Investment

Billionaire Kamprad brothers back insurtech/fintech ventures

Hedvig, a Swedish insurer, is the latest in a stream of new ventures offering clients easy terms, and ease of access, to financial products. 

Following the success of a US equivalent, Lemonade, it has won backing from a savvy group of families and venture capital firms.

The Kamprads are also involved with financial services as co-owners of Ikano, spun out of Ikea in 1988.  Earlier this year Ikano and Ikea joined forces to offer banking products to shoppers

A $45 million fundraising, confirmed at the end of September, has attracted support from billionaires Jonas and Mathias Kamprad, sons of the late Ingvar Kamprad, founder of Ikea, the flat-pack furniture store, known for offering value for money.

The Kamprads are also involved with financial services as co-owners of Ikano, spun out of Ikea in 1988.  Earlier this year Ikano and Ikea joined forces to offer banking products to shoppers. 

A growing number of startups are offering services such as online credit, foreign exchange, robo-advice and insurance at prices that are highly competitive, compared to the banks.

They also project a woke image to millenials, disinterested in jumping through hoops to entrust their own money to banks and insurers. Hedwig’s corporate blurb says: “Hedwig is a new approach to insurance. It’s about freedom and being ok with your life no matter what happens to you.”

Its chief executive is Lucas Carlsen, a former McKinsey man, on a mission to bring transparency and fairness to the insurance experience.

Launched in Sweden in 2018, Hedvig is a carrier with a licence to operate across the European Union. It offers its 70,000 clients home, travel and contents insurance, plus cover if they make clumsy mistakes.

Twenty-five percent of premium income goes to Hedvig. The rest covers insurance claims, with any money left over at the end of the year donated to charity. Policies can be terminated at any time. 

Hedvig says simple claims, reported by mobile phone, get settled the same day, although those which are complex require conversations with its help desk.

The service contrasts with established providers who seek to build up reserves by agreeing expensive contracts and delaying the settlement of claims. 

They use gains from their investment portfolio to subsidise their businesses.  In theory, this keeps premiums down and props up the business in hard times. 

But it is extremely expensive to pay staff to manage assets, along with everything else. And if you are running a low-cost business, there is less to prop up. 

Analysts at Motley Fool say Lemonade uses one employee per 1,700 customers, against 150 to 450 at traditional insurers. 

As well as the Kamprads, Hedvig has won backing from top fintech investor Anthemis, whose partner Ruth Foxe Blader backed Lemonade at her previous digital business, owned by German insurer Allianz. Her colleague Matthew Jones is joining Hedwig’s board of directors. 

CommerzVentures, a digital venture owned by Germany’s Commerzbank, is another backer, as is D-Ax, a venture owned by Axel Johnson, a renowned Nordic family-run business founded in 1873.

Early backer Obvious Ventures invests in Beyond Meat and Magic Leap, a virtual reality business. Members of Cherry Ventures developed Spotify and Zalando, the e-commerce platform. 

Nineyards Equity, founded in 2019, is an interesting emerging VC manager which sets out to back a new generation of entrepreneurs. It was founded by Stefan Nordahl, who briefly worked for JP Morgan and Deloittes prior to a string of new ventures.

Hedvig is planning to expand beyond the Nordic region into the rest of Europe. Last year it achieved a premium increase of 200%, on the back of strong organic growth and personal referrals, essential to this kind of business.

Lemonade is also making progress, after listing its shares in 2020. The company made a net loss of $55.6 million in the second quarter against $21 million last time. Some of its policies are 50% cheaper than the opposition.

Motley Fool likes Lemonade’s 82% retention rate.  The market still likes its business model enough to make its shares worth $4 billion, despite losing their early post-IPO gains.

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