In the current funding environment, it's not every day you hear about a French startup raising a big funding round, but Neat, a Paris-based insurtech startup, has managed to raise €50 million (about $55 million at current exchange rates).
There are some fine print, though: In addition to a traditional equity-for-cash financing deal, part of this funding round is a debt facility. The company says it's about 60% equity and 40% debt, so it's essentially a €30 million round with an additional €20 million in debt.
Neat helps other companies sell insurance products to their own customers, focusing on affinity policies, in insurance industry jargon, that are linked to another service or product.
For example, if you buy a smartphone, you might want to buy insurance in case you accidentally drop it. Other examples include travel insurance, concert ticket insurance, and extended warranties on home appliances.
Neat focuses on embedded insurance products, helping partner retailers find insurance customers so that they also receive a commission for each insurance product sold, but without having to deal directly with the complexities of the insurance industry.
Neat, on the other hand, works with insurance and reinsurance companies to cover risks directly, with Neat acting as the general agent.
“In our industry, we often say we hold the company's checkbook, in the sense that we write our own rates, products and policies, while at the same time outsourcing risk to insurers and reinsurers that trust us,” Neat co-founder and CEO Maximilien Dauzet told TechCrunch.
When developing new insurance products, Neat has its own compliance and actuarial team, so there is no need to go through an insurance partner. We develop insurance products for startups with small and transparent fees built in. At the same time, distributors receive commission and reinsurers can generate profits at the end of the insurance food chain by working with Neat.
“Despite some organic growth, insurers still faced significant dissatisfaction. So the real solution is to consolidate the entire value chain into one company, looking at things from the same angle and aligning the interests of policyholders and distributors,” Dause said.
A key benefit of this full-stack approach is that Neat is not a broker built on legacy systems, so it can create a wide range of insurance products. For example, travel insurance should not cost the same for a 20-year-old and a 60-year-old. A camping trip in the countryside should be priced differently than a trip to another continent. Similarly, smartphone insurance prices should vary depending on the device and whether it is a refurbished model or new.
Image credit: Neat
Neat has diversified its risk profile by branching out across a wide range of sectors. “We cover 10 industries and are pretty neutral. In fact, from the beginning, Max and I made a point of not focusing on just one industry,” says Fabien Cazes, Neat's co-founder and COO. “We can mutualize risks in terms of insurance, and we have a lot of synergies from a technology perspective.”
Neat offers insurance products attached to credit and debit cards with Floa, travel insurance with Pierre et vacances, and hearing aid insurance with Afflelou and Krys. These partners can bundle insurance products with payment cards or sell insurance products as add-on purchases both online and in retail stores.
As a result, Neat now has 1,500 distribution partners who collectively sell over 1 million insurance policies. Hedosophia led the company's Series A round, with participation from Alma Mundi Ventures, ETFS, Athletico Ventures and existing investors.