Ensurance makes strategic investment in fast-growing car insurance retailer, KOBA Insurance
Under the deal, Ensurance will invest $1.5 million in KOBA and will have the right to distribute its insurance products.
Insurance underwriting agency Ensurance (ASX: ENA) has taken another step in its Australian growth strategy after agreeing to invest $1.5 million in dynamic car insurance start-up company, KOBA Insurance.
Ensurance, which recently sold its UK operations to leading ASX-listed group PSC Insurance (ASX: PSI) to focus on its Australian business, has said it will continue to expand its Aussie operations through organic growth as well as “targeted and strategic” business acquisitions and investments.
Multi-billion-dollar Australian car insurance market
The KOBA investment fits the bill, giving Ensurance immediate exposure to what it sees as a significant growth opportunity in the multi-billion-dollar Australian car insurance market.
The domestic car insurance market is estimated to be worth $3 billion a year in Gross Written Premiums, with approximately three million Australian customers switching car insurance providers each year.
Low-usage drivers, the key target market for KOBA’s products, account for approximately one-third of the total market.
Alternative in car insurance
KOBA is a private Australian company that launched in November 2021 – offering a data-driven approach to car insurance.
Users pay a fixed amount to have their car insured while it’s parked, and then pay only for the distance they drive.
Usage is measured through a small matchbox-sized device called a KOBA Rider that attaches to a car’s On-board Diagnostics (OBD) port.
This communicates with the KOBA smartphone app to automatically calculate driving distances and charges a per-kilometre rate for each trip.
This per-kilometre insurance premium model offers the potential to deliver significant cost savings for low-usage drivers.
Right to distribute KOBA products
As part of the deal announced today, Ensurance will invest up to $1.5 million in KOBA via a Simple Agreement for Future Equity (SAFE), a common investment mechanism for start-up technology companies.
The agreement also gives Ensurance the right to distribute KOBA’s insurance products
Under the SAFE, Ensurance will make a cash payment to KOBA in exchange for a contractual right to convert that amount into shares upon pre-agreed milestones. Under the terms of the agreement, the investment will be made in up to five separate tranches over a two-year period.
Ensurance chief executive officer Tom Kent will join the KOBA board as a non-executive director, with KOBA to also benefit from access to Ensurance’s established back-office systems and support to help enhance its offering and expand its market share.
‘Compelling’ opportunity
Mr Kent said the investment in KOBA was a compelling and exciting growth opportunity for the listed insurance group.
“With people increasingly working from home, and with a growing focus on reducing car use to minimise carbon emissions, I believe KOBA’s products will be a very attractive offering to a growing number of vehicle owners,” he said.
“KOBA is a progressive, end-to-end insurance platform that uses the data generated by cars to help low-usage drivers save money. This investment represents a strong growth opportunity for Ensurance shareholders and is an exciting addition to the company’s product suite.”
KOBA chief executive officer Andrew Wong said Ensurance was an ideal strategic partner as KOBA moved to scale-up its business and expand its market share over the next few years.
“There hasn’t been much innovation in the Australian car insurance market for a few years, so it’s very exciting to have an established partner who understands the insurance business and shares our vision for delivering customer-first solutions,” Mr Wong said.