Sometimes as an investor you identify a market you want to get involved in, but it takes a lot of work to find the company you believe can really define it. Home insurance has been one of these markets for us – huge in size, dominated by legacy practices and almost entirely lacking consumer love. It’s an industry that’s ripe for change, but represents a formidable challenge for start-ups to disrupt.
That’s because creating a successful insurance business is complex beyond the normal challenges of company building. As well as product innovation and operational excellence, you need to master the distribution economics of an industry where obvious go-to-market tools are too expensive. And you need a team with the ambition and skill to go up against major players with deep roots and even deeper pockets.
For some time, we’ve been searching for a company and team equal to these challenges. We think we’ve finally found these in Luko, and are excited to be leading their Series A.
Perhaps it’s appropriate that a business which wants to redefine the insurance industry didn’t actually start life as an insurance company. Luko’s founders, Raphael and Benoit, began by wanting to help people look after their homes through connected devices that monitor everything from the front door to water pipes and electric meter. But when they looked for an insurance partner to deliver those products, they couldn’t find the business they wanted to work with. So, as great founders do, they decided to build it themselves.
That was the origin of Luko, which has already started to address some of the fundamental deficiencies of existing home insurance providers. Unlike most competitors, Luko works quickly: it takes two minutes to obtain coverage, two hours to receive payment for a claim and two days for damage to be repaired. It’s transparent about what customers are paying for, and allows them to switch different elements on and off at will. It even donates leftover money from premiums to a group of charities chosen by customers.
Luko’s fast-growing customer base shows that consumers love an insurance product that tells them exactly where their money goes (30% to operational costs, 70% to cover claims) and what cover it provides for them. This creates customer confidence in an industry where opaque terms and conditions traditionally mean many people don’t understand the detail of their policies, and end up with either too much or too little coverage.
True to its roots, Luko doesn’t think like a traditional home insurer, focused narrowly on what happens after an accident has occurred. While it provides an excellent insurance service, its real priority is home care: helping people look after their homes so that more accidents can be prevented, or problems resolved before the damage becomes serious. With ongoing investment in its sensor technology, and a fast-growing pool of customers and data to support machine learning insight, it’s pioneering new approaches to home care. As founder Raphael says, the real end-game for Luko is to avoid home accidents altogether.
Deservedly, it has become Europe’s fastest-growing home insurance company, one that is starting to earn the customer love so lacking elsewhere in the industry. Among traditional insurers, 40% of customers churn after the experience of making a claim. With Luko, customer NPS actually increases after a claim has been made. This is a testament to the excellence of its online platform, added-value services such as suggesting solutions for damage repair, and a approach that trusts the customer rather than adopting a ‘guilty before proven innocent’ approach to claims. Above all, it reflects a business that has taken a process most people expect to be difficult and time-consuming, and made it straightforward, efficient and customer-friendly.
Where most home insurers hardly know their customers at all, Luko is building its brand and business on the trust of customers who love the service and recommend it to their friends and family. Luko is winning customer love by being on their side in an industry where people generally expect the worst of their provider. This community ethos will no doubt continue to be a cornerstone of Luko’s growth, as it expands across Europe from its home market of France.
It’s easy to love a company that’s loved by its customers, and where the vision is so bold and distinctive. And it’s hard not to admire the sheer ambition of founders like Raphael and Benoit who want to take on and transform a gigantic industry with considerable barriers to entry. They are exactly the kind of entrepreneurs Accel enjoys backing, in a greenfield market with an almost endless runway for growth. Congratulations to the team, and watch this space!