As of the summer of 2023, in mid-June precisely, Luko was acquired by the English insurer Admiral Group.
But do you really know the whole story of this emblematic startup in the French InsurTech scene? That's what you're going to discover (or rediscover), as we together remember its journey from its launch a few years ago to its recent acquisition.
For French 🇫🇷 speaker, you can listen to that story in my latest podcast:
https://open.spotify.com/episode/0AGpkQmzevH0u1vGrYTaqU
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(it's also available on every podcast platform)
The company 'Luko Cover' was officially registered in February 2018. Luko initially focused on smart home, planning to develop connected devices that could, for example, track electricity consumption or detect potential water leaks. Quickly, it established a connection with the insurance world, and while maintaining this connected devices project, it officially entered the InsurTech industry by selling home insurance.
It started as a broker and its first insurance policies were underwritten by traditional insurance players like Wakam (known as 'La Parisienne' at the time) or SwissRE, as indicated on its website (1).
Quite quickly, in May 2018 (2), just a few months after its creation, Luko announced its first funding round. With an amount of €2 million, this round was raised from investors like Kima Ventures - Xavier Niel's seed fund -, Evolem - the investment vehicle of APRIL's founder - and several insurance-related business angels. On this occasion, it transparently unveiled its business model. Quoting from the press release at that time: "30% of the premiums are collected to manage claims. The remaining 70% are placed in a common fund used to quickly compensate policyholders in case of a claim. At the end of the fiscal year, the balance of this fund is donated to the charitable association chosen by the policyholder." End of quote. And in this last point, one might recognize the influence of Lemonade, another homeowners' InsurTech launched in the United States a bit earlier, which also emphasized this redistribution to associations. Finally, Luko announces plans to launch soon in the UK and Germany.
A year and a half later, in November 2019, Luko announced another funding round of €20 million (3)! This was quite an impressive figure for the time. And it has remained one of the largest Series A rounds in the B2C InsurTech category when compared to other similar French players. This funding round was secured from prominent investors, led by Accel, along with participation from FoundersFund and Speedinvest. The startup reiterated its expansion plan in Europe, this time mentioning "two European countries," with a timeline set for "by the end of 2020," I quote. The PR released at that time also referred to the connected objects that the startup was still working on. Do you remember? That's the path Luko initially embarked on. And the development was seemingly ongoing.
A few months later, in December 2020 - just one year after its previous funding round - Luko announced another financing round, even larger this time: €50 million (4). EQT Ventures led this round. Historical investors also participated. Notably, Orange Ventures and several business angels, including the founder of Vinted or the founder of Hippo (an American InsurTech also focused on homeowners' insurance), joined as well. The funding announcement was also an opportunity for the startup to highlight its B Corp certification, obtained in July 2019 (5).
This rapid succession of funding rounds naturally leads us to delve into the startup's commercial development. And here again, the numbers escalated quickly. During the November 2019 Series A, Luko announced covering 20,000 customers (3). This still stands today as the upper end of the InsurTech benchmark in France, just 18 months after its launch.
One year later, for its Series B, Luko announced covering 100,000 customers (4).
Twelve months later again, we were at the end of 2021, and the milestone of 200,000 customers was crossed (6).
Finally, Luko doubled its number of policyholders yet again the following year and announced covering 400,000 customers by the end of 2022 (7).
This still remains one of the most significant growths in France. And even in Europe, where only Getsafe reported similar numbers, with a similar B2C positioning but a more varied offering. Getsafe indeed offers car, bicycle, and pet insurance in addition to homeowners' insurance.
In addition to its direct acquisition efforts, including through advertisements on social networks or even physically in the Parisian metro, Luko quickly engaged in partnerships and made some very emblematic announcements.
It started with Lydia in November 2019 (8). Beyond the announcement and the visibility benefit of associating two iconic brands in the French FinTech scene, the promise was to enable accelerated claims reimbursement by utilizing the Lydia users' fund pools.
Next came Revolut in July 2020 (9). The partnership offered Luko customers 2 months free for those coming from Revolut through their 'Rewards' program.
But the most emblematic one was undoubtedly the partnership announced with Airbnb in April 2021 (10). The idea here was to offer 1 year of insurance to anyone wishing to rent out their accommodation on the Airbnb platform.
