While COVID accelerated interest in life insurance products, a large portion of the UK population still does not have coverage or is underinsured. COVID also accelerated our adoption of digital solutions as in-person activity came to a halt. Yet, 80% of life insurance products are sold offline through financial advisors. Anorak is an online life insurance advice platform that’s focused on making life insurance more accessible to consumers in a digital-first era. For years, there have been online solutions that allow you to type in a few inputs and receive quotes from a small portion of available options with very little personalization. Anorak goes beyond that by holistically understanding your financial situation and obligations in order to tailor independent recommendations for policies that will meet your needs. Anorak services interested consumers through its website and is also available through APIs for its partner ecosystem of digital financial service providers, broadening the scope of the market it can serve.
London TechWatch caught up with CEO and Cofounder David Vanek to learn more about how the pandemic has presented the momentum for innovation in the life insurance industry, the company’s strategic plans, latest round of funding, which brings the total funding raised to £14M, and much, much more.
Who were your investors and how much did you raise?
Our £5M series A was led by Outward VC, with Triple Point Ventures and existing investor Kamet Ventures also participating. The round was backed by a list of the leading angel investors in European insurtech including Nic Kohler, the former CEO of Hollard, Paul Evans, Chairman of Allianz PLC, and board member of Bupa and SwissRE Europe, Charlie Delingpole (CEO and founder of ComplyAdvantage), and Will Neale (Founder of Fonix and Grabyo).
Tell us about your product or service.
The life insurance industry has experienced a surge in demand since the pandemic hit, with over eight million 22-44 year-olds having considered protection in the last three months. The pandemic has accelerated the awareness of millions of people of their financial vulnerability.
Yet life insurance and income protection are complicated insurance products to buy, people’s awareness is still low: when asked how they would assess their needs and find the right cover, the majority of respondents we asked claimed they would need help. This is what the life insurance industry calls the “Protection Gap”. Millions of Brits are totally exposed if the worst happens. At Anorak, we believe that this gap exists mostly due to an education and advice gap.
Around 80% of life insurance products are sold offline through financial advisers. This is not scalable and typically only targets affluent individuals – leaving an entire part of the market unprotected and with no access to protection advice.
Anorak is on a mission to make life insurance and expert financial advice accessible to everyone. To empower people to make informed decisions and feel confident that if they die or become ill, their families will be looked after.
Accessibility is key to us. Our regulated automated insurance advice platform can be integrated into existing partners’ ecosystems so that people can access a whole of market life insurance recommendations while using everyday services such as digital banks, online mortgage brokers, investment platforms, digital money management services, and challenger banks.
What inspired the start of Anorak?
My cofounder Vincent Durnez and I founded Anorak in 2017 when we realised there was a gap in the market for unbiased advice within the life insurance field. We wanted to create a platform that put people’s needs at the heart of finding the right insurance policy, as opposed to just being presented with the cheapest option like a price comparison website. The idea grew into a life insurance companion which gives impartial, regulated, and personalised advice to anyone who needs it, to help the British people get better financial protection.
How is it different?
Life insurance distribution is still heavily reliant on traditional financial advisers. This is unlike what happens in the general insurance space (motor, home, etc.) where Price Comparison Websites are dominant. In the life insurance sector PCWs (or price comparison websites) represent a small fraction of policies sold, because their quote and buy service does not help users navigate their needs and get personalised recommendations.
Interestingly, when thinking about digital innovation in life insurance, most players are obsessed with the “buy now” experience, where people can buy life insurance in simply three clicks. This is probably good for people who are ready to purchase and know exactly what they want, but, this is a very small fraction of the addressable market. That is why we look at things differently at Anorak – we believe that most people need education and personalised advice to help them understand their protection needs and to find the right cover for them.
Anorak is unique on the market as it is the only player globally to have built a recommendation engine that brings regulated advice to the mass market as a digital-first service. Anorak’s platform is also managing a seamless omnichannel advice process, which engages users online and matches them with an expert adviser if the user prefers to have human help. One of our strong beliefs at Anorak is that we should meet people where they are. Life insurance is like investment and mortgages, part of a considered decision-making process where a combination of hybrid online and offline services are often the best way to help clients.
What market are you targeting and how big is it?
Our market is anyone who wants to protect their or their family’s financial future. Currently, over 40% of UK homeowners don’t have life insurance, so we have a broad and varied audience to reach.
Following the uncertainty of the pandemic and the additional financial strains, this puts on the average household, we’ve seen a boost in numbers from users looking to financially safeguard their future. Amongst millennials and younger earners in particular, we’ve seen a 40% increase in 25 to 44-year-olds with no life cover who are now considering cover in a bid to ease worry over their financial liabilities should something prevent them from earning.
Following the uncertainty of the pandemic and the additional financial strains, this puts on the average household, we’ve seen a boost in numbers from users looking to financially safeguard their future. Amongst millennials and younger earners in particular, we’ve seen a 40% increase in 25 to 44-year-olds with no life cover who are now considering cover in a bid to ease worry over their financial liabilities should something prevent them from earning.
