Hedvig, a Swedish startup, is following in the footsteps of Lemonade, building a new generation of insurance platforms that use AI to help evaluate customers and operate on a policy of using surplus for social good. Today the company announced the next stage of its growth. The startup has closed a SEK100 million ($10.4 million) round of funding to expand from its current offering of property insurance into a wider range of categories, and begin the costly process of expanding its business into more countries beyond its home market.
The funding values the company at SEK342 million ($35.5 million) — a modest figure considering Lemonade’s recent $300 million round, reportedly (per PitchBook) at a $2.1 billion post-money valuation — but helps position the company to set its sights on being a strong regional player (if not an acquisition target for Lemonade if it wants to quickly add new regions: the latter kicked off its first services in Europe earlier this year, so its global aspirations are clear).
It currently has 15,000 customers in its home market of Sweden, who use it for property insurance on rented or owned apartments, and Lucas Carlsen, the co-founder and CEO, said in an emailed interview with TechCrunch that it “definitely” plans to expand that to houses as well as other categories. Home insurance also covers contents, such as gadgets, and travel, and Carlsen said that the former (gadgets) accounts for the majority of claims at the moment.
The round was led by Obvious Ventures, the venture fund co-founded by Twitter/Medium/Blogger co-founder Ev Williams, with D-Ax, the early-stage investment arm of Swedish retail giant Axel Johnson Group, also participating, along with past investor Cherry Ventures.
“We are building a global company. We just started in Sweden since we happened to live here, and it serves as a good test market as we have some of the worlds’ most progressive and demanding consumers. Today, we do not have any news to share about future markets, but stay tuned!,” said Carlsen.
“The new funding will mainly be used to fuel growth in Sweden, but we’ll also be looking at extending into new markets and insurance categories. Insurance is capital intensive and our new partners are committed to supporting our long-term vision,” he continued.
Indeed, getting an investor like Obvious (which published its own short announcement about the investment) involved could open the door to introductions with a number of other investors down the road.
“Hedvig is harnessing its purpose, the power of AI, and its human-centered product to create a modern, full-stack insurance company. Their incredible team is delivering against the mission – to give people the world’s most incredible insurance experience – and we at Obvious are honored to help scale it further,” said Vishal Vasishth, one of Obvious Ventures’ other co-founders, in a statement.
Hedvig — named, Carlsen said, after a legend of “someone who stood up for others and fought for their causes: that’s what we do,” — will sound familiar to you if you know Lemonade.
It follows in a wave of more socially forward businesses that are being created, which are using technology to help disrupt the status quo but also to bridge the gap between building services that consumers need and the principles they would like to adhere to more if possible. (Other examples include the likes of Beyond Meat, which is also backed by Obvious; as well as the plethora of electric and hybrid vehicle makers; and more.)
In the case of Hedvig and the challenge of insurance, the proposition goes like this:
Hedvig uses technology and innovative algorithms to help assess a potential customer, who is then provided with lowest-cost, and often competitively priced, premiums. Then, as a “full-stack” digital company, it also uses its algorithms to help process claims. After Hedvig uses its bigger pot of money to pay out claims, the annual surplus is donated to charities selected by its customers.
“By not pocketing this money ourselves we can focus on providing the best service possible to you and not on making more money from denying claims,” Carlsen said.
Hedvig itself makes money by taking a cut off users’ monthly premiums (it doesn’t specify how much). To date, Hedvig has not disclosed how much it has been able to “give back” according to its business model. But the philosophy is that by digitising some of the more mundane processes that are relegated to human adjustors and customer agents at traditional agencies — and by not being inherently greedy — the startup is able to provide a more pleasant, more efficient and more conscionable service.