Creating a New Product Category in Financial Services
Perspectives from a Founder-CEO
Creating new product categories in financial services, particularly in insurance, is tough.
There are a handful of founders of insurance companies and new 'digital' FSCs that I admire for their boldness and vision at the time.
Sir Donald Gordon: what he achieved with Liberty Life since 1957 was astounding. He had a vision and started the insurer back in the days before ICT was a thing. He built it into a giant in South Africa and had some international successes too. Liberty Life now belongs to the Standard Bank Group listed on the JSE, A2X, and NSX. UPDATE—"The man who turned R100,000 into a R40 billion insurance giant"—His R100,000 ($66,667) capital raise in 1957 would be about R12,171 million ($655,645) today. In the USA, $66,667 in 1957 would be about $748,000 today.
Adrian Gore: launching Discovery Health when corporate ICT was still in its infancy was no small feat. While I’m no fan of Vitality (his loyalty program), I admire how its used to enhance Discovery’s expanded portfolio of traditional products. Discovery Limited is listed on the JSE and has ADRs traded OTC in the USA.
Lemonade Insurance: its early years intrigued me as the vision seemed aligned with what we were building pre-2020. But their model and products fell short of what I envisioned, evolving into a traditional insurer with a sleek user interface (UI). Their social upliftment formula? Clever marketing, but not transformative. Listed July 2020 on the NYSE with a lacklustre performance that sadly reflects my observations.
Revolut Bank: I followed them quite closely as this was a great pre-2020 example of an upstart digital bank / NeoBank. It's been great to see them navigate banking regulations and grow. I had thoughts of approaching with a JV proposal but was disappointed when they introduced insurance products. I was relieved, however, when I delved a bit deeper and could see that our approach is better. They remain privately held although reports suggest a possible listing on the NASDAQ.
Tymebank: another interesting pre-2020 example of a digital / NeoBank that I have followed from its early days in Australia to excellent achievements in South Africa. They are tightly held by ARC, an investment company listed on the JSE, which forms part of SA billionaire Dr Patrice Motsepe’s empire, originally built through innovative dealmaking in the gold mining industry. The same empire controls some of SA’s oldest and largest insurers, so a JV with Tymebank is always going to be unlikely.
Both Revolut and Tymebank have great digital banking products architected into new banking structures, but they fall into the same problem when it comes to insurance by forming partnerships with traditional insurers and risk products.
Warren Buffett, Charlie Munger, and Berkshire Hathaway (BH): They could see the value of an insurance company as foundational to their plans and, like Donald Gordon above, this was way before ICT became a thing. It is now also very clear that they agreed on certain core values and a pragmatic approach to building BH globally. Insurance is a core component of BH’s business model and success; insurance operations provide a steady stream of premiums (float) that BH invests in other ventures. Berkshire Hathaway remains listed exclusively on the NYSE.
What do those examples have in common? Despite technological advances, they remain tied to the incumbent and traditional insurance model. That model continues to thrive financially but fails to serve the majority of the world’s population effectively or equitably.
I have recently been reminded that what I’m doing is creating a new product category. This isn’t easy to articulate because it’s fundamentally different in a centuries-old industry. But borrowing from the popular saying, 'Build it, and they will come,' has been my approach from the start.
The industry’s $6.7 trillion in annual premiums comes from a minority of the global population, many of whom are dissatisfied with and distrustful of their providers. The opportunity to enter underserved markets with a new product is immense, and the time for change is now.
This is not an indictment of financial intermediaries but of the insurers themselves (although there are issues and opportunities with intermediaries too). It is time for change, and I believe that I am part of leading the way. Time will tell if I am right - I have already made mistakes - but I have not been proven wrong since entering the ICT/technology and financial services industry 10 years ago.
A close associate (an insurance industry expert and regulatory boffin) told me back in the pre-censorship days of 2016-2019, “Martin, what we have is a completely new product category with huge potential. Stay under the radar in the early years”.
I now see how prescient his ‘new category of product’ comment was. The industry’s capture, so evident during 2020-2024, has only amplified our opportunities. The future of insurance isn’t just about reinvention—it’s about doing better for people, globally.
I’m no longer staying ‘under the radar’.
This post first appeared 2 Jan on X - please follow me on X and Facets Insure too.
