London-based Laka, a community-driven insurance startup, has successfully raised $4.7 million seed round, led by LocalGlobe and Creandum with support from several angel investors.
The insurtech focuses on the cycling market, and its current product insures bicycles and cycling equipment against theft or damage. Over 5,000 cyclists across the UK are now insured by Laka
Unlike traditional insurance models, where profit is accumulated by settling as few claims as possible, Laka’s community ensures everyone is fairly covered by sharing the cost of claims.
Each member’s monthly contribution is capped in proportion to the value of their insured equipment — this protects individuals in case there’s a high claim volume in a certain month. In fact, the company reports that 80 percent of customer payment goes to help fellow Laka members who have damaged or lost their bike, with just 20 percent to cover the business’ operational costs.
“The beauty of Laka is it returns insurance to its pure, mutual heritage. Laka’s members and their shared interests incentivise positive behaviour which in turn benefits the entire community,” said Remus Brett of LocalGlobe. “These principles are over 300 years old, the difference being technology and increasing consumer awareness that traditional insurance models, with complex clauses, excesses and a painful claims process, are fundamentally broken.”
Launched in January 2018, Laka raised pre-seed funding that June, and this new round brings the total to $6.4 million.
The business will launch in the Netherlands soon, and then roll out across Europe. Laka aims to add personal accident coverage, which would focus on medical support for injuries.
Eventually Laka plans to insure other sports.
CEO Tobi Taupitz commented on the possibilities: “The applicability of this model is really exciting. Ideally suited to high frequency and low severity forms of insurance, our ultimate ambition is to roll out Laka insurance products for a range of different purposes. From covering the equipment of the 138 million outdoor sports enthusiasts across Europe, to personal accident cover and beyond, our mission to create a community driven, transparent approach to insurance has only just begun.”