"There will be consolidation in the legaltech space"

Helpcheck founder and CEO Peer Schulz explains why the start-up now wants to take on cases beyond life insurance, why the fight for capital in the legal tech sector is difficult and what the sector has to do with the Highlander.

Things are happening in the legaltech world. The "Act to Promote Consumer-Oriented Offerings in the Legal Services Market", also known as the "Legaltech Act", strengthens the model of many start-ups that work with performance-based payment. Some founders are using the opportunity to expand. Peer Schulz, CEO of Helpcheck, is now looking to expand his previously life insurance-focused business into other areas. In this interview, he talks about lawsuits from large insurance companies, the consolidation of the industry and explains why classic venture capitalists tend to stay away from the industry.

Mr. Schulz, you are not a lawyer, but you have nevertheless founded a legaltech company, Helpcheck. Why did you venture into this complicated field as a non-specialist?

The idea came about when I wanted to help some of my family members with their life insurance policies. Specifically, there was a ruling by the German Federal Supreme Court, which found that millions of life insurance policies were faulty. There was then an opportunity for insurance customers to get money back. That sounded good, but I then quickly discovered that the process was very complex and time-consuming.

That's when you saw a business.

I thought to myself that yes, many people will probably feel the same way and accordingly then launched Helpcheck in 2016. At that time, there were already first legaltechs, for example Flightright, which helped consumers to enforce claims against airlines. That's when I started thinking that the concept could also be applied very well to financial contracts.

Insurance tends to be an unsexy topic...

...about on a par with tax law...

...nobody likes to deal with that. Do you get enough customers?

Definitely, especially when there are high-profile verdicts. And just in the past year, the inquiries have increased. People were sitting at home, had time, possibly needed money. That's when some combed through their policies.

Now, by no means is every life insurance policy faulty. Do you still fence every one that comes your way?

No, we don't. We have two upstream reviews. Firstly, what we call the "initial pre-check", in which we ask for some key data, such as the year in which the policy was taken out, the status of the policy and any recent premium increases. If this indicates to us that there could be an error, the customers can hand over their documents to us. Then we check more closely: Is the contract really faulty? And is it financially worthwhile to take this error to court? Incidentally, just over 70 percent of the contracts we check are faulty. Our partner lawyers then take on the case if we are given a binding mandate. If we are successful, we take 25 percent of the additional profit as commission.

You have probably not made yourself popular with the insurance companies in recent years.

Not necessarily. The Nuremberg insurance company even tried to prohibit our business model. They failed with that only recently. But overall, we have noticed that the settlement rate is significantly higher than it used to be. In around 50 percent of cases, we now reach an agreement out of court or before a judgment is handed down. Initially, this was the case in just five percent of cases.

You now also want to tackle other legal issues with Helpcheck, such as real estate financing or severance payments. Doesn't that put you in competition with other start-ups in your sector?

We are quite alone in the financial contract sector. But one thing is clear: all our competitors are pursuing a similar strategy, and we would all like to become the one-stop shop for legal claims. That doesn't mean that we are at enmity with each other, we have a very friendly exchange with many Legaltechs, for example. But there will be consolidation in the long run.

As in "Highlander": there can only be one?

That's perhaps a bit drastic. But overall, a few players will emerge.

Will that lead to a venture capital arms race?

Legaltech per se is only a classic venture capital case to a certain extent. We and most other legaltechs have alternative funding methods.

What are the reasons for that?

There are different reasons. In Germany, law firms are subject to a ban on third-party ownership, which means that investors are not allowed to invest in them. This makes it difficult, depending on the construction of the start-up. Internationalisation is also complicated, as the legal systems sometimes differ significantly. And customer lifetime value is also limited: Multiple monetization is difficult. Overall, however, legal tech is an exciting case for investors and there will be tremendous growth here in the future - in my opinion, "Day 1" is just getting started.

So is the legal tech business a rather tough bread for start-up entrepreneurs?

I wouldn't say that. At the end of the day, our primary goal is to help people get access to justice. And I'm convinced that we're succeeding. I noticed that five years ago when I was still doing customer support at Helpcheck myself on a trial basis. Our customers are delighted when we get good money out of their old policies that have been gathering dust in the cupboard for years. Especially at this time of year, we sometimes even get Christmas cakes sent to us by satisfied customers.

Personal details: Peer Schulz is the founder and Managing Director of Helpcheck. He co-founded the company with Phil Sokowicz in 2016. Schulz is also one of the co-founders of the Bundesverband Legal Tech Deutschland, where he was also a board member until recently. Before joining Helpcheck, he worked at Metro and BMW, among others. Schulz studied business administration at the International School of Management and the ESCP Europe Business School.