Insuretech for good - why we invested in wefox

Earlier this week, wefox announced that they’ve raised a record $650m Series C – we at Lightrock are super excited to come on board and back wefox in “turning insurance into a customer centric product that people love” (Julian Teicke, CEO wefox)! Founded in 2015, wefox is leading the digital disruption in European insurance headed up by the visionary founders Julian Teicke, Fabian Wesemann, Dario Fazlic and their fantastic management team. wefox sells insurance uniquely through a combination of in-house and external brokers, which has resulted in significant growth and a clear path to profitability. Above all, the company is driven by a single purpose: to make people safe and prevent risk by reinventing insurance at scale through technology – making it a perfect fit for Lightrock, who is backing purpose-driven game-changers that pursue scalable and tech-driven business models benefitting people, planet and productivity.

Besides an exceptional founding team and a well-positioned market leader, there were a few other reasons which attracted us to invest in the company.

An emerging pan-European leader in an attractive market ripe for disruption

wefox is addressing a €1.3trn European insurance market, which we believe is at an inflexion point. Whilst the first wave of disruptors redesigned the consumer experience through digital journeys, new disruption by players likewefox is focusing on applying technology across the full value chain, from distribution to claims and policy management. The penetration of online channels is expected to expand from the 6% today to 15-20% in the next five years, kicked-off by the aggregators and comparison platforms.

The majority of the insurance distribution (c.90%) today for more complex insurance products such as health or life insurance is done by intermediaries (brokers, tied agents and banks). As digital full-stack carriers offer flexibility, it will simplify distribution and accelerate low-cost niche smaller ticket insurance (pet insurance, items insurance, anything really!) as well. Nevertheless, we believe that wefox’s focus on the broker channels is well-suited to the structure of the European market. Further, wefox has demonstrated strong traction and unit economics development across multiple geographies. In 2020, wefox insurance was the first digital insurance company to reach profitability. Furthermore, it has experienced strong revenue growth over the last few years. Additionally, with four acquisitions completed in the past two years, wefox has a clear M&A playbook and is well positioned to become a pan-European leader as it expands its footprint across.

Headed up by a brilliant and visionary team.

The founders Julian, Fabian, and Dario are visionary, ambitious, and successful serial entrepreneurs with exceptional vision and execution, whilst remaining humble and surrounding themselves with strong operational team members. Throughout the six years, they have continually optimised the strategic direction, the technology, and the operating metrics to improve efficiency and synergies between their growing and complex business.

Building a highly scalable API first platform

Built as a tech business from ground up, wefox is employing a data driven product development strategy. With its full stack insurance technology, the company is able to swiftly distribute new products to the market. For improving operational efficiency, wefox has a comprehensive and user-friendly software offering which allows brokers to sell better, efficiently through admin automation and better policy lifecycle management (think of it as a Salesforce for brokers). Fundamentally, we are impressed by how wefox is constantly leveraging data and automating its processes to improve its operations, enhance the customer experience and reduce operating costs. wefox offers one of the highest Straight through Processing (“STP”) in the industry with the use of technology tools to drive operational efficiencies. The resulting operational uplift is remarkable as it is significantly higher than 10-15% STP for the incumbents. We believe that the technology stack is well positioned for “tackling that $5.2 trillion industry that has been stuck in the pre-internet era” as described by CEO and co-founder Julian Teicke.

Driving the “good insurance movement” and make people be safe

wefox management’s mission aligns well with Lightrock’s investment strategy focused on positive impact. The Company is on a mission to leveraging technology to simplify insurance, increase accessibility and affordability through transparency. wefox aims to build an automated and more efficient insurance business, as well as enhance the positive social impact of the insurance product for end consumers. We see wefox’s positive impact through two lenses: consumer and systemic. At the consumer level, brokers enabled by a suite of wefox tools provide a higher quality of service through a more transparent and easier to use customer experience. This leads to better access to and choice of insurance products, as well as simpler and faster processes from a consumer perspective (e.g. wefox handles claims eight times faster than the traditional insurance industry). From a systemic point of view, digitalisation of the industry can improve transparency and efficiency as well as simplify the customer choice. Similar to the transformation observable in other sectors such as the financial services sector, we see this change being accelerated by insurtechs and COVID driven tailwinds, putting pressure on the overall ecosystem driving innovation. wefox empowers people and businesses who are seeking real-time support, account management, and advisory to find the adequate policy to secure themselves and their assets. But wefox’s ambition actually goes further as it is leveraging data and technology to prevent risks from happening in the first place –a seismic shift in the role of insurers from claims payers to a guardian angel…

We at Lightrock are proud to be backing a leading company that is transforming the insurance industry, building disruptive people-centric solutions and is fiercely focused on optimizing every aspect of the customer journey, to protect people and assets instead of paying claims. We are all fired up to be alongside this great company and its management team on this mission.

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