Zego, the London-based startup that appears to have spotted a gaping insurance hole in the so-called gig economy, has raised £6 million in Series A funding. The round was led by Balderton Capital, with participation from existing backers, including LocalGlobe and unnamed angel investors in the insurance sector. The company plans to use the new capital to increase engineering and other headcount as it launches further insurance products and expands internationally.
Founded by Harry Franks, Sten Saar and Stuart Kelly in 2016, Zego has set out to re-invent commercial insurance for self-employed people, with a particular focus on contractors powering various parts of the gig economy. Its first product is pay-as-you-go scooter and car insurance for food delivery workers utilising platforms such as the Deliveroos of the world.
Unlike traditional insurance, which can work out prohibitively expensive as a proportion of income for food delivery drivers who may only work part time and even sporadically, Zego charges by the hour, with drivers only buying cover for when they are logged in to the various on-demand food ordering services they contract for.
This sounds like an incredibly simple proposition on the surface and a bit of a no-brainer, but, CEO and co-founder Franks tells me, is quite challenging under the hood, not least creating a frictionless user experience while also wrestling with the way traditional insurance underwriting is configured. This, he believes, makes Zego somewhat defensible.
The startup has also developed good relationships with the platforms it supports, meaning its insurance app is able to connect to those on-demand food delivery platforms so that Zego-insured drivers don’t need to manually tell Zego when they are and aren’t working. Instead, the cover kicks in as soon as they log on for a delivery shift.
And because Zego knows when a person is or isn’t out driving and where, it is potentially able to use this data to adjust its risk assessment accordingly. The startup is also exploring telematics — the use of tracking hardware and software — as another way of more accurately pricing its pay-as-you-go cover or helping to reduce risk by perhaps warning drivers when they are being unsafe.
It’s go-to-market strategy is pretty convenient, too, as platforms like Deliveroo have had to defend their use of self-employed drivers as the wider gig economy comes under regulatory scrutiny. Commercial insurance is mandatory for food delivery drivers but platform companies, since they maintain they aren’t employers, can’t offer insurance cover direct. They can, however, demand to see proof of commercial insurance before signing up a driver to their platform, making it harder for a gig economy driver to work without the correct cover. This has seen Zego able to pick up plenty of slack.
Meanwhile, Franks, who previously worked at Deliveroo, says the bigger vision is to provide a whole suite of insurance products for gig economy workers, including the addition of personal injury and sickness cover. If the insecurity of gig economy work is here to stay, it seems that Zego and similar insurtech upstarts have plenty of mileage yet.