It’s great to see more Brits taking control of their finances. We hope, by making information on life insurance, income protection and critical illness cover as accessible, personalised and reliable as possible, we’ll inspire more people to get protected.
What’s your business model?
We are an online broker, as such, we are paid commissions by insurance companies when we sell policies to consumers.
Our client acquisition model is quite unique in the market as our go-to-market strategy is B2B2C. We partner with online players (personal finance apps, digital banks, online investment platforms, digital mortgage brokers, etc. ) who integrate our API and user journey to deliver protection advice to their clients. We have revenue-sharing agreements with these partners. Our service is a turnkey solution to enable them to do the right thing by helping their clients to protect their families, whilst increasing the lifetime value of their user base.
How has COVID-19 impacted the business?
As a business, we were fortunate. Our sector is highly defensive, with demand for life insurance and income protection having massively increased over the past year – so much so that our team has had to double in size to keep up with demand. One of the trends we noticed through the pandemic was an acceleration in demand from new distribution partners – including large retail banks – as they work to keep up with and adapt to the growing demand for online services from more young customers seeking protection products. Today, people are far more comfortable with relying on online services to manage their money and larger financial institutions are having to keep up with smaller, more agile challengers.
When it comes to life insurance, many of the traditional products are still extremely complex, designed to be sold through advisers face-to-face – a service most people don’t have access to anyway, let alone during a global pandemic. As a result, providers have had to adapt to survive and sought out services like Anorak to keep them ahead of the curve. While we’re not expecting a full move to automation in the future, over the pandemic many providers started looking for a hybrid approach that allows them to go digital without losing the human element that is still at the heart of the insurance industry.
When it comes to life insurance, many of the traditional products are still extremely complex, designed to be sold through advisers face-to-face – a service most people don’t have access to anyway, let alone during a global pandemic. As a result, providers have had to adapt to survive and sought out services like Anorak to keep them ahead of the curve. While we’re not expecting a full move to automation in the future, over the pandemic many providers started looking for a hybrid approach that allows them to go digital without losing the human element that is still at the heart of the insurance industry.
What was the funding process like?
We started our funding process in March 2020…perfect timing. We quickly decided to stop and to take all measures required to extend our cash runway. We resumed the funding process in September 2020 when the world was slightly more predictable and when investors were ready to look at new investments as opposed to fire fighting with their existing portfolio companies.
A funding process is always heavily time-consuming. The name of the game is to make sure that the team is focused on executing our plan whilst I am dedicating most of my time to the funding process. The leadership team of Anorak is experienced and we all managed to run and grow the business, limiting the negative impact a funding process can have on the day to day of business.
What are the biggest challenges that you faced while raising capital?
Like numerous other businesses, my partner and I knew we needed to ensure that the company had maximised its cash runway when the first lockdown started in April 2020. However, our priority was to protect the jobs of the entire team. We decided to keep all employees but asked everyone to reduce their salary by 20% for 8 months. The team has been fantastic during this period, they pulled their weight while earning far less than they were entitled to and we all came out of 2020 as a stronger business.
What factors about your business led your investors to write the cheque?
Outward were explicit about their reasoning to invest in us. They felt our product was truly unique in its engineering, in particular our ‘advisor’ models, which have the ability to understand and compute any individuals’ financial situation, thereby offering instant product recommendations. Our distribution strategy also stood out to them (B2B2C), which focuses on on-boarding financial advisors first before turning on focus to the wider market.
Over the last 20 years, the protection gap has never been bigger than today, with individuals unable to access the financial advice they need. Insuretech is growing within the space to try to close this gap, as more people turn their attention to the benefits of protection products, with millennials and Gen Xers representing the next area of significant growth. With our user base fitting this market need exactly, Outward were extremely excited to work with us and join us on this journey.
Over the last 20 years, the protection gap has never been bigger than today, with individuals unable to access the financial advice they need. Insuretech is growing within the space to try to close this gap, as more people turn their attention to the benefits of protection products, with millennials and Gen Xers representing the next area of significant growth. With our user base fitting this market need exactly, Outward were extremely excited to work with us and join us on this journey.
What are the milestones you plan to achieve in the next six months?
The next 6 months will be focused on scaling our distribution both B2B2C but also D2C as well as we now have very strong acquisition metrics. We will also continue to invest in our platform which comes with an aggressive hiring plan for tech and product roles.
Where do you see the company going now over the near term?
Our aim is to reach as many people as possible, to help make life insurance and financial advice accessible to everyone, so they feel confident that if the worst happened, their families would be looked after.
Our £5 million funding round will be used to continue to develop our products, in particular, we’re keen to focus on accelerating our partnership efforts with new distributors, helping us to reach more people in turbulent times. Our “embedded advice service” is a way for many companies to provide clients and employees with access to a transparent and easy service that protects their family’s financial future. We are also working on scaling our operations to enable more users to engage with an expert protection adviser if they wish to, by seamlessly integrating this option within our advice model.
