Our investment in Laka
For the average customer, it often feels like insurers are trying to catch us out.
Policy exclusions, complex excesses and a painful claims process all erode trust. This lack of trust means consumers often exaggerate claims thus perpetuating a negative spiral in premiums. In fact, after tax fraud, insurance fraud is the most practised in the world and its honest customers who suffer the most. Depending on which country you’re in, insurance fraud is estimated to impact your premium by 10%-20%.
However, insurance wasn’t always this way. Over 300 years ago the concept of mutual insurance first appeared in London to help groups of homeowners protect themselves against fires. In these models, the insurance company was owned entirely by its policyholders. Any profits were either retained by the company or rebated to customers in dividends or reduced future premiums. Incentives were aligned (or in blunt terms, neither party was trying to stiff the other).
Maybe these mutuals were right and maybe the model just needed a technology re-boot?
This was what struck us most when Laka burst onto our radar last summer. Focusing initially on high-end bikes, Laka had built a highly engaged cyclist community sharing all the original traits of a mutual insurer but with a deep technology twist:
- Customers enter the details of the bike they wish to insure. An expected monthly amount is quoted with a guaranteed cap (thanks to a stop-loss agreement with Zurich Insurance).
- Depending on the actual claims paid out to the community in the previous month, the bill is ‘split’ between all members.
- Full transparency on how much was claimed and what members claim for is submitted in a monthly statement.
The model is working. Now with over 5,000 UK members, Laka’s customers pay on average 25% less than traditional insurers. Behavioural change is at the heart of this — members look after their bikes better (reducing claims) and are less likely to overclaim. When they do claim, the experience is transformational — the average time to agree a claim is one day and its 5-star Google reviews show just how bowled over Laka customers are.
With an estimated 40m cyclists with high-end bikes in Europe, Laka has its sights set on the continent, shortly launching in the Netherlands. By design, Laka’s model also happens to be fully Sharia-compliant or ‘takaful’ as no investment income is derived from upfront policy premiums. In 2020, Malaysia will be the first market to experience Laka’s takaful insurance.
Cycling is just the first of what we hope will be many Laka communities. Take the raw ingredients of an engaged community with prized, high-value possessions, poorly served by traditional insurers and Laka’s model should deliver a vastly superior proposition.
We’re delighted to be backing (left to right) Ben (CTO) Tobi (CEO) and Jens (CPO) and to be joined by our friends at Creandum Ventures.
Amongst others, we also welcome Nick Evans, Chairman of Rapha as an angel investor and Amanda Blanc, former Group CEO of Axa UK, Chair of Zurich Plc and current Non-Exec Director of Aviva to the Laka Board.
Laka also expands our burgeoning insurtech portfolio, now including Cuvva, Zego, FloodFlash, YuLife, At-Bay and Thimble
