Insurtech Startups Are Doing It Again!

The recent $4.5 billion valuation of Wefox makes no sense. It shows that investors haven't yet learned the lessons of Lemonade, Hippo and Root.

Laptop on a white counter with yellow flowers in a glass next to it and a blue glass

Let's make some new friends....

This month, Wefox did a new round of financing at a $4.5 billion valuation. This valuation makes no sense!

At current market prices, you can buy pretty interesting insurance targets with this amount. Moreover, I doubt any investor would accept exchanging stocks in an equity-only merger with Wefox.

This nine-year-old startup, with about $1.4 billion in cumulative funding, is:

  • a platform used by brokers and other intermediaries, so it should earn usage fees;
  • an intermediary, so it should earn commissions on the premiums intermediated;
  • an insurer, so it should make profits from the risk transfer (both underwiring profits and investment income).

The insurance arm (Wefox Insurance AG) underwrote EUR196 million in 2022 -- with a bloody 95% gross loss ratio -- and generated $30 million of underwriting losses. Premiums intermediated on their platform are at EUR2 billion.

Do you remember my doubt four years ago about whether we were dealing with unicorns in insurtech or with ponies in Halloween costumes? Or, my rant about Root's multibillion--dollar valuation?

Here we are again!


Talking about valuations: I did my first exit a few weeks ago.

As many of you know, Andrea Battista and I promoted a special purpose acquisition company in 2018, and we acquired Net Insurance with the money raised. The combined entity did pretty well. Insurtech solutions have been used to execute the vision as planned. Long story short, Poste Italiane made a public offer on the company in September, and in the past weeks they completed the acquisition.

There was a 120% return for SPAC investors in four years! And the acquisition price of about EUR175 million is at a P/E multiple that makes sense for a good insurance company.

Andrea's unwavering dedication, strategic vision and profound expertise have guided Net Insurance's successful journey. I desire to show my gratitude for the opportunity he gave me to contribute to this adventure. This has been an unforgettable experience, a constant intellectual challenge, an honor and an extraordinary opportunity to learn from exceptional and experienced professionals, such as the board chair, Luisa Todini. 

See also: 7 Key Trends in 2023


Let's stay on my personal experience over the last month. On May 8 in Johannesburg, I had the privilege to present at Vitality Distribution Network Annual Summit to executives from all their global partners. It was a great opportunity to discuss the evolution of the shared value approach and to hear directly the perspective of tens of different insurers from Japan, Asia, Europe, North America and South America.

After moments like this, you really understand the privilege of talking directly and spending hours with players from different markets, rather than relying only on reading articles or press releases coming from these markets. I'm blessed for these opportunities, even if to fit them into my agenda I have to sleep on planes and take showers in the lounges of airports some days each week.

At the event, I had the opportunity to enjoy the speech of Andrew Sykes.

First, he is one of the best speakers I've ever seen on an insurance stage. He has become my benchmark: I aspire to become as good as him (even with my heavy Italian accent) at some point in my journey.

Second, his speech was extremely thought-provoking. His presentation was about trust. The basics of trust are:

  1. underpromise
  2. overdeliver
  3. document everything

The journey of the business combination between our SPAC and Net Insurance did precisely this! We declared up-front what we would do and how we wanted to use data and technology to do it. The team did a fantastic job overdelivering:

  • premiums at EUR187 million (from EUR69 million at the end of 2018)
  • combined operating ratio at 87%

Here, I'm documenting.

These steps are the opposite of what the first generation of insurtech startups did. Basically, they overpromised, underdelivered and periodically twisted the narrative (or documented exotic key performance indicators).

In the first edition of this newsletter -- 15 months ago -- I asked if Lemonade fans felt betrayed about overpromising and underdelivering. In the fall of 2018, we heard, "Europe, forget everything you know about insurance!" Hundreds of insurtech cheerleaders clapped their hands and celebrated the inevitable disruption of the European markets.

After four years, Lemonade has written EUR4.3 million in premiums in Europe. This is not a typo. Their current European book of business is the same size as the portfolio of that old insurance agency at the corner of your street.

The other U.S. full-stack insurtech carriers have not been more trustworthy:

However, now I have a new friend to play with: Wefox.

I want to sincerely congratulate your leadership team for the successful financing rounds, even in this market contingency. However, you are repeating a playbook that lacks any of the basics of trust.

In September 2022, at an event in Zurich, you presented this chart, claiming to have a "loss ratio more than 10 percentage points better than the market average." But you added an exotically adjusted benchmark, saying you were calculating based "ON THE BACK BOOK." 

See also: A Look Ahead for Insurtechs in 2023

These are the actual results of your auto insurance business ("Solvency & Financial Condition Report 2022"):

Motor vehicle liability

  • premiums: EUR44 million (EUR24 million in '21)
  • gross loss ratio: 102% (94% in '21)
  • Net underwriting result: loss of EUR7.7 million (loss of EUR12 million in '21)

Other motor insurance

  • premiums: EUR18 million (EUR15 million in '21)
  • gross loss ratio: 172% (172% in '21)
  • Net underwriting result: loss of EUR5.2 million (loss of EUR10.1million in '21)

With such KPIs, it would be more serious and trustable to say something like, "our loss ratio is terrible, and we are working to improve it." Instead, your statements after the financing round go even beyond overpromising.  

I hope the new generation of insurtechs will not follow this playbook, too. I hope they will promise less and deliver more... so they can proudly document everything. I hope the next generation of insurtech innovators will be trustworthy leaders who can strengthen our sector!

Matteo Carbone

Profile picture for user MatteoCarbone

Matteo Carbone

Matteo Carbone is founder and director of the Connected Insurance Observatory and a global insurtech thought leader. He is an author and public speaker who is internationally recognized as an insurance industry strategist with a specialization in innovation.


Read More