Peppercorn is the first UK Insurtech to get EIS relief
The startup, which provides a digital, personalised, and automated car insurance service to its customers, combines underwriting rules, technology, cutting-edge data, AI and a re-imagined CX to deliver a self-service lower cost product to the marketplace.
Peppercorn originally applied for the EIS tax relief in July 2020, but was rejected under the previous guidelines. The company reapplied in April and has just been approved for relief.
Speaking about the change in regulation, and what it will mean to UK insurtech startups, Peppercorn CEO, Nigel Lombard explained, “As well as the process taking a large amount of effort and time, the absence of advance assurance meant the traditional early stage routes of sourcing investment from angels and EIS funds was effectively blocked,” he said. “The good news is it won’t be anymore for new MGA startups.”
Lombard said he was pleased the insurtech now qualified for the EIS support following it’s rejected application last year.
“We applied to HMRC for SEIS and EIS advance assurance in July 2020 with support from [accountancy] PKF Littlejohn. We understood the rules for qualifying businesses – that insurers do not qualify - and were clear we qualified in line with HMRC’s definitions.”
Lombard said Peppercorn answered several rounds of questions from HMRC to confirm it would not be a risk carrier, the underwriter nor a legal entity effectively owned by an insurer. Rather, it would be an MGA with delegated authority which would be regulated by the FCA.
He continued; “In October 2020, HMRC advised they couldn’t provide advance assurance because insurance activities were excluded from the list of qualifying trades.
New tax relief for UK insurtechs
Insurtech UK, which is the biggest insurtech alliance globally with a membership base of more than 100 insurtechs and partners, worked collaboratively with HMRC for over a year to update the EIS and SEIS guidance.
Peppercorn was used as a “case in point” to rework the regulations in favour of insurtech companies.
The updated HMRC public guidance now states that MGA’s, which include insurtechs, now qualify for SEIS and EIS relief.
Commenting on the recent change, Insurtech UK’s chair of government and external affairs working group, John Warburton, said, “Resolving the SEIS/EIS issue was one of the primary campaigning objectives of Insurtech UK when we formed in 2018.”
He said the move was a critical requirement for the sector to organise itself and speak with a collective voice in order to achieve a positive outcome. “We are delighted, therefore, that our work has resulted in a change in guidance from the government, but more importantly, a real life case study where an insurtech has immediately benefited from it,”
He continued, “We are pleased to secure our first major lobbying win as an association and we will continue to campaign on behalf of our members to ensure that the UK becomes the global leader for insurance innovation.”
EIS case studies
Warburton said there were several case studies of insurtech MGAs who had been rejected from SEIS/EIS eligibility because of an incorrect assumption by HMRC that because it was working within the insurance sector, it was an insurer that carried on insurance activity.
“Insurance is an excluded activity from SEIS/EIS as per the legislation, but this only relates to insurers who bear financial risk on behalf of customers – something that an MGA does not do as an intermediary.
“Insurtech UK worked with our partners, including PKF Littlejohn and Smith and Williamson, to provide written guidance for HMRC inspectors about the nature of the MGA business model and we sought to update the public guidance on the issue to provide clarity that MGAs as a business model are eligible for SEIS/EIS relief.
“The change in the public guidance, the assurance that HMRC inspectors have been notified of the changes and the positive outcome of the Peppercorn application shows that our efforts have been successful.”
TrueMotion insurtech acquired by Cambridge Mobile Telematics
One of the world’s leading telematics insurtechs, Cambridge Mobile Telematics, was launched in 2010 and powers 65 enterprise programmes in 28 countries.
Meanwhile, TrueMotion, which launched in 2012, has enjoyed significant success as a telematics operator, raising US$10mn in its seed funding round in 2010, and then partnering with the motor insurtech Noblr in 2019.
TrueMotion has also entered the European market, collaborating with LB Forsikring to promote safe driving in Denmark.
The joining of the companies means TrueMotion’s 150-strong workforce will join Cambridge Mobile Telematic’s already established team, along with their client list, which includes Travelers, Farmers, and Progressive.
The new company will focus on increased interest in using telematics for crash reconstruction in personal lines claims and more innovation in the telematics space.
Speaking about the acquisition, William Powers, CEO, and co-founder of Cambridge Mobile Telematics, described the move as an opportunity to explore new markets, expand throughout the US and bring telematics to a much wider customer base.
"With this acquisition, we will use our world-class talent, technology, and scale to help our partners overcome the complex challenges of global road safety,” he added.
Ryan McMahon, VP of insurance and customer affairs for Cambridge Mobile Telematics, explained that expanding the company with additional talent and customers would help meet the demands of a growing telematics market. He also quoted data from a study by J.D. Power which revealed that personal auto telematics users have doubled in five years to 16% of policyholders.
McMahon told the press, “This market is rapidly expanding, and building more capabilities is more important than ever,” McMahon says. “Both companies follow similar philosophies and grew up in similar ecosystems, and now we’re bringing those cultures together.”
He continued, “Telematics is absolutely the future of commercial auto and rideshare, and it’s kind of a step up beyond the normal telematics."
McMahon added, “We will not only widen our lead in smartphone telematics, but also use our combined talent to invent new products for risk measurement, contextual telematics, and crash mitigation across emerging mobile, IoT, connected-car, video, and sensing technologies.”
Five reasons why telematics is in demand
- It reduces fuel costs and increases operational efficiency. This is a consideration for most commercial fleets given the rising costs of fuel
- The technology enables fleet managers to plan operations with greater precision by providing exact locations, timescales, and speeds of vehicles.
- It improves driving standards and monitors driver behaviour, reducing detours and ensuring responsible driving.
- It helps fleet health and maintenance by monitoring the health of operational vehicles.
- It increases corporate social responsibility in terms of care for the driver, the vehicle, the impact of driving in terms of emissions, and also the security of the vehicle itself.
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