"Our objective is not to change the insurance industry," said Sten Saar, the cofounder and CEO of Zego, the fast-growing London-based insurtech startup which offers flexible, on-demand commercial vehicle insurance.
Instead, Saar likes to frame his company in similar terms to the electric carmaker Tesla: an innovator that can help push the rest of the industry into the 21st century.
Founded in 2016 by former Deliveroo directors Harry Franks and Saar, alongside CTO Stuart Kelly, Zego started life as a way for gig economy workers to get commercial insurance by the hour. The company has since attracted investment from the likes of Local Globe, Balderton Capital and Transferwise founder Taavet Hinrikus, to the tune of $50 million.
A good chunk of that money went towards acquiring its insurance licence from the Financial Conduct Authority this year and Zego has since been busy expanding its remit to cover commercial fleets, including the quickly growing electric scooter market.
That process itself took 14 months, a relative age in the startup world. "It was long but is very thorough and the regulator challenged us on numerous things, wanted to make sure everything's in place, all the way through from team to structure to capital to solvency and all the other things," Saar told Techworld from the company's office in the Tea Building in Shoreditch earlier this month.
A lot of Zego policies are still underwritten by insurance partners, around 80 percent in fact, but having a licence of its own enables Zego to iterate on its products more quickly, without layers of sign-off from the partners to wade through.
"It's a good way to be quick and innovative," Saar said. "In terms of price changes, or tweaking product features or better explaining certain legal documents and all those things we can be doing so much quicker and better."
'Why can't you just do it by the hour?'
A serial entrepreneur, Saar founded his first company, Realister, back home in Estonia when he was just 17, making notepads that had study aids in the inside cover. He moved to London 10 years ago where he has held senior roles at the luxury rental company Onefinestay and then Deliveroo, were he met Franks.
While at the food delivery startup, Saar and Franks were frustrated that they couldn't onboard drivers quickly enough to meet the company's quickly ramping scale. "We did some digging and realised that one of the main reasons is insurance," he said. "We then thought: why can't you just do it by the hour?"
The problem was that every insurer they spoke to said it was a terrible idea, until one agreed to give them a shot.
"If you think about the car on the road under an annual insurance deal, they normally sell an annual policy. But they know that out of 365 days, you only drive two percent," Saar explained. "So they know that most of the time, they're getting money when the vehicle is parked. In our case, we said we only charge when the vehicle is traveling, so there's 100 percent exposure all the time... they just couldn't comprehend this."
So how did Zego make the numbers work? "Very simply if you think about it, our exposure is higher as we are 100 percent at risk, but we charge accordingly... The pool of money ends up being the same, maybe even slightly less because we know who is a good risk," he added.
Then, when it comes to covering entire commercial fleets on-demand, the proposition can prove even more attractive: "You have vehicles that are off road or have drivers calling in sick, you still pay for the same insurance. In our case that vehicle is not driving you're not paying. So again, if there's low season months, you pay less, in high season months you pay more. So this in line with your company's income."
Once they had proven out the business model and found an underwriting partner the small team hunkered down for three months to build the product in Python, Django and React on AWS public cloud infrastructure, before launching on 1 August 2016, when they had one customer sign up. "We made £2.30, it was a great day, I will remember that day forever," Saar said.
The product itself is built for simplicity: it integrates directly with companies like Uber and Deliveroo's driver apps to track their working hours and only insure them for when they are on the road.
"When you sign up with them as a driver and you sign up with Zego then you link those accounts, like you use Google to log into services," he explained. "So it's automatic, whatever triggers the work triggers the insurance, so there's no self-selection and we know exactly when someone's working."
Competition, what competition?
But what if these companies decided to cut off the integrations, or even establish their own insurance offering? Uber for one has made its own shift into financial services recently with the launch of its Uber Money digital wallet for drivers, for example.
But Saar says he isn't concerned.
"I think it works the other way. Today we have drivers contact their work provider to say, 'can you please get Zego, because I want a flexible product'," he said.
Then Saar is similarly nonplussed about the threat of incumbent insurers moving into on-demand insurance: "I mean, I would love them to move more towards this direction. I'm here to build a great insurance company that does incredibly simple, smart, easy to understand products for customers and because the insurance market is so vast, there's going to be numerous players. I would love them all to change their direction 90 degrees and actually do this with health, or competing against us."
Then there are the legacy barriers. "When I look at the pillars of their businesses, all of their infrastructure is from the 60s and 70s and it's all outsourced, which means the outsourcer has no interest to let them go or completely change the infrastructure," he said.
"On top of that, they don't necessarily always think with the customer hat on, they think with their protective hat on. That's why it's very difficult to change for these big entities, I feel."
The hidden value with Zego, like many tech companies today, resides with the data it has. By its nature the product collects a lot of telematics data which will, eventually, allow Zego to offer more personalised cover, build safety features and even give companies insights into their riskiest drivers.
"By having more information, you're developing smart insurance products," he said. "So there's numerous iterations of how to go about that."
Saar explained: "[say] you have 100 drivers and we can say: 'here's all the accidents they had', and you can see five drivers are giving you 80 percent of the losses. So you should quickly retrain them because otherwise you're going to pay 40 percent more next year on insurance. Or if you retrain them, your insurance costs will come down 20 percent."
According to Saar, Zego is firmly focused on the commercial insurance market for now, with no grand ambitions to bring its on-demand model to the consumer just yet.
"If you think about anyone who's out and about on the road, that's the kind of market where we focus on today," he said. "Solve all the problems, design all different products, with no hidden fees, no surprises. Make it simple, easy to understand and make them flexible. So that's the ethos that we've had for our products."
Shorter term, Zego will continue to hire and is already outgrowing its Shoreditch office, as well as continuing to expand across Europe.
Longer term, Saar wants to build "a global company that has the biggest impact positively for the customers within insurance".
"I feel the population and the people on this planet really truly deserve a great insurance provider with a product that they understand, it gives them the control in their own hands," he said. "That's what I'm here to build."