It’s Tuesday, and today we’re covering Crabi, a Mexican insurtech startup. Founded by Daniel Bernardez and Javier Orozco, the company recently raised a $13.6M Series A led by Kaszek and IGNIA, with participation from 30N Ventures, Redwood Ventures, Carao Ventures, Azuro Capital, and Newtopia VC.

Crabi is the first 100% digital and autonomous neo-insurer for cars in Mexico. It enables customers to get an insurance plan in minutes, not hours.

Everything runs through the app — buying a policy, modifying it, renewing it, calling support, even filing a claim. You answer a few basic questions, like what car you drive, and Crabi gives you a quote. Behind the scenes, it uses AI to handle underwriting, which allows for more personalized and affordable plans.

Where traditional insurers often stick to full coverage, with Crabi everything is adjustable.

The company lets you pick and choose: theft protection, roadside assistance, medical care — or not. The price adjusts based on what you select and what car you drive. You can also choose how to pay: one month at a time or in 3-, 6-, or 12-month blocks, with monthly costs dropping the longer you commit.

Another product thing that differentiates Crabi from competitors is its focus. Many insurers tend to start with one type of insurance and then venture into new ones. Not the case with Crabi.

Crabi isn’t chasing new categories like life or health. Instead, it stuck to its original idea: offer everything a driver might need around car insurance — and nothing else. Continuing with that vision, instead of launching a new type of insurance, the company introduced CrabiPass — a maintenance and support service.

With CrabiPass, users access a network of automotive service providers. They can get everything from batteries, tires, and spare parts to maintenance services at workshops, plus roadside assistance. What’s interesting is that it’s not a separate product that drivers pay for — it is included in the plan.

There are three parts to Crabi’s value creation:

This combination enables Crabi to acquire and onboard customers quickly while maintaining a high level of satisfaction. Broad distribution creates reach. A straightforward onboarding process with product optionality increases conversion. A user-friendly app with relevant features encourages retention. The fact that Crabi reportedly has an NPS of 87 suggests that the model is working.

Crabi’s main source of revenue is insurance premiums, which customers pay annually or in installments. Crabi also earns income on the float — the premium cash it holds to pay future claims — by investing it in low-risk short-term instruments.

Other revenue streams are not fully disclosed, but likely include services such as assistance subscriptions (which can be purchased separately) and processing fees.

Mexico’s insurance market remains underdeveloped, even compared to other developing countries. The sector representsjust 2.3% of GDP, far below Brazil (6%) and India (4%). Insurance penetration is also low: only 30% of the country’s 41 million vehicles are insured, compared to 50% in Latin America.

Liability coverage has been mandatory since 2019, and fines for driving without insurance exceed 4,000 pesos per stop. In practice, enforcement is weak, and drivers often don’t see value in getting insured.

The core issue is product quality. Data from Condusef, the government body overseeing financial service providers, shows that 36% of complaints relate to insurers refusing to pay indemnities, and 17% involve delays in vehicle repairs.

In another survey, 76% of customers said they were dissatisfied with the explanation or treatment received; 61% pointed specifically to poor service from adjusters or frontline staff.

One number summarizes the gap: the average Net Promoter Score (NPS) for insurers in Mexico is 35. Crabi’s, as I mentioned, is 87.

It’s not that insurance isn’t useful in Mexico. Two data points illustrate the risk:

Beyond major losses, small losses are becoming more expensive. Repair costs rose by 12.3% in 2023, following a 6.6% increase in 2022 — largely driven by rising parts prices.

As in many countries, buying a new car on credit in Mexico requires insurance. And the share of new cars bought this way is growing — 56% in 2023, 60% in 2024 — which in theory should help insurance penetration.

But there are limitations.

First, many people only buy the most basic coverage, i.e. they buy because they have to, not because they want to.

Second, the size of the credit segment is limited. Only 1.5 million new cars are sold annually, while another 5–6 millionare used. The average car in Mexico is 14 years old, double the German average. If you’re buying a ten-year-old vehicle, you’re unlikely to purchase insurance — especially comprehensive coverage.

So while the credit-driven portion of the market is growing, most cars remain uninsured simply because there’s little push — legal, financial, or cultural — to insure them.

Crabi faces two main risks — one internal, one external.

The internal risk is economics. Insurance is a capital-intensive business, and profitability often comes only with scale. Large insurers — or banks with insurance divisions — have more pricing power and better cost structures. Crabi, as a smaller player, is at a disadvantage until it reaches significant scale.

The external risk is macroeconomic. Crabi’s growth depends on how well the Mexican economy performs. If conditions worsen, fewer people buy cars — or they buy older, cheaper ones and skip insurance altogether. Another concern is parts inflation. If the cost of repairs continues to rise — especially amid trade wars — that directly impacts Crabi’s cost base and erodes margins.

Crabi is going after a large and underserved market — one that’s also difficult to access. If it remains the only licensed digital auto insurer and scales successfully, its differentiated product could reshape a small niche into a much larger segment of the market.

Even if it doesn’t dominate the market, Crabi’s tech, product, and user base could make it an attractive acquisition target for incumbents. In a space that hasn’t changed much, buying Crabi might look easier than building a competing offer from scratch.

I’m a big fan of the Acquired podcast—and like them, a fan of Hamilton Helmer’s 7 Powers. So I’m adding a new section to my posts. Early-stage startups don’t have power yet, but they might. This is my attempt to look ahead and guess which power they could build. According to Helmer, the seven are: scale economies, network economies, counter-positioning, switching costs, branding, cornered resource, and process power.

Crabi haș strong counter-positioning vibes. Legacy insurance products are rigid, outdated, not digitally native — and widely disliked. Crabi offers the opposite: speed, flexibility, and a product designed around the customer.

Its entire model differs from incumbents. And even getting to the starting line isn’t easy — obtaining a license alone takesaround two years. That alone raises the barrier to entry. As IGNIA, one of Crabi’s investors, notes:

For incumbents to match Crabi’s model, they’d have to overhaul their distribution channels, redesign underwriting processes, and invest heavily in digital infrastructure — all while risking cannibalization of their core business. Crabi, by contrast, started from zero, allowing it to build around speed, flexibility, and efficiency without legacy friction.

Today my takeaway is about DTC. Like many companies in many industries, Crabi started with a dream of being DTC. And while it still sells directly, it had to diversify its distribution.

DTC is something many — myself included — want to work. But more often than not, it doesn’t.

You want the business to be about the product. But if that product doesn’t have the right distribution, it doesn’t matter how good it is or what it does. So distribution is still what makes or breaks a business.