Wefox, the German insurtech startup, has closed a new round of financing with existing investors. The funding amount will not impress anyone as the company managed to secure $55 million. This could be viewed as an extension of the $400 million Series D round, as Wefox managed to maintain the same $4.5 billion valuation.
However, the fact that Wefox is still valued at $4.5 billion is an interesting tidbit. Many startups are struggling to get rounds of funding or have to lower their valuation. In addition to this traditional equity investment, Wefox also secured a $55 million revolving credit facility from JP Morgan and Barclays.
As a reminder, Wefox sells insurance products through internal and external insurance brokers. Unlike its German rival Secure yourselfIt is not based on a direct to consumer sales strategy. This model has proven itself very well, as Wefox now has over 4,000 sales partners.
Wefox recently launched its own insurance carrier – Wefox Insurance. This allows the company to develop and sell its own insurance products without depending on third party insurance companies.
I sat down with the company’s co-founder and CEO, Julian Teicke (pictured above) to discuss the company’s current strategy. Wefox’s most important source of income remains the distribution business. “We are already profitable on the sales side,” said Teicke.
“We have around 300 insurance companies that we work with. It’s all the big insurance companies in the P&C space [property and casualty], life and health. Then we have our own insurer. Most of the revenue comes from our distribution business. If you look at the total volume of insurance premiums on the platform, it is around 2 billion euros. Of that, last year 200 million euros was for our own insurance and the rest for liability insurance,” he added.
As for the credit line, Julian Teicke told me that it could be used for acquisitions, for example. Wefox is currently active in six European markets (Germany, Switzerland, Austria, Italy, Poland and the Netherlands). Expansion into new markets – such as France, Spain or Great Britain – is planned by acquiring, integrating and further developing a promising insurance distribution company.
Refocusing on sales
“18 months ago we saw that the world was changing. We then made many decisions related to financial discipline, which have now paid off. We were able to double our sales and double our margins in the first quarter,” said Teicke. He compares the first quarter of 2023 with the first quarter of 2022.
For this reason, Wefox’s primary insurance business has been relegated to the background compared to its distribution business. “Our main focus was on increasing sales [of Wefox Insurance] – and we stopped that,” said Teicke. The company is now focusing on markets it knows very well. On the sales side, the company is currently building a network of affinity partners to embed insurance products into its offering.
“When you buy a car, you also take out car insurance. When you buy an e-bike, you also get e-bike insurance. This is very similar to our brokerage business. It reduces our customer acquisition costs,” said Teicke.
The ongoing investment in Wefox Insurance will also benefit the company’s next product. Next year, the company plans to release its technology stack to enable other insurance companies to create insurance products, manage performance in real time, and process claims using APIs. Essentially, Wefox wants to use this platform to become the Amazon Web Services for insurance companies.
I asked Julian Teicke if Wefox became an insurance carrier with that end goal. “It wasn’t the plan at all. When we started we had no idea. We just took it day by day and step by step. The insurance industry is such a difficult industry and it evolves so slowly. It’s so slow to really make a difference on a large scale. If you look at the insurance companies, they basically have to fight for 99% of the business they already have – 1%,” he said.
“There is no urgency for change. And that’s why it’s not easy to build a new disruptive player in insurance. And I felt like we had to understand how sales works, how insurance works. Every insurer needs to go digital. “There will be a digital infrastructure company for insurance companies,” he added.
In short: Wefox is streamlining its existing operations in order to reach profitability in all areas (distribution and insurance) as quickly as possible. At the same time, the company is exploring this new platform business with the hope that it will become the most important business over time.