Wefox, a German insurtech startup, has raised $400 million in a series D round of fundraising, giving it a post-money valuation of $4.5 billion. This is a 50% boost from the $3 billion estimations in its Series C round last year.
The startup avoids the D2C strategy used by insurtech rivals like rival German startup Getsafe by selling a variety of insurance products through a combination of internal and external brokers. Wefox’s CEO and founder Julian Teicke believes this strategy for increasing users, in which third-party brokers utilise Wefox to advise their own clients, helped the business double its revenues to $320 million last year. Additionally, it recently crossed 2 million customers across the board and has already earned $200 million in the first four months of 2022, putting it on track to hit $600 million in turnover by the end of the year.
Wefox claims to have trained its own brokers in other markets like Switzerland, Germany, and Austria while maintaining a network of about 3,000 independent brokers in its home country of Germany.
Wefox’s indirect distribution business model, which has allowed the company to scale more quickly than any other insurtech in the world, Teicke told TechCrunch, is its “secret sauce.” Since no other insurtech model goes direct to customer, ours is the only one.
The key advantage of this approach is the cost of customer acquisition, which is greatly reduced because Wefox’s brokers, agents, and other partners handle the bulk of the groundwork. Additionally, it makes it possible for Wefox to enter new markets more swiftly.
Teicke continued, “We can then concentrate on helping our brokers, agents, and affinity partners target the most lucrative consumers, improving our loss ratios and customer lifetime value. Wefox is able to achieve a superior financial profile thanks to our model, which puts us on a direct path to profitability.
The strategy is based on the fundamental tenet that customers prefer to speak with a live person and receive individualised guidance because insurance is a subject that is by its very nature complicated. The technology doesn’t start working until after that, with all the customary mobile apps and internet dashboards for registering and filing claims.
Insurtech is one of the few sectors that is not immune to the economic slump. Policygenius eliminated a quarter of its staff in the past month alone, shortly after raising $125 million, while Next Insurance is reducing its employment by about 17%. Others, like Root, Hippo, and Lemonade, which is also rumoured to have let off some of its personnel back in April, are among the publicly traded insurtech businesses that are trading much below their initial IPO price.
On the other hand, we have seen some sizable investments in the insurtech sector, with YuLife only last week securing $120 million at a $800 million valuation and Branch recently attracting a $147 million Series C tranche at a $1.05 billion valuation. Even if 2022 doesn’t match the record-breaking 2021, it’s evident that insurtech isn’t completely out of the running given the ongoing stream of smaller investments in the industry.
Wefox finds it impossible to believe that it could have spent that much money so quickly given that it has just been a year since it secured a $650 million round of funding. According to Teicke, it wasn’t in a rush to raise money again; rather, it was simply preparing for the possibility that it would require the money in the future.
We don’t require additional funding, but investors approached us after our Series C round, and in light of the current economic climate, Teicke said, “We believe it was prudent to review the situation and take advantage of the current economic downturn—because we see this as an opportunity to grow even faster.”
Mubadala Investment Company, with participation from LGT, Horizons Ventures, and Omers Ventures, led the Series D round of funding for Wefox, which consists of equity and debt. The business, which is flush with cash, announced that it has long-term intentions to grow into the United States and Asia in 2024, as well as new European markets in 2022.
Image Credit: Wefox