Lastly, speaking of development, geographical expansion must also be mentioned. Do you remember? It was already mentioned during the first funding round. Well, it happened. Indeed, in May 2021, the startup announced its launch in the Spanish market (11). Note that Luko Spain was eventually acquired by its local counterpart - Tuio - in March 2023 (12). We'll discuss the development in Germany a bit later. I wanted to approach it more from the perspective of the value chain, following the acquisition of a German competitor.
Beyond the insurance product itself, initially offered for apartment renters, then for homeowners, and later for buildings; in simple terms, everything related to home insurance, I wanted to explore the more tech aspect of the product.
Naturally, I start with the connected devices that were Luko's genesis. The startup clarified its ambitions at the end of 2019 (13) and detailed the various products it was working on: Luko Elec to monitor electricity consumption and prevent potential fires; Luko Door to monitor potential intrusions and prevent thefts; and finally, Luko Water to detect leaks and prevent water damage.
While waiting to launch its own smart devices, Luko announced a partnership with Netatmo in July 2020 (14) concerning home surveillance cameras. Interesting timing, by the way, given the summer vacation period.
Ultimately, in the fall of 2021, Luko announced a downward revision of its ambitions and nearly halted its IoT initiatives (15). Through its Medium post dedicated to the subject, the startup unveiled many lessons learned from its initial experiments, particularly with Luko Elec and Luko Door, which were tested with several hundred volunteer customers. However, it faced the complexities of hardware development, its cost, and the need for it not to spread too thin beyond its core business: insurance. Therefore, it decided to focus on a single device: Luko Water. This device is related to the most frequent damage in homes, water damage. For reference, in 2021 alone, France Assureurs indicated that water damage accounted for 43% of the claims recorded for the year (16).
In June 2022, Luko officially announced the launch of its Water sensor (17). Its application allowed real-time tracking of water consumption on a weekly or monthly basis.
And now, let's delve into its mobile experience because over time, Luko has launched several additional services, all centered around homeownership, of course, but going beyond the mere need for insurance. This was clearly a derivative of the ecosystem of services concept that is often discussed in insurance. I might even refer to the term "super app."
Indeed, beyond enabling online subscription and providing access to all contract information, even allowing updates (18), Luko's service has expanded to include related services. First, in October 2020, Luko announced a teleconsultation service for the home (19). While the concept was becoming more common in healthcare, this seemed to be a first - to my knowledge. Beyond the name - Dr. House!? - the idea was intriguing: it aimed to facilitate remote discussions with a professional (or handyman) about any uncertain aspects of one's installation. If you were uncertain about an electrical outlet, a pipe joint, or anything else, you could show it and thus assess the need for intervention. The goal was to prevent damages and costs, as a simple remote-guided intervention can sometimes suffice to avert a worse situation.
A few months later, in January 2021, Luko launched 'Leon,' a service designed to help customers find their next apartment (20). Again, the idea appeared interesting: anticipating the moving process, which is a churn-risk moment, as customers will have to subscribe to a new home insurance policy for their new accommodation. By assisting them during this crucial moment, it might potentially help retain the customer, simply by updating their policy without having to go through the comparison process, whether online or not.
In short, with these related services, the contours of a home insurance super app were taking shape, possibly one of the few concrete examples in the sector.
If you have other examples in mind, of course, let me know in the comments.
And in its frantic pursuit of growth, Luko didn't just expand the list of its related services; it also embarked on diversification in terms of its business model and along the value chain.
This actually began from this angle—moving up the value chain, precisely. As you might recall, Luko has been an insurance distributor from the start. It sells home insurance policies that are underwritten by traditional insurance players. Then, in early 2022, an announcement changed the game: Luko announced the acquisition of Coya in January 2022 (21).
For those unfamiliar with this startup, it's a German InsurTech launched in 2016. Right from the start, the startup adopted a full-stack model (meaning it's a fully-fledged insurer) and offered various types of insurance beyond home insurance; it's a multi-product InsurTech, much like Getsafe that we discussed earlier. Coya also went through a series of fundraising rounds. Thus, since its inception, Coya had raised over $46 million, according to Crunchbase, notably with the renowned American investor Peter Thiel. However, its development proved more challenging, and it lagged behind its German market counterparts in terms of issued premiums. When saying this, I'm thinking of Element, Neodigital, Ottonova, or of course, Wefox.
Yet, in my view, this acquisition had a dual benefit for Luko. On one hand, it undoubtedly allowed the startup to enter the German market, as Coya exclusively operated there. This means Luko was launching in a second European market, and not from scratch, as it was acquiring a portfolio of several thousands of customers here (back then, announcements mentioned precisely 80,000 clients). But also, and most importantly, Luko became a full-fledged insurer through this acquisition. Luko was now a full-stack InsurTech!
