Coverflex hits €5m in largest seed round raised in Portugal
The Portuguese insurtech/fintech startup, Coverflex, has initiated the biggest seed funding round in Portugal to date, and one of the largest in Europe, led by Breega and co-investment from the 200M Fund.
Coverflex, which provides an all-in-one solution for companies to design and personalise their compensation offers to include meal allowances, fringe benefits, health insurance and more, was founded in October 2019.
Their platform enables businesses of all sizes to streamline their employee benefits while also saving time and money. The solution provides access to an app, company defined budgets and options and a VISA card. Employees can select which benefits best fit their needs.
The disruptive insurtech is transforming legacy compensation practices by aggregating multiple providers, helping companies to cut costs with fiscally efficient benefits and by giving employees more value while improving their personal financial literacy regarding compensation and benefits.
Over 3000 employees from big-name companies such as PwC, Bolt, Emma - The Sleep Company, Landing.Jobs, Startup Lisboa, Rows, Paul Stricker, Velocidi, Dott and Unbabel are currently using Coverflex’s solution.
Coverflex investment strategy
Breega and the 200M Fund’s contributions to the investment drive will fuel Coverflex’s expansion plans. The 200M Fund is a co-investment matching initiative by the Portuguese government to support better investment in cutting-edge businesses and attract international entrepreneurs and qualified funds and corporations to invest in the Portuguese market.
According to reports, Coverflex aims to become the market leader in Portugal, with the financial backing enabling their international rollout and recruitment drive for expert product, design and engineering teams.
The startup is hoping that their personalised and easy-to-use employee compensation service will reinforce their clients’ attractivity, giving them the competitive edge and enabling them to better attract and retain their most valuable staff.
Speaking about the investment drive, Miguel Amaro, Coverflex Co-Founder and CEO explained, “The way we work is changing, but compensation — salary, bonus, equity and benefits — has not evolved for decades. The current rigid, one-size-fits-all approach is outdated and fails to satisfy the needs of the modern workforce.”
Amaro continued, “From the very beginning, we've been focused on creating an experienced and solid team that is aligned with Coverflex’s mission and goals. Building a project from the ground up requires teamwork and an environment where everyone is collaborating and delivering on a shared strategy. We always look for the best people in each field, those who stand out. This mindset is going to define our direction over the next decade.”
He added, “As entrepreneurs, having built and directed companies in different industries, we came up against the same problems time and again when dealing with employee compensation: multiple providers, a lack of transparency, reliable information and flexibility created a less than optimal experience for both us as employers and our teams.”
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.