Millennial consumers are emerging as a key demographic in the insurance market, and today a Swedish startup that’s building a business catering specifically to their needs and priorities is announcing a round of funding to fuel its growth. Hedvig, a neo-insurer that provides property, travel, contents and accident insurance geared to the lifestyles of younger adults — it also has a “clumsiness” policy, and a portion of profits is donated to charity — has raised $45 million in a Series B round of funding.
Anthemis — a firm that specializes in fintech and insurance investments — led the round, with previous backers Cherry Ventures, Obvious Ventures and CommerzVentures participating, along with new backers Swedish Novax, Nineyards Equity, Jonas Kamprad and Mathias Kamprad. Valuation is not being disclosed, and this brings the total amount of funding in Hedvig to $68 million.
The company, based out of Stockholm, is also live in Norway and Denmark and it will use part of the funding to launch in its fourth (yet to be announced) country, outside of Scandinavia. Funds will also be used to continue expanding Hedvig’s team and product.
The startup today has some 70,000 customers, with the majority of them under the age of 30, so the plan will be to continue building more products for them. In March of this year, Hedvig picked up an EU-wide insurance carrier license to gear up for that geographical and product growth.
“One of the reasons we transitioned into a full-stack carrier was to enable us to serve our members as they progress through life,” said CEO and co-founder Lucas Carlsén. “This means we will definitely expand our offering in the future.”
To give some context on its growth so far, when we covered Hedvig’s August 2019 raise led by Obvious Ventures, it had 15,000 customers, meaning the startup’s customer base has grown nearly 370% over the last two years. And Hedvig, like its target demographic, seems to thrive on virality: Some 40% of its month-on-month growth comes from word of mouth.
Carlsén and his two co-founders Fredrik Fors and John Ardelius are all younger consumers themselves and built the platform initially around the concept of “nice” insurance, products that are easier and cheaper to buy, faster to use and generally more attuned to what millennials want. Its first products were around insurance for rented or owned properties; these days, to speak to the wider remit, the homepage features a young man on a European city street doing an extended wheelie on his bike.
Insurance has undergone a big shift in recent years thanks to technology, the evolution of smartphone use and changing consumer expectations. Taking a page from the world of fintech and using networks of APIs to provide a compelling mix of services to be able to focus more squarely on customer relationship and better user experience, there are now a number of insurance service providers in other markets like Marshmallow in the U.K. or Lemonade out of the U.S. building mobile-first, easier to use experiences for their customers, or those like YuLife and Ethos using technology to upend how insurance is presented to would-be buyers. But Carlsén contends that there is no one in Europe addressing the needs of, well, that free-wheeling cyclist.
“Hedvig is a premium proposition for a very demanding group of consumers, who expect stellar service and ultra-fast claims handling,” Carlsén said. “We cover not only your home, but also your lifestyle through our ‘clumsiness insurance’ that covers all of your stuff with one policy and reimburses you even for damages caused by your own sheer clumsiness — a type of lifestyle insurance that does not exist in large parts of Europe today.”
Many might assume that younger adults would be the last people to think of, let alone buy, insurance. They often have less money for discretionary purchases, they may not own properties, and the assumption is that younger people simply feel more invincible. In fact, it seems that the opposite may be the case if you pitch the product more specifically to those younger users’ lifestyles and their values as consumers.
“[Our] insurance experience made us a cult brand in just a few years,” Carlsén said, adding that about 40% of our growth is organic or through word-of-mouth. “We now look forward to taking our proposition to markets where insurance is an even more painful experience than in the Nordics.” In addition to its customer service and insurance offerings, Hedvig also has worked in a social good angle. Its business model is based on taking a 25% cut of the premium a customer pays. Hedvig said that the rest goes into “a common claims pool for whenever a Hedvig member needs help.” Whatever is left over from that and the end of the year — if there’s anything left in the common claims pool) at the end of the year — is then donated to charity.
Over time, it sounds like it’s likely that Hedvig will look to expand to other demographics. “It’s not surprising that it’s the on-demand younger generation that appreciates our dedication to service and ultra-fast claims handling,” he continued. “With that said, we can clearly see how others want to join in with house insurance being our fastest growing segment.”
Ruth Foxe Blader, a partner at Anthemis, and Matthew Jones, an MD at the firm, co-led this investment. It’s notable that Blader, when at AllianzX, also led an investment in Lemonade. Jones, meanwhile, is taking a board seat with this round.
“The Hedvig team has a truly unique mix of talent and skills in technology, design and insurance. The combination of their creativity and customer empathy gives them an advantage that will be difficult for others to follow. Insurance is exciting again!” he said in a statement.