Patrice Motsepe’s African Rainbow Capital (ARC) has launched an insurance company, African Rainbow Life (ARL).
Unlike other insurers that serve the low-income segment of the market, the company offers a full spectrum of insurance, from underwritten life insurance to investments and retirement products.
The new venture is owned by ARC and Sanlam, which also has a business serving the entry-level market, Sanlam Sky. ARL is the product of a two-pronged BEE deal between Sanlam and Motsepe, finalised in 2018, whereby the insurer agreed to grant ARC’s parent company, Ubuntu-Botho, a R2bn loan to form a new insurance company.
Sanlam owns a controlling 51% stake in the new insurer. ARC Financial Services holds 26%, while the rest is held by an ARL management consortium that includes a staff, community and management trust.
The new group is the country’s second mainstream insurer to have a black management team after Hollard.
ARL CEO Bongani Madikiza said the Sanlam and ARC joined forces so they can better compete in a market dominated by the likes of Old Mutual and Assupol. He added that the market is big enough to share, and it remains relatively untappped in terms of players offering comprehensive insurance and investments.
“We must think about ‘how do I beat Old Mutual, how do I beat Assupol’. Our aim is to get a foothold that will allow us to become a sizable business over the next five to 10 years,” said Madikiza.
Old Mutual’s mass market business still commands the biggest share of entry-level retail insurance in SA. The other big player in that segment is Metropolitan, which held an 18% market share in the lower income segment at the end of 2018.
Madikiza said ARL wants to disrupt the entry-level market by dealing with that segment of the market differently. While most companies mainly offer funeral cover and limited insurance in the entry-level market, ARL launched with a full suite, from underwritten life to illness cover, investments and retirement products. The life cover benefit is currently limited to R1m.