London-based Element Ventures have led a $10 million (£7.23 million approx.) Series A funding round for insurtech startup Hepster. Hepster helps companies access and provide bespoke insurance policies that are not available through traditional insurance brokers and markets.
Although still a relatively new market, Hepster is the first of its kind, the embedded insurance market is expected to be $3 trillion by 2030. Hepster saw 600% growth in 2020 and, since being founded, has serviced over 200 different insurance products through 700 partners to more than 70 thousand customers.
The funding, in which Element were joined by Seventure Partners, MBMV and GPS Ventures, will be used to expand Hepster’s innovative offer and accommodate more partners.
Hepster’s game-changing toolkit
The German insurtech operates in a market still largely dominated by brokers and agents selling traditional products. Hepster’s model allows businesses to build policies from nothing, so they are precisely tailored to their services or products. The insurance can then be embedded into the customer journey, to create a seamless experience.
The approach became particularly relevant in 2020 when the pandemic helped fuel an explosion in micro-mobility. Hepster’s partners were able to integrate their insurance products into things like shared e-bike schemes and peer-to-peer rental platforms. In effect a just-in-time insurance model, Hepster are able to help their partners by providing insurance that prevents liability becoming a business risk.
Christian Range, Hepster’s co-founder and CEO, said that they planned to use the funding to expand their platform and ecosystem, focusing on automation so more partners can provide their products, adding, “we are extremely proud of what our talented team has achieved in recent years and we look forward to continuing our commitment to creating the best insurance experiences for customers and partners with our new and existing investors.”
Why Element invested?
Hepster’s impressive growth was a key attraction for Element Ventures. Michael McFadgen, a partner at Element Ventures, said, “Hepster is the breakout company in the space, and their focus on embedded insurance will pay dividends in years to come. The team has created a brilliant platform and the exceptional results so far show that we’re not the only ones to think so.”
Element Ventures is a global venture capital fund specialising in B2B financial technology companies. McFadgen, speaking exclusively to UKTN, told us, “I am excited about a wave of new players that are fundamentally reimagining the way businesses – particularly SMEs – interact with their various financial services.”
Hepster, by providing a service that not only didn’t exist but couldn’t be provided by the existing insurance industry, aligned with Element’s mission to back the startups changing the fintech sector.
“The embedded insurance vertical — which Hepster is a part of — is really coming to maturity at the moment.” McFadgen told us, “Users are more tech-savvy than ever before, and have higher expectations for services. They want to be able to go through an e-commerce experience and purchase a product knowing that they don’t need to worry about having to purchase insurance separately.”
Two growing markets — and Covid
Part of Hepster’s success has been down to them being well-positioned at the intersection of two trends, both of which have been accelerated by Covid-19.
The insurance industry was embracing digitisation, moving away from traditional policy documents to online options. Meanwhile the growth in e-commerce and micro-mobility, both markets in which Hepster’s model has particular salience, have helped fuel its growth.
The underlying trend had been positive for Hepster, McFadgen explained, “the long-term trends in insurance were opening huge markets for Hepster. To modernise and to buy into what consumers actually want, corporates and incumbents have been turning to providers like Hepster.”
However, the Covid-19 pandemic has been transformative, accelerating the existing trends as consumers preferred online options and moved increasing to micro-mobility options over public transport.
Hepster’s vision for insurance
Hepster’s product combines convenience and transparency for both Hepster’s clients and their customers. Embedded insurance, like embedded finance in general, has seen increasing demand in recent years. Customers appreciated the convenience and transparency of being able to get the right insurance at the same time as they make a purchase. While businesses can take advantage of Hepster’s platform to easily provide tailored insurance as part of the sales process.
“Embedded insurance is a $3tn market globally so the opportunity for Hepster is essentially limitless, and the team, led by Christian, Hanna and Alex, have successfully tapped into an opportunity to re-make how we sell and buy insurance products,” McFadgen said, explaining why Element felt Hepster were a good investment. ”For us, Hepster is the number one company in the insurance market that has the expertise and technology to be actually able to do this effectively.”