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As a founder, it takes conviction not to pivot when it seems that everyone else is. But what if everyone was right? Also this week: bedbugs (sorry). — Anna
DTC for all?
Exchanging with German insurtech founder Christian Wiens recently, I was drawn to the fact that he is still bullish about direct-to-consumer insurance. In the four European countries where his company Getsafe is present, its strategy is digital and mobile-first.
By Getsafe’s own admission, other insurtechs are moving away from the DTC model, opting to sell via brokers instead, if they weren’t already. I asked Wiens why Getsafe isn’t following in their footsteps, and he mentioned his belief that “DTC is the only way to fundamentally disrupt insurance.”
Getsafe’s main connection to its customers is its app, which 35% of them use every month. “[This DTC approach] allows us to access substantial amounts and types of new data, create brand loyalty and engagement, increase process speed, and cut costs. Ultimately, it enables us to focus more on prevention and guiding proactive user behavior,” Wiens told me.
The Heidelberg-based CEO also has a theory as to why others move away from DTC: “Because they don’t have the business model or economics to support it.” He is referring to customer acquisition costs: These can much more easily be recouped if you sell multiple products to the same customer and if you leverage organic growth.
It’s not hard to see how Getsafe’s model is a good fit for this approach. “Our strategy of addressing young customers with a high and untapped customer lifetime value, offering multiple lines of insurance, and fostering strong engagement leads to economics that allow us to earn back direct marketing costs within 12 months.”
However, his answer also suggests that DTC is not necessarily well-suited for all insurtechs. Going B2B or B2B2C through brokers has a cost, but it can work, too. It depends in large part on the customer segment they are targeting, and it may not be as much about their age as it is about culture.
I discussed the topic with Hélène Falchier, a partner at fintech-focused fund Portage with deep insurtech expertise, and she mentioned some country-to-country differences that portfolio company Hellas Direct is taking into account. “In Greece, they’re direct-to-consumer, in Romania, they’re B2B, but that’s because the market structure is so different that it doesn’t work in the same way.”
Watching Portage’s portfolio companies operate made her realize that neither DTC nor B2B were always right. “Where I might have had a few dogmas before, I no longer have.” She cited another example, French online insurer Acheel. “It’s a team that really knows how to work direct-to-consumer and B2B at the same time,” she said.
Acheel currently has more than 100 B2B partners, co-founder Francky Défossé posted on LinkedIn. He pointed out its decision “not to put all our eggs in one basket and to adopt a mixed B2C-B2B2C distribution model from the outset” as the secret that led Acheel to reach “nearly half a million policyholders in 2.5 years.”
At the end of the day, what VCs want to see from their portfolio companies and prospective investments are solid unit economics. If Getsafe’s team finds higher gross margins in going DTC, good for them. But if their competitors can find a way to make brokers worth the cost, investors will be happy, too. In both cases, customers will be weighing in with their wallets and buying insurance through whichever channels they prefer.
Bedbugs meet Badbugs
Apologies if the mere mention of bedbugs makes you itchy or brings back memories you’d rather forget, but if you have been planning a trip to Paris or London recently, these nasty bugs likely came up on your radar; there have been unfortunate reports of metro and train sightings.
Badbugs.fr is a French startup that hasn’t waited for the last media cycle or the imminence of the 2024 Paris Olympics to see a business opportunity in fighting bedbug infestations. Launched in late 2019 to help people find professionals to help get rid of the pests, it now also teamed up with IMA Assurances to sell insurance that covers bedbug-related costs — a risk that the average home insurance policy rarely covers.
While Europe’s bedbug panic can create tailwinds for a company like Badbugs, it can also be a double-edged sword. With public pressure mounting, and voices at Paris’ city hall calling for bedbug insurance to be part of default home insurance, there could soon be more names on its list of competitors, and not just neoinsurers like Friday and Luko.
Who are you gonna call, then? As it often is in the insurance sector, it’s about trust.
“I think that’s where the customer experience really counts,” Falchier said. “Because if you’ve had a good customer experience with your insurer, you say: ‘I want to be covered [by them] for these risks too, because I know that my insurer will help me find solutions.’”
Of course, that reasoning can apply to brokers, too — or to DTC neoinsurers with engaging apps. You choose. But remember: Sleep tight, and don’t let the bedbugs bite.
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