Manchester-based insurance technology company Fruga has raised £1 million to expand a service that allows customers to build credits towards their insurance renewals through everyday spending.
The investment comes from NPIF II – PXN Equity Finance, managed by PXN Ventures as part of the Northern Powerhouse Investment Fund II, and venture capital company Haatch. Fruga will use the capital to develop its technology, grow its team and extend relationships with insurers and other distribution partners.
Founded by Ross McCarthy, the business is addressing a familiar problem in general insurance: customers often hear little from their provider after buying a policy, only to face another price comparison when renewal approaches. Insurers can spend heavily acquiring policyholders and then compete to retain them against a crowded market of alternative quotations.
Fruga’s approach gives insurers an ongoing reason to engage customers. Policyholders connect a bank account or payment card to their insurance policy using open-banking technology. When they spend with participating supermarkets, travel companies and high-street retailers, they accumulate insurance credits that can be applied to the cost of renewal.
The company says the credits can reduce annual renewal costs by more than £150 in some cases. The amount depends on customers’ spending, participating brands and the arrangements available through their insurance provider.
Money Expert is already using Fruga’s technology, allowing its customers to earn credits through participating merchants. Insurers can also integrate the service under their own branding, keeping the rewards experience within an existing customer relationship rather than directing policyholders to a separate consumer platform.
Credits accumulated throughout a policy year give customers a financial incentive to remain with their existing provider, while regular rewards activity offers insurers more opportunities to demonstrate value between the original sale and the next quotation.
McCarthy has previously argued that the industry’s dependence on price competition has damaged customer relationships. In public comments explaining Fruga’s approach, he said: “The insurance industry spent 20 years trying to solve retention with price – and handed that battle to comparison sites.”
The technology also creates an opportunity to use permissioned transaction information to identify when customers may need different types of cover. McCarthy has suggested that spending associated with a new pet, for example, could help an insurer recognise demand for pet insurance before the customer begins searching for a policy elsewhere.
That capability could support additional product sales alongside improved retention. It also makes consent, data protection and security important considerations, particularly where transaction information is used to inform personalised offers. Insurers will need to establish how the information is processed and ensure that customers understand the purposes for which it is being used.
The commercial model will ultimately depend on whether rewards translate into higher renewal rates, more frequent engagement and additional insurance sales. A meaningful credit balance may encourage customers to stay, although the competitiveness of the underlying premium and the quality of cover will remain important factors in purchasing decisions.
Fruga has financed its development without external institutional investment until this round. The company plans to expand its workforce, with key appointments expected during the first quarter of 2027, and says it has developed a pipeline of household insurers and managing general agents interested in adopting the technology.
The investors see potential in combining customer rewards with the insurance industry’s need for more direct relationships with policyholders. Joe Ball, senior investment associate at PXN Ventures, identified the commercial promise of the proposition, while Haatch associate Marwa Ebrahim highlighted its potential to improve retention and provide insurers with better customer insight.
Money Expert managing director Liz Hunter also welcomed the partnership’s ability to return value to customers through everyday purchases. Its existing use of the platform provides Fruga with a commercial application as the business seeks further insurance partners.
The Northern Powerhouse Investment Fund II is a £660 million programme operated by the British Business Bank, providing debt and equity finance to smaller businesses across the North of England.
The new investment will support Fruga’s efforts to expand beyond its initial partnerships. Its challenge will be demonstrating that credits accumulated through everyday spending can deliver measurable improvements in customer loyalty while giving insurers a commercially sustainable way to maintain relationships throughout the policy year.
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