When investing, your capital is at risk.
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Fun fact: 14% of Brits aged 25-44 have never heard of life insurance.
This is a shocking statistic but considering 1-5 of people have never heard of income protection either, it shows that financial protection is a topic not reaching enough people.
When you attempt to research how to financially protect yourself, the solutions presented are either for the affluent or the masses. It’s never personalised to the individual, especially for the vast majority who aren’t aware.
Ex-Made.com CFO, David Vanek, noticed this and thought there must be a better way to provide insurance. So he created Anorak, a Business Insider top 10 global fintech firm.
We sat down with David to learn about why their mission is so important, what makes them different to anything else on the market and how they plan to scale their business.
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Tell us about life before Anorak?
I’m a former investment banker turned a serial entrepreneur. Before I co-founded Anorak, I worked at Made.com which I had joined in its very early days. We scaled the company from 20 people when I joined to 600 people, becoming a category leader in e-commerce. I was the group CFO when I left to create Anorak.
8.5 million people have no life insurance in the UK and 3.8 million self-employed people have no income protection. What are the dangers of these stats for when events, like a pandemic for example, occur?
The UK population is highly exposed to the financial consequences of the risk of Death and Disability. We are talking about millions of people who have no financial safety net (savings, insurance, etc.). If and when something severe happens to them, they are most likely to experience financial distress. They need to cope with hard and painful decisions: can I continue to live in my house, how do I repay the mortgage, how do I cover my essential living expenses?
The pandemic has raised the population’s awareness of these risks. However, people need help to act and protect themselves against these situations. And the traditional insurance market has not done a good job at reaching them with the right support.
People need to be educated further and this is why Anorak exists. It takes people from knowing little to nothing about life insurance and income protection to getting covered with the right policy for them – all in one place.
What did those early days of Anorak look like and what does the team look like now?
Since the beginning, our mission is to build the world’s smartest insurance companion and help millions protect their financial future. We’re convinced that software and data are key to deliver on the mission.
The early days were heavily focused on designing and building our automated insurance engine platform – a great technology challenge. This led to delivering an FCA authorised platform for protection advice. A first on the market!
Then it was time to convince B2B2C partners to connect their users to our advice journey. We started with Starling Bank – it proved very efficient and it was great to partner with such a forward looking Fintech. Many more have joined our network of partners since: Snoop, Plum, The Times, Trussle, are more. It’s just the beginning.
We are now a team of 30+ Anoraks, all slightly obsessed with life insurance: software engineers, life actuaries, insurance specialists and design heavyweights. A very unusual combination of talents and expertise in the life insurance market.
What makes Anorak different to the other services or online marketplaces out there?
The need for financial protection in the UK is massive. The current process to buy these covers is complicated, outdated and leaves a large number of the population underserved. 70% of policies are sold by traditional financial advisers who are mostly targeting affluent individuals. It is unscalable and will never reach out to the mass market.
In the meantime, existing online services are limited to transactional (quote & apply) journeys and are unable to meet user expectations. The first question they ask the user is, “How much cover do you want?”. When people have very little understanding of how financial protection insurance works, this isn’t an effective model.
This is why price comparison websites and insurers websites online represent 20%-25% of the market.
One of the biggest barriers is the lack of knowledge about how these insurance products work, what they cover and what the buying process is. It is why traditional advisers are still so dominant.
We have created Anorak to change this and to scale protection advice to the mass market. Anorak educates people on their needs and matches them with personalised recommendations.
Anorak being the first digital life insurance advice service is what makes us unique. We focus on the ‘right’ cover. We only ever recommend as much as you need. No more, no less. So everyone can walk away feeling confident that they have the right plan in place. Our advice is free, independent, whole-of-market and FCA-regulated. We work for the customer, not the insurer.
Describe Anorak’s revenue model and how you plan to scale the business?
We estimate that there is a £6.6bn commission pool ready to be seized in the UK life insurance market.
Anorak has a proven commission-based business model with strong unit economics. As a digital broker Anorak receives a commission from insurance companies each time it sells a policy.
- Commission levels in life insurance sales are high: c.£800 of commission per policy sold.
- 100% of the commission is paid upfront by insurers, making Anorak’s cash model very efficient.
- Capital efficient revenue sharing model with our distribution partners limits the risk in customer acquisition
The platform is also already commercialised as a SaaS for distributors who want to operate their own protection insurance business. Existing clients include London & Country (leading mortgage broker), Trussle (online mortgage broker) and InsuranceZ (online mortgage broker).
Our tech platform has been built for scale. We’re now in a phase where we are growing our distribution network to connect more users to our service. We’ve also successfully launched our B2C business targeting underserved segments of users. We are getting very strong traction from both B2B2C and B2C distribution.
Business Insider named you on their top 10 fintech startups in the world! You’ve also partnered with established companies such as Starling Bank and The Times. What’s been your biggest accomplishment to date?
Great question. When you run a startup you keep moving the goal post, tackling the next challenge, seizing the next opportunity. You often forget to celebrate your victories and accomplishments.
Our biggest achievements are two fold:
- We have convinced renowned brands that long term financial protection insurance plays a key role in people’s financial wellbeing, and as such they should offer their clients an easy way to be helped with it. As a result, more partners are joining the movement which is great.
- We have assembled a stellar team of experienced anoraks that are true believers in our mission and committed to transforming the way people protect their family. The level of expertise and execution excellence we have is rare in the life insurance distribution space.
What do you plan to do with the money you raise?
- Accelerate our B2B2C distribution by integrating with more partners.
- Grow our B2C by scaling acquisition channels on selected underserved audiences – mainly income protection.
- Further, invest in our tech and digital products to deepen our competitive advantage and become our users’ protection companion.
What do you love to do in your free time?
Offshore double-handed sailing and spending time with my three daughters.
If you weren’t building Anorak, what do you think you’d be doing?
I would be sailing around the globe.
What’s the biggest lesson you’ve learnt so far building Anorak?
Stop waiting for Tier 1 insurers and Tier 1 banks to embrace change and vet your tech and service. Their decision making process is not compatible with a startup cash runway! Don’t wait for them.
Build, Test, Scale.
They’ll catch up at some point…or not. But it’s their problem not yours. What matters is the user. They deserve 100% of our focus.
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Anorak’s passion to educate and protect an underserved market is infectious. To join them on their mission, visit the pitch here.
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