And as several CEOs of European InsurTech companies have mentioned on stage, this move up the value chain—from distributors to risk carriers—has a dual advantage. Firstly, it allows for margin expansion by eliminating a link in the chain. Secondly, it should enhance flexibility in product construction, particularly by leveraging customer insights and data accumulated since the launch. Note that in the European landscape, there are two types of full-stack InsurTech: those that have been so from their inception—like Coya or Alan, for instance, in France—and those that have become full-stack over the course of their development. During the peak of InsurTech investments, this approach became more prevalent: I'm thinking of Zego in the UK, Getsafe in Germany, and thus, Luko in France.
Beyond this extension along the value chain, in this year 2022, Luko has begun exploring new business models. Having operated solely through direct distribution—where customers could subscribe to its insurance offerings online—the startup is exploring two types of indirect distribution. Firstly, it announced a distribution partnership with Novelia (22)—a subsidiary of the Arkea Group—which will distribute its home insurance products—those of Luko—through its traditional and physical distribution network, Novelia's network.
Note that this opening to traditional distribution networks had already occurred with some American players. I'm thinking of Root in auto insurance or Lemonade in home insurance. The objective remained the same: considering that the vast majority of subscriptions still occur through traditional networks, this movement toward them aimed to continue growing by reaching new customers beyond those already addressed online, directly. It remains to be seen how this can work from an economic perspective, as it involves adding a link to the chain, whereas the move toward full-stack positioning had removed one. Similarly, if the subscription process and the 100% digital user experience were highlighted for differentiation, what is the competitive advantage - in the eyes of a broker, I mean - of promoting an InsurTech's offer rather than that of a traditional insurer? The question still holds, and it was also raised by American VC Dave Weschler - formerly of Hippo, incidentally - during an online conference we held together, comparing InsurTech activities in Europe and the United States.
In addition to this involvement with traditional brokers, Luko also initiated a foray into embedded insurance. This was clearly the hot trend in InsurTech at the time, with fundraising multiplying in this field, and many investors - including myself - believing that platforms are well-positioned to offer insurance to their customers within the sales process. In short: the right product, at the right time, through the right channel. To do this, Luko acquired Unkle in March 2022 (23). The announced objective was to have technology for indirect distribution, allowing third-party players - in this case, real estate agents - to offer insurance in their processes. As a reminder, Unkle was a French InsurTech launched in 2018 in the rental insurance niche. It had raised €11 million since its inception - notably through a very recent funding round, announced only a few months before this acquisition - and had signed numerous partnerships with real estate agents. To further emphasize this, Luko announced in September 2022 a cross-distribution partnership with Decathlon for eScooter insurance (24).
Having tested it online, it's actually a redirection from the dedicated page on the Decathlon website to Luko's online subscription process. So, I would rather refer to it as "lead generation" rather than "embedded insurance". However, this is, of course, open to discussion.
All of these initiatives come at a time - the beginning of 2022 - when the technology and startup market is undergoing a shift. We're transitioning from a euphoric 2021 where ever-increasing funding rounds were the norm. Wild figures were being announced. Originating from the United States, this wave of skepticism has spread to Europe and is clearly not exclusive to InsurTech. Nevertheless, investors are becoming more cautious, influenced by the decline of publicly comparable companies. And from that perspective, InsurTech is affected. Even though the publicly traded US companies are very specific - mainly full-stack startups operating in traditional risks such as auto or home insurance; for reference, these models account for only 2% of all deals announced in the last five years in Europe! - their significant stock price drops have not gone unnoticed. Investments in B2C startups are plummeting. In my opinion, this is as much of a stark turnaround as the previous euphoria was. I would refer to it as a correction. The market is questioning the value added by these players, and even their nature: are they insurance companies or technology companies? If the technological asset is an online subscription process, the question is valid.
In this environment, the market is closely watching for new funding rounds. And remember, Luko's last funding round was at the end of 2020. The startup usually makes an announcement at the end of the year, so the absence of an announcement in mid-2022 - eighteen months later - raises questions. But in this context, market conditions require a certain degree of intellectual flexibility. However, the months go by and still no announcement. In the broader ecosystem, startups are reducing their staff, thus reducing their expenses in order to ideally achieve financial equilibrium or at the very least buy time and delay the next funding round. From this perspective, Luko's dynamics are somewhat different, and the number of employees, as displayed on LinkedIn, remains largely unchanged for a long time. Even though some key departures appear here and there on LinkedIn, it's inevitably perplexing: how are they managing this?
