The alignment of economic interests between buyer and seller is much spoken about but little done. Over two and half years ago when Tobi was first on the show he spoke about the idea of aligning Laka’s interests with their clients. Now we hear this narrative all the time but rarely is it deeply true.
In Laka’s case they do not take payment for the insurance but rather earn money when they pay-out on an insurance claim – the opposite of the insurance industry. Its a “back to the future” approach – back to the origins of insurance as being collectives, co-operatives of say Swiss dairy farmers up an alp bonding together for mutual (sic) support.
Well back then it sounded like a wonderful idea but one that would need careful paramaterisation. As with anything in life one needs to balance compassion for others with compassion for yourself – all too many teachers, doctors et al go into their profession to help people but come out of it decades later bitter and cynical. In the same way you can set up a company tomorrow that is totally focused on client-value (which many say of course but no-one really does) but if you are 100% on client-value then that’s zero value for your business and at some point you go bust.
In this episode we look at truly aligned Insurtech. How has the model gone? Is it widespread? Will it catch on? What does the future hold?
Topics discussed include:
- home exercise bikes esp the much-hyped Peloton
- establishing brands, trust and keeping that
- Tobi’s career journey to being an Insurtech Founder
- original idea was late 2015/16, 6mts working on it as an idea and validating it, summer 2016 speed-dating for co-founders (a mere 3mt speed-date :-D) – came together Nov 2016
- first policy sold early 2018 when Laka went live
- the original idea of insurance and why the industry moved away from this – demutualisation and subsequent corporatisation leading to a more shareholder-focused than client-focused business model
- existing model – pay up-front, actuarial estimation of future claims
- Laka’s model – don’t pay up-front, no actuarial estimation, rather than risk to manage is the credit risk of customers not paying up monthly
- very little change in their model over the years
- not estimating up=front gives the advantage that you don’t need to charge more to cope with the uncertainty of your forecasts of losses
- taking money first and then having to give it back later creates friction in the journey
- widespread outsourcing of claims processing to third-party processors by mainstream – cf Laka who make claims the heart of their business
- Laka’s mission to build a win-win-win model
- Laka finds credit risk is easier to manage than the insurance risk consequent to up-front payment.
- 34mts track record of 99%+ customers paying-up monthly
- early comments on their model “too good to be true” – Laka having improved their ability to explain why it is not over time
- mutualising risk
- expected payments are shared with customers with a maximum price each month being the existing market rate
- accountability is put upon the community to keep losses etc low as in the collective’s mutual interest
- pay only pro-rata to the value of your bike
- long-tail risk is outsourced
- Laka just passed 10,000 bikes insured worth £26m
- this model is still relatively unique although the huge Ant Financial in China use a similar model (on a much larger scale) for critical health cover
- Laka’s plans for the future
- expanding into other bikes segments and e-bikes
- 2025 estimate of 150 million e-bikes sold in next 10 years, and 125 million active cyclists
- Laka is just about to launch in the Netherlands
- launched a personal accident policy – but will retain the focus on personal mobility sector
- Laka’s current crowdfunding on Seedrs
- increasing mutuality from their existing customers – over 50% of current customers have already signed-up
- shoutout for partners expanding in Europe and worldwide
And much much more 🙂
Share and enjoy!