customers engage with it? What's the feedback? Because you are making something that is intangible. That's the age-old issue with insurance what am I actually paying for? 100%.

Arun: 27:56

What we realized when we went out and spoke to people on the streets and oftentimes you won't find insurance company CEOs going out onto the streets, in the bus stations and so on, talking to a hawker in the market. They live a completely different life, and so, because we were willing to do that, we actually got a lot of insight into what makes people in that category tick. And, as you correctly said, we took an intangible product and we made it tangible, because people relate to value in terms of the tangibility that that particular product affords them, in terms of the product design as well. So we launched with an accidental death and disability product which is really unique, not only in Africa, but in many other parts of the world as well. I heard about this product that had been very successful in China, was an $8 billion a year premium product, and so I went to Munich Rea and I said look, this product is going to be my flagship product on my box product line that I'm launching, and I want your actuarial team to help me design the product and price it according to what will sell in this market and still enable us to be able to make a buck. And so we went out and we designed this product from scratch so we're able to offer like $100,000 of cover for under $5 a month in premium. But it's a graded payout structure and so on and so forth, but it gives people a chance to have $100,000 of insurance which they could never have dreamt of in their life before we launched the product.

Arun: 29:34

We also have, like a third party motor insurance product. We have electronic device products, so cover cell phones and tablet computers and laptops and the like, and we have a legal insurance product. So some of these products are designed along the lines of existing products in the market, but we've changed the distribution model and some of them are novel products that we created from scratch. But the important thing to realize is that our box business, as we refer to it, is not a, it's not a single product business, it's a platform business. Once we have a presence in a retail store, we can launch as many products as the market will take. And that's exactly how we do it. We launch a new product every couple of months and we test out the market. If a product doesn't work, we quickly kill it, and if a product works, then we keep it going and we try to, you know, get more people to buy the product.

Damola: 30:32

Very interesting initiative there, and I mean I wanted to use the opportunity to congratulate you on the African Reinshote of the award. I mean back in 2020, I think it was as regards this product right.

Arun: 30:47

That's right. And what's interesting is, I think at that time we had sold about 10,000 boxes and now we're at about 60,000.

Damola: 30:58

Wow, wow. So for the boxes, so for the products, so is this something that you buy a month or a class for a year?

Arun: 31:07

and yeah, it's month to month, Okay, okay. Month to month and the reason we've made it month to month is because of the affordability thing, like if you ask somebody to pay you a full annual premium upfront in, you know in that category of customer they won't take the risk of trying you out and seeing how the product yeah.

Damola: 31:30

So you have to make the barrier to entry really, really low.

Arun: 31:33

So for us the barrier to entry is literally like it's about $4 for US dollars.

Damola: 31:40

I wanted to ask so compared to your competitors or the traditional insurance companies, right, how is Afro direct fair in terms of expense? You know how much of how much is technology helping in that regard, because you know when you look at insurance, the expense is something that is a huge line on the balance sheet. What's differentiating factor for you compared to your peers?

Arun: 32:04

So look, I would say this. I would say that our expense ratios are, as of today, very much in line with the market, perhaps a little bit superior to the market. We've grown from a standing start to today. We are the fifth largest underwriter in Botswana and I think in the next two or three years will be the fourth largest and the. The idea is we will get our expense ratios the benefits of all the efforts that we put in as we scale this business to the next level. In fact, we're already starting to see it. So, if you look at, every year since we started our business, our expense ratio has dropped because we've written more business, more premium and so on and so forth.

Arun: 32:50

We're not necessarily having to hire more staff or incur more overheads, and I think that, in terms of claims, while we know our primary focus up until now has been to deliver the best claim service and not necessarily to cut costs, I think that now is the time when we can go in and start to optimize our claims process, optimize our buying leverage technology to be more efficient, and you need to use less people to do the same job. That's sort of the thing, because we've achieved a certain level of scale at about $7 million in gross return premium. Now we can start to optimize our business for performance and, most importantly, optimize it without compromising on the customer experience is. In my view, the customer experience is the most important thing, is a driver of revenue and it is the singular most important thing that we need to focus on. The second most important thing is optimizing our own cost structure and our own balance sheet so that we are giving you know sort of the profitability and the results that we expect to see from the business.

Damola: 33:54

Alright, so you've disrupted basically the, both swan and markets, leveraging technology, innovation, customer first. Looking at the, the insurance industry generally across the continent, what do you think the future holds?

