Can the Trust-Based Model of this Swedish Startup Change Insurance Globally?

“To earn trust, we believe you need to start by giving it, by truly trusting people.” - Sanna Westerberg, Hedvig Chief People & Performance Officer

In a world where mistrust and fake news is on the rise, a natural inclination for some companies can be to increase control. But Hedvig believes trust is better - and cheaper.

The Swedish startup, founded in 2017, has a new approach to insurance. Historically, insurance companies have had financial incentive to find ways to reject insurance claims and mistrust people’s stories. To design an insurance experience based on trust in people, Hedvig came up with a different way to make money. This involves only taking a fixed fee from their members’ monthly premium and reserving the rest of the premium for paying out claims. If there is anything left of the reserve at the end of the year, it is donated to the members’ chosen charities. In this way, Hedvig focuses their energy on building a more rewarding and supportive insurance experience - one in which they have no reason to question their member’s stories.

So far, Hedvig says its approach has earned the startup customers that are 10 times happier than the industry average, and has more daily new home insurance signings than some of the oldest insurance companies in Sweden. Placing their trust in people has even helped protect against insurance fraud.

“It’s an understatement to say that my jaw dropped the first time a member alerted us to the fact that she had found her lost bag and wanted to reimburse us, or on another occasion when a fraudster sent us a handwritten letter asking for our forgiveness," Hedvig CEO & co-founder Lucas Carlsén wrote in an article on the subject of corporate trust. "When we trust, we get honesty in return and the willingness among our members to inflate or exaggerate the extent of a claim decreases.”

A belief in the honesty, integrity, and reliability of others guides the startup’s internal organisation as much as it guides their business model.

“Our perspective on trust and on people is exactly the same internally as it is externally, it goes hand in hand,” said Sanna Westerberg, Chief People & Performance Officer at Hedvig, in an interview with The Org.

Building an organisation based on trust and transparency rather than control, however, requires more than accepting the concept as a good idea.

“Many corporate decision makers have started to realize that you don't need to control people, but most accept that fact only on a conceptual level,” Westerberg said. “They might agree that trust is important, but then they still demand that people go to the office to prove that they are working - then you haven’t grasped the thing with trust at all.”

How executives view employees and what motivates them to work, naturally affects their management style. If they view their employees as unmotivated and untrustworthy, more control follows. But if they view their people as responsible and taking pride in doing a good job, it follows that they need quite the opposite to be nurtured.

“At Hedvig we don't have any managers because we don't believe that people need to be managed,” Westerberg said. “Simply put, we believe what people need is a clear direction and a big amount of trust and the freedom to make their own decisions based on our values.”

Four of Hedvig’s 68 team members work with the startup’s people and culture. To live up to Hedvig’s core values of empathy and trust, the team believes in a proactive rather than reactive approach. Each team member has a coach and everyone is offered leadership training. Importantly, no training - or working from the office - is mandatory. This is in line with their “pull, not push” approach. For example, if the team wants people to go to their leadership training, it is simply up to them to make the training as appealing as possible.

Hedvig is currently operating in Sweden, Norway, and soon, Denmark. The level of trust is high in the Nordic countries, in fact the region has the highest level of social trust in the world. Yet the rapid and mostly organic growth of Hedvig - now constituting 6% of all new insurance signings in Sweden in 2020 - points to how, even in the Nordics, a more trust based business model is called for. With $28M raised and backed by international investors including Obvious Ventures, Cherry Ventures, and CommerzVentures, Hedvig is on a path to prove that if the Nordics want to have trust in their insurance companies, the rest of the world does too.

“We want to show that less control and more trust makes sense from a business perspective,” Westerberg said. “Hopefully we can inspire other companies to become a bit more forward leaning too. I think the world would be a much nicer place if we made it a more trusting place to live.”

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