A first response is finally sketched out by the CEO himself in a LinkedIn post published in November 2022 (25). He acknowledges the market downturn, the shift from growth to profitability as the new paradigm, but remains confident, outlining some perspectives for the months ahead, notably by leveraging the solid foundations built since Luko's inception, I quote. Later on, from the CEO's own words, it will be revealed that Luko was struggling to raise funds, had given a sales mandate, and was exploring all avenues to keep moving forward.
Moreover, in 2023, clouds are gathering: Luko no longer appears in the FrenchTech120 ranking when it's updated in February 2023 (26). And even though rankings should always be taken with a grain of salt, when one has celebrated entering it, it's hard to ignore the exit. Likewise, the employee curve on LinkedIn is finally starting to decline, reaching about a 20% decrease from its peak (which is the average observed in the US, by the way, while in Europe it was closer to 15% at the same time according to our analysis of all InsurTechs that announced funding rounds in 2021).
Things start to escalate as summer approaches. On June 10, 2023, the media reports that Luko has filed for an accelerated safeguard procedure. This procedure aims to facilitate the repayment of its debt. In fact, we discover on this occasion the significant amount of this debt: €45 million! This is an aspect and a figure that we might not have had in mind, and it adds to the €72 million raised since the startup's inception.
Finally, on June 15, 2023, just a few days after this heated episode and the excitement that followed throughout the InsurTech scene in France and even more widely in Europe, Admiral Group - a British insurer - announces the acquisition of Luko (28). Well, to be more precise, the acquisition is for a part of Luko. Indeed, Coya - holding the insurance license - and Unkle are not part of the acquisition scope (29). In essence, Admiral acquires the French portfolio.
What about the price, you may ask. It hasn't been made public, but I'll let you look online for the various figures that have circulated.
In any case, it's probably not the desired outcome for the founders or the investors. However, it remains an interesting, even logical move for the British insurer. Just like what Direct Line - another British insurer, by the way - did with the acquisition of byMiles in the auto InsurTech sector a few months ago, this acquisition can have several interests, which are actually suggested in the insurer's press release. First, it's about equipping themselves with a 100% digital offering and the accompanying digital subscription process. Second, it's about acquiring a portfolio and, more importantly, an acquisition momentum (the British insurer is better known in France under the brand L'Olivier Assurance, especially in auto insurance). From the acquisition momentum perspective, the press release indicates that at the time of the acquisition, 1/4 of home insurance policies purchased online in France were from Luko. A significant digital market share.
This also echoes a rather discreet initiative by the British insurer, which had launched Homebrella, its Luko-like platform, some time ago, but stopped its activity only a year after its launch.
In conclusion, I would venture to consider this acquisition as a response to the well-known "make or buy" dilemma among large corporations ;)
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If you enjoy reading this kind of content, you can have a look at other stories I wrote recently: B3i, here ; Simplesurance, there ; and byMiles, here.
Notes:
(1) https://faq.luko.eu/fr/articles/3197939-pourquoi-faire-confiance-a-luko
(2) https://fr.luko.eu/presse/release/luko-seed-2-million-levee-de-fond/
(3) https://fr.luko.eu/presse/release/luko-leve-20-millions--pour-protegertous-les-foyers/
(4) https://fr.luko.eu/presse/release/luko-leve-50-millions-deuros--pour-renforcer-sa-position/
(5) https://fr.luko.eu/presse/release/luko-devient-la-premiere-societe-dassurance-europeenne/
(10) https://fr.luko.eu/presse/release/29-avril-2021/
(13) https://medium.com/lukocover/o%C3%B9-en-est-on-sur-nos-technologies-de-protection-5dffcce63c90
(14) https://fr.luko.eu/presse/article/luko-et-netatmo-associent-les-cameras-de-surveillance/
(18) https://play.google.com/store/apps/details?id=com.getluko.cover.app&hl=fr
(26) https://www.lesechos.fr/start-up/next40-vivatech/next40ft120-qui-sont-les-laureats-2023-1908090
(28) https://www.argusdelassurance.com/les-assureurs/admiral-group-jette-son-devolu-sur-luko.220172
. If a link is not accessible online, you can find a printed PDF version here.
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