Arun: 34:12

So I mean the benefits I think are fairly obvious. In the sense, the number one problem that we need to crack in Africa is our low insurance penetration rate. Even even when you take our insurance penetration rate and you adjust it for you know differences in per capita income and so on and so forth it's still dismally low. And so there's a lot, there's a naturally a lot of potential to grow the market itself and I think that there's going to be a lot of innovation in the space. But there's also a lot of barriers that I think we, as not only an industry, but even us as Africans, need to think about. So, for example, I would love to see a day when Botswana insurance company and right business in Nigeria and not have to necessarily go in and apply for a separate license in Nigeria and every other market that wants to operate. And the same way we're thinking about trade within the African continent and increasing intra Africa trade, we should also start thinking about how do we enable our homegrown financial services in this businesses, and insurance in particular, because that's my field of interest to go into new markets easily, effectively, with a unified sort of dispute resolution process and so on, and be able to operate in a new market so that we can contribute to growing that market. I think that's a super big problem to solve and I think it's a it's a very hairy problem that exists currently in in terms of us achieving our true potential.

Arun: 35:49

The second thing is that, while there's a lot of potential for innovation, I do believe that there's going to be a couple of different models that are going to succeed better than others, and the reason why we've we've gone with this model of controlling the entire custom experience from end to end, from product design to claim settlement to reinsurance.

Arun: 36:13

I believe that our model will ultimately be more successful because working with incumbents is a zero sum game. The incumbents don't want the status quo to change. There's no incumbent who really wants to be disrupted. There's no incumbent who really wants their current profits and bonuses to change. Human beings are innately selfish, so you're going to find that they're going to sabotage you. They're going to try to take you down unless you actually come in and disrupt their very own business model, and that, I think, will force them to sort of work with insuretex and look at insuretex not as a threat that they need to squash, but as a new paradigm shift in how we think about insurance and what it can do for people in Africa, for the ordinary people in Africa.

Damola: 37:02

So in terms of insuretex in Botswana, are there that many or some of them springing up?

Arun: 37:10

No, there aren't that many, unfortunately. I'm hoping that entrepreneurs in Botswana that are interested in the insurance space will look at us and say, if these guys can do it, why can't I? And they'll come in and try to be part of the industry and the ecosystem and help us to build the ecosystem. But, as of today, there hasn't been this big insuretex boom that's happened in Botswana because of Alpha Director or even otherwise. So I'm hopeful about it, but I'm not sure if there are other entrepreneurs thinking about this problem as much as we've spent our time thinking about.

Damola: 37:48

OK, so beyond Botswana, what does the future hold? Is there expansion? Are you coming to Nigeria soon?

Arun: 37:56

Yeah, that's a great question. So, look, we started an operation in Zambia about two years ago. It's doing fairly well, it's expanded quite significantly and that was our first step outside of Botswana. We are currently busy going into South Africa and the future beyond South Africa. Of course, we want to be in all the big markets. We want to be in Nigeria, egypt and Kenya, but that may not be the way it pans out. Our business model could even be applied successfully in countries like Brazil, vietnam, cambodia, some countries in the EU. Even so, we see a lot of potential for the business Beyond the Southern African play. We see a lot of potential for the business even globally, in many emerging markets where similar problems exist in terms of insurance penetration and where our solution can actually be a real game changer for those markets.

Damola: 38:53

Fair enough. So for short texts looking to come into this space, which would you advise to come in, maybe like an innovation partner to existing insurers, or they come in fully like you as an insurer themselves, controlling the value chain?

Arun: 39:08

I don't think it's a one-size-fits-all type of situation. I think it's about what, as an entrepreneur, what moves you, what is your calling? So my personal desire was initially to be a game changer, to change the game, to change the way that things were done and, to some degree, to prove to myself and to a few other people that I know very well that my ideas have merit. And then, over time, it evolved to how do we solve this problem of insurance penetration? It's a big problem, it's a very problem.

Arun: 39:41

It's a problem where, if we do successfully solve it, we can have a tremendous amount of social impact and do a lot of good in the world.

Arun: 39:49

And that was sort of where we came from in terms of attacking this problem. So it depends a lot on the problem itself that you're trying to solve. So if you're trying to solve insurance penetration, like we are, then I think the model of being an underwriter is your best model, because you can have the flexibility to design and deploy products at your own pace but that also meet the needs of customers, which larger incumbents may not do, may not want to do or may not be successful at doing. And if you're trying to solve a different problem, like maybe you're trying to solve for fraud in the claims process, then I think it's a better model for you to be a technology provider to a large incumbent or to the industry. That's the way I would see it. So InsureTech is a very broad statement. I like to call us a risk carrying InsureTech. So yes, we build our own technology, but we also carry risk, and that, I think, differentiates us, because we have to stand behind every single product that we build and develop and deploy.

Damola: 40:49

Yeah, I mean.

Arun: 40:50

And if the product is, so do we you know.

Damola: 40:52

Yes, yes, yes, I've been meaning to ask this right Even from the name Alpha Direct. You've spoken about how you started off in this space and you were basically walking against the tide. What kind of culture do you have within your team that helps you to just be gong-go about this project? What's the mindset that you're instilling within your team Because you're doing something different? You're going against, just like you said, a very protective industry.

Arun: 41:24

Your assessment is correct in the sense you have to start at the base level, at the root level, of solving the problem, and that means your own organization needs to have a disruptive mindset. So I'll give you a simple example. Yesterday, last evening, I took a walk around the office. I do that after hours. I go around, talk to all the managers, talk to all the different teams that are working within the company, and I realized that we're currently deploying three new systems within our organization. I'm talking about technology platforms. Within our organization, we're migrating a key part of our business onto our proprietary platform. We are changing the way that we buy automotive parts and we're changing the entire procurement system for that, and that's also ongoing. And then there's a third piece of our business as well that we are deploying new technology to, and the only way that I'm able to do this I mean I didn't even know about one of the deployments that was happening, because that's an initiative that's being taken by one of the teams that hasn't bothered to tell me that they were implementing this, but that's great. That's the kind of culture that we encourage.

Arun: 42:36

So when we started the business, we said we have to, first and foremost, recruit the right people and we never recruited anybody from within the industry. We always located our office, so insurance companies like to locate in a cluster. So if you come to Habaroni, you'll notice that almost every insurance company is located either in the fairgrounds area, which is like a financial services district, where the largest insurance company located, so everybody else also located there and all the brokers are located there too, or they're in the central business district, which is the other place where the few brokers are, and so on and so forth. We started our business in an industrial park, in a warehouse with no air conditioning, and now we're at the Botswana Innovation Hub, which is extremely far away from every other insurance company.

Arun: 43:22

So we always had this mindset that we want to be different, so we located our offices in a different place. We never hired anybody from within the industry for years and years and years. Now. Of course, we do have a lot of people that we've hired from other companies, but we still prefer to hire people fresh out of college and give them the training that they need and the platform that they need to build the best versions of themselves, and I think that belief and faith that young people can do it and can do it without tanking the company. I think was the key to us finding the best talent, motivating them and giving them platform to really showcase what they could do for solving the problem that we're after Wow.

Damola: 44:07

Aaron, it's been a pleasure speaking. I mean very insightful conversation, Very interesting journey as well. Also great insight into what's happening in the Botswana market and I mean super exciting what's happening within insurance innovation across Africa. I mean we definitely would have further conversations because I know that there are a lot of things that we still definitely need to deep into, even around in short text. And growing the space and, you know, attracting funding. Oh yeah, thank you Absolutely.

Arun: 44:42

First and foremost, let me say thank you, damola, for taking the initiative to reach out to me and giving me this opportunity to share part of my story with your listenership Solving such a big problem as insurance penetration. While, while we all understand that it can have tremendous impact, it can't be done by one person or a small group of people. A lot of people who are passionate about solving this problem need to come together to solve this problem, and they can be from across Africa. So my feeling is that there's going to be a lot of people that listen to this and think you know what this is a good enough, important enough problem that I want to solve it, and then we'll join hands and go out and figure out how we solve this problem.

Damola: 45:28

Yeah, that's something that we are keen on. Three things encourage learning, facilitate innovation, encourage networking and I know that this conversation, a lot of people will learn from it is to support some innovation, different thinking. And, in terms of the networking, how can people connect with Aaron? How can people connect with Alpha Direct? I want to partner, I want to work with you, I want to invest, because I know you work with the number of VC firms, launch Africa being one of them. Zac is a friend of the house. How can they connect?

Arun: 46:04

So yeah. So, first of all, a big shout out to Zac Sinead and the Launch Africa team. Them backing us was the game changer for us. It changed the game significantly, and I'm ever so grateful for having met them and for them having believed in us. And then, in terms of reaching out to us, I think if people want to understand more about what we do, please do visit our website it's alphadirectafrica and then, if they want to connect with me personally, the best way is LinkedIn. Arun P Ayer from Alpha Direct. You can connect with me on LinkedIn and share your ideas, share your thoughts, and we will take them forward. If you want to just have a chat or a coffee, happy to do that as well. Awesome, thank you, aaron. Thank you so much, damola.

Damola: 47:17

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