Why we are not increasing our rates in 2019
Between the Christmas gifts and greetings cards, you probably also received a letter from your insurance in January. This letter, unfortunately recurrent, informed you of the increase in your membership fee for the coming year. Because 2019 does not denote: all insurers have increased their prices, by 2% on average.
At Luko, we have chosen not to follow this insurance inflationary trend.
Our rates will not increase in 2019.
If today we can afford to make this strong commitment, against the tide of traditional actors, it is largely due to the transparent and virtuous model we have adopted.
I therefore propose a review of this original model which allows us, 6 months after our launch, to keep our prices, and even to lower them in some cases.
This post is an exchange, so I would be happy to have your feedback and bright ideas in the comments section to continue the discussion 💬 This is how we built Luko from the beginning: based on the feedback from our community.
Recent trends in insurance premiums
A continuous increase… for more than 15 years
Since the 2000s, home insurance premiums have been rising steadily. Home insurance rates have gradually moved away from the consumer price index curve.
This phenomenon has become more pronounced over the past 10 years: between 2008 and 2018, premiums increased by 34%, almost 4 times more than inflation over the same period (8.6%).
2019 is no exception, since this year there has been an increase of 1 to 2% according to Facts&Figures. For example, MAIF increased its home insurance premiums by 3% in 2019.
A justified increase?
There are many reasons for the increase in insurance premiums:
- Increase in the number of natural disasters and weather-related disasters in recent years, which have outnumbered each other;
- Increase in the price of the “terrorism” coverage. This contribution is mandatory for insurers (= tax) and protects the insured and his property in the event of an attack;
- There has been marked inflation in the construction industry (price of materials, labour, etc.), which is reflected in reimbursement rates.
However, these elements alone do not seem to justify a constant increase, disconnected from inflation and the economic constraints of its beneficiaries. The loss of purchasing power is a central issue, and traditional insurance once again demonstrates its inability to get closer to the daily lives of its customers.
That’s exactly why we decided to launch Luko last May: the insurance model seemed to us to be running out of steam. It is time to put it back at the service of society, to shake up existing practices and to change the mentalities of this industry. Digitalization, prevention; there is still so much to be done to improve the obscure functioning of insurance and contain these soaring prices!
How did we manage to contain our prices… until they fell?
When we launched Luko, we started from scratch to create a new insurance model. With one objective in mind: how to make insurance a simple, transparent and above all a useful product at last?
Giveback and elimination of the insurer-insured conflict
The traditional insurance model seemed outdated to us: it creates a conflict of interest between insurers and insureds. Indeed, reimbursements are a drain on insurers’ profits, which should therefore be dragged out and evaluated downwards, to the detriment of the insured.
To overcome this conflict of interest, we have decided to implement a transparent compensation model. The operation is simple: 30% of the policyholders’ premiums go to us (operating costs, R&D for our connected devices, etc.) and the remaining 70% are 100% dedicated to the reimbursement of claims. At the end of the year, if this 70% has not been fully consumed by the reimbursement of claims, we pay the remaining money to the associations chosen by the insured ( the Giveback).
We therefore have no interest in incorrectly reimbursing or delaying the reimbursement of our insureds. The “surplus” money never falling into Luko’s pocket. This transparent operation also has the advantage of limiting fraud, which would penalize the associations chosen.
Establish strong partnerships with the entire ecosystem around the nest
Luko’s vision goes beyond insurance: we want to protect your entire home. This requires a sustainable and perennial anchoring in the ecosystem of the home. We have therefore decided to forge strong partnerships with:
- competent craftsmen in each city to intervene quickly, with attractive prices
- reinsurers (insurers of insurers) who have a detailed knowledge of natural and climatic disasters
Still in collaboration with our ecosystem, we have been able to set up innovative services such as the delivery of a spare key to the insured’s home in the event of loss or theft (thanks to a partnership with Stuart). This allows our policyholders to save a lot of time in resolving their claim, and for Luko to avoid the cost of locksmithing or door replacement.
These partnerships allow us to avoid many inconveniences for our policyholders and to maintain consistent rates, which do not disappear according to contingencies.
Clear guarantees, a beautiful UX and an efficient chat rather than salespeople in pointed shoes
Luko neo insurance works on the 100% digital model. All the procedures are done online, which allows structural savings to be made and reflected in insurance premiums.
We also chose to model a transparent offer explained with simple words. When the entire market sells its home insurance products over the phone or in stores, we have decided on our side not to employ any sales force. We believe that insurance is a product that can be bought and not “sold” with a lot of jargon and telephone harassment. This approach also allows us to strongly limit our structural costs. Today, 95% of our contracts are sold online with only one help: a chat where the Luko team answers in 20 seconds.
We are not interested in building a low-cost insurance policy, we are simply looking with Luko to offer the best experience at the right price. All our efforts are invested in our product and customer service. Do you have water damage? We suggest that you file your claim by video to save time and money. As a result, we use and develop new technologies every day to speed up claims and reimbursement processes, facilitate decision-making and limit fraud and expert fees.
We are therefore convinced today that a new, fairer and more transparent model is possible. It is by rethinking the entire value chain that we can make insurance more useful, more efficient and even more economical.
All this money saved can be reinvested in prevention and customer service excellence to make homes safer and drastically reduce the number of claims. A utopia? Not so sure 💪
Originally published at https://www.luko.eu on March 22, 2019.
