wefox raises US$650m in record insurtech funding round
The Berlin-based insurtech, wefox, has closed a record $650m Series C funding drive - the biggest for an insurtech globally.
The round, which was led by Target Global, has also resulted in a post-money valuation of $3bn.
wefox will invest the capital in strengthening its presence in existing markets and expanding globally within the next two years.
According to reports, the round was significantly oversubscribed, with participation from existing investors OMERS Ventures, Merian, Horizon Ventures, Eurazeo, G Squared, Mountain Partners, Mubadala Capital, GR Capital, Speedinvest, Salesforce Ventures and Seedcamp.
New investors included FinTLV, LGT and its affiliated impact investing platform Lightrock, Partners Group, EDBI, Jupiter, UBS and Decisive.
wefox profits for 2020
wefox is currently Europe’s largest insurtech. The fully licensed digital insurance company sells insurance through intermediaries and not directly to customers, which has resulted in significant growth with a clear path to profitability.
Details of the company’s 2020 financial year show the carrier made revenues of $143m and posted a profit for the first time.
This latest round means wefox has raised a total of $910m since it’s first funding drive in 2016.
Speaking about the funding drive, Julian Teicke, CEO and founder of wefox, explained, “We’ve grown our business significantly over the last six years since we launched and we have delivered strong year-on-year growth.
“This year we took several important steps, such as unifying the business under one wefox brand, expanding into Poland, and setting up a deep tech team in Paris. Within the next few years, we will expand our global footprint, increase our presence in Europe, and move into both the US and Asian markets.
“wefox will become the leading personal insurance company within the decade.”
Teicke said wefox had set out to improve the customer experience for both its advisors and customers through technology to increase customer satisfaction, reduce customer acquisition costs, increase cross-selling, and decrease churn.
He added, “This is why wefox has built a huge network of advisors across Europe. We believe that insurance is all about people, and we believe that technology is an enabler and should not replace the human connection.”
wefox expansion plans
wefox will continue to deliver a loss ratio supported in large part by its straight-through-processing (STP) of more than 80%, and a central product factory that swiftly distributes new products to the market due to its full stack insurance technology.
CFO and founder of wefox, Fabian Wesemann, expanded on the inturtech’s growth strategy, saying, “This investment strengthens our growth strategy and moves us closer to realising our vision - to prevent 30% of risks from happening - in order to offer the most advanced service to our customers.
“As part of this, we want to ensure that we are building the technology to automate our business processes to have a STP ratio consistently above 80%.”
He continued, “This investment round is the culmination of six years of hard work and we are still at the very early stage of our business. I want to thank the entire wefox team for their hard work in enabling us to achieve such incredible results.”
Wefox’s full-stack digital insurance offering is the parent company of wefox Insurance, which is the in-house regulated insurance carrier. Since it’s 2015 launch, it has attracted a series of high-level investors.
Goldman Sachs International were hired as the private placement agent to wefox for the financing round.
Yaron Valler, General Partner at Target Global, pointed out that wefox has consistently delivered “exceptional results” and that this has been backed with demonstrable year-on-year revenue growth, which saw their insurance carrier, wefox Insurance, report a profit earlier this year.
He said, “We invested in wefox in their series A round in 2016 and we are delighted to be leading this series C round. Wefox is unique among the insurtech players with ample room for growth ahead.”
Timeline of wefox funding rounds
- 2021: Series C round $650M led by Target Global.
- 2019: Series B round $235M led by Mubadala Capital.
- 2017: Series A round of $30M led by Horizons Ventures and Target Global.
- 2016: Seed round of $5.5M led by Salesforce Ventures.
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.