➤ Hippo Insurance leverages online data to produce home insurance quotes for potential customers.
➤ The company has grown with an eye toward widening its portfolio of exposure.
Hippo Insurance's latest round of funding pushed the home insurance startup past the unofficial "unicorn" milestone of $1 billion in valuation just two years after insurance technology parent Hippo Analytics Inc. went into the business of covering homes. The insurer, which writes policies as a managing general agent, says it aggregates geographic data and public records to issue home insurance quotes much faster than normal. Hippo Insurance then offers risk mitigation technology to policyholders to detect leaks or smoke and to prevent break-ins to try avoid claims. Hippo Insurance, which began in California, operates in 19 states and expects to be in business in all 50 in 2020. Holding insurance risk for Hippo are Spinnaker Insurance Co. and Topa Insurance Co.
Chief Insurance Officer Richard McCathron spoke with S&P Global Market Intelligence about its growth trajectory, how the company has gotten its name out to homebuyers and a surprise in the profile of its customer base.
The following is an edited transcript of the conversation.
S&P Global Market Intelligence: Did Hippo have a growth strategy to get to this point?
Richard McCathron, chief insurance officer, |
Richard McCathron:
Is there a certain profile of customer attracted to what you offer?
Our hypothesis was that Hippo would resonate more towards the younger homebuyer, more towards millennials, because of the online presence and the use of technology. What we have learned is that simplicity transcends generations. We were equally interesting to Gen Xers and Baby Boomers. Our average customer nears that of the general population. We have customers ranging from teenagers all the way through people in their 90s.
Besides the regulatory challenges of expanding into new states, what has been your biggