Honcho pivots into B2B embedded insurance

Reverse auction marketplace Honcho is pivoting its proposition into embedded and business to business (B2B) insurance – and moving away from its direct-to-consumer model.

Gavin Sewell, Honcho’s chief executive and co-founder, told Insurance Times: “About eighteen months ago we started pivoting towards an embedded insurance proposition. We have some interesting clients lined up and have got the ability to deliver an embedded insurance product to a bunch of UK-based new and used car dealers.

“That will be the essence of the new life for Honcho.”

Initially, Honcho launched into car insurance in the second quarter of 2019. 

Its new direction follows a note posted on the insurtech’s website last week informing the sector that it was “packing up” five years after it was founded – the note explained that it was costing more to run the business and difficult to acquire direct to consumer customers in a highly competitive market.

Although he admits it has been a “bittersweet time”, Sewell said the reaction from the industry has been supportive.

The idea behind Honcho’s embedded insurance product involves it seamlessly integrating into the customer sales journey. Sewell gave the example of a customer at a car dealership being offered insurance off the back of their purchase and being able to drive away fully insured.

“We are building APIs [Application Processing Interface] and a technology platform. At the back end it takes insurance products through API and at the front end it integrates with dealers, inventory systems and data sales systems. It seamlessly allows the customer to access the product as they go through the sales journey,” he added.

Why embedded?

For Sewell, the the automotive sector is currently undergoing a high degree of change.

He continued: “[The sector] has had a hard couple of years with lockdown and now you can’t get [semiconductor] chips [for cars].

”There’s a lot of appetite in automotive to look at how to enhance the customer proposition and present a holistic offering.”

This semiconductor chip shortage hit the automotive industry in 2021 and was largely due to automakers temporarily shutting down during the Covid-19 pandemic, which also put a pause on new vehicle production.

In June last year, Honcho announced that it was building a system to house a multi-car policy proposition, as well as a partnership with Admiral.

Speaking about embedded insurance, he added: “If you can serve a customer at the time they are transacting, they are not having to wake up a couple months down the line and go to a price comparison website (PCW). From my perspective we shortcut that whole customer acquisition journey.”

This is beneficial in two ways, he said. The car dealer and customer get a more holistic proposition and Honcho can serve the customer a better product that suits their needs.

Rising insurer charges

Meanwhile, PCWs have been putting prices up for insurers.

“Insurers pay £60 to £100 every time a policy is sold, but the PCWs have been putting up the prices, so it is becoming more and more expensive for insurers to distribute products via a PCW,” explained Sewell.

In this way, being able to distribute products more cheaply would be beneficial to insurers in terms of cost savings.

“Insurers are keen to find an alternative distribution channel, embedded insurance is becoming more of a thing,” Sewell added.

From a customer perspective it allows them to save on time, cost and leg work of looking for a policy separately.

Honcho is an advocate of the FCA’s fair pricing regulation and ban on price walking.

He added: “We were talking about good and fair value products before the FCA. We’ve already tried to move people away from cheapest is best – we still don’t believe cheapest is best. I think we were a bit early to the party with a focus on value rather than price.”

Honcho’s solution enables products to be integrated for anyone that can deliver embedded insurance.

The insurtech is also open to funding opportunities as it enters this new phase.