Financial technology start-up Laka has launched a cycle insurance model that is "truly disruptive", says the company. The insurance for high-value bikes is underwritten by Zurich but, significantly, it's also backed by the individuals who take out the policies.
Laka groups cyclists together based on their lifestyle and behaviour, these peer groups are called a "pack". Those in the pack is covered against theft, accidental damage, accidental loss and vandalism. If there are claims, each individual member pays a share of the claims in the pack. This share is capped by Laka around market rate.
"If everyone takes good care and fewer claims occur the whole pack pays less," says Laka co-founder Jens Hartwig.
The start-up is testing its model as part of the FCA’s innovative Regulatory Sandbox and is underwritten in the UK by Zurich.
Fellow co-founder Tobias Taupitz said: “For decades, customers have paid premiums in the hope to be reinstated when they have a claim. Being at the short end of the stick creates all sorts of friction. Laka introduces an alternative where both sides win and as such offers a unique experience, starting with cover for high-value bicycles."
Zurich's Marcus Latchford said: “Innovation is an often over-used word but Laka is one of very few 'InsurTechs' doing something genuinely exciting and disruptive."
He added: "Laka are giving their customers what they want - the model is straight-forward, premiums are capped at a fixed amount and everything can be processed through a smartphone."
Originally known as Insure A Thing, the co-founders renamed it to Laka, which is the Hawaiian goddess of prosperity (and hula dancing).
Hartwig told BikeBiz: "We only accept bicycles between £1,000 and £7,500, customers must have a Sold Secure lock and in the onboarding, we need two images of the bicycle. Although for each accessory it’s just one. This is how we pre-filter those who can join."
The peer groups can include clubs and teams.
"Cycling clubs are certainly interesting and we are building good ties with a few around London," said Hartwig.
"Equally, we work with the cycling teams BPC Spokes Racing and Morvélo Basso which helps us spread the word. Over the past months, we have acquired a solid waiting list of interested cyclists who we now gradually onboard."
The first group onboard has been called the “Alpha Pack”.
"We will be using machine learning techniques to help us form these packs around the most important individual traits, looking for behavioural similarities," said Hartwig.
"As a simple example, we know that a road biker is very different from a cargo biker. One may leave their bike in their apartment but takes part in races, the other might leave the bike outside overnight but is very careful while cycling inner-city routes."
He added: "Postcode may not be the best predictor of theft – if your bicycle is absolutely your pride and joy we’re much more interested in how you look after it rather penalising customer for where they choose to live.
"Understanding what drives theft and damages helps us to educate our customers how to avoid risky situations to not lose their bike in a theft or not break their bikes because of misuse."