Digital insurer wefox is riding high on the insurtech boom, closing a $650m Series C round that pushed its valuation past the $3bn mark while insisting that its technology and agents make it very different from old insurers and other tech startups.
The new valuation is a big jump from the $1.65bn the Berlin-based company achieved on the back of a $110m Series B extension in December 2019, which added to the $125m previously raised in March that year.
CEO Julian Teicke, CFO Fabian Wesemann and CRO Dario Fazlic launched wefox in 2015. They boast of having “delivered strong year-on-year growth” since.
Over the past year, wefox has expanded into Poland and set up what Teicke refers to as “a deep tech team” in Paris.
In 2020, wefox reported a profit for its insurance business, wefox insurance, claiming that this made it the first digital insurance company to reach profitability. wefox also said its revenue doubled between 2019 and 2020 to $143m. It aims to increase that figure to $350m in 2021.
On the back of the funding round, the insurtech startup plans to expand further into different European markets as well as venturing into the US and Asia.
wefox distinguishes itself from many other insurtech startups by not selling directly to customers. Instead, prospective clients buy wefox policies from the company’s 700 agents and its army of 5,000 associate partners.
“Most insurtechs says that insurance agents are dead. We say: They are more alive than ever,” Teicke told Reuters.
He argued that the role of technology is not to get rid of human agents but to make the process as smooth as possible for both consumers and agents by increasing automation, cutting acquisition costs and boosting cross-selling.
When asked exactly how this arrangement differs from the one many legacy insurers have with their own agents and associate partners – not to mention their own tech investments – a spokesperson told Verdict that the technology is the key differentiator.
“We are using technology to increase automation and reduce time to market of new insurance products,” the spokesperson said. “This allows agents and customers to buy our policies much faster and easier, automate the entire customer service in real-time and make our claim pay-outs eight times faster than the market.
“What separates us from traditional insurers is the speed of product innovation – this year alone we are launching 24 new insurance products, the low-loss ratios via data analytics and the lower admin costs through automation.”
Traditional insurers like AXA and Allianz, however, have also made similar investments in automation over the years. But wefox’s argument was clearly convincing enough for venture capital giant Target Global to lead the round alongside existing and new investors.
Those backers included OMERS Ventures, Gsquared, Merian, Horizons Ventures, Eurazeo, Mubadala, Creditease, Salesforce Ventures, Speedinvest, Alma Mundi Ventures, Victory Park Capital, GR Capital, Mountain Partners, Seedcamp, Sound Ventures, LGT, Partners Group, Jupiter and FinTLV.
wefox’s Series C raise comes as the insurtech industry has proven to be one of the big winners from the Covid-19 pandemic. The traditional insurance industry has a reputation for being sluggish to innovate, especially compared to other sectors like the financial and entertainment industries.
This perceived sluggishness is due to a combination of heavy regulation and old legacy systems that are costly to replace.
While the incumbents have made some efforts to digitise their operations, the process has accelerated thanks to the coronavirus.
As the sector found itself facing an avalanche of policy claims because of the health crisis, insurers have needed to update their risk models and their systems.
This has been identified as an opportunity for new insurtech startups, either selling their own products to consumers or peddling their solutions to insurers eager to innovate.
And investors are there to back them up. Consequently, and despite initial fears that Covid-19 would make it challenging to raise new funds, 2020 proved a breakout year for the sector.
GlobalData’s Technology Intelligence Centre recorded 270 venture financing, private equity, debt offering and equity offering deals in the insurance industry worth a total of $10.31bn in 2020.
The last year also saw companies like Lemonade and Root Insurance enjoying successful initial public offerings.
“Covid-19 was undoubtedly a catalyst for change in the industry,” Mark Allan, CEO of Ki Insurance, which raised a massive $500m round last year, recently told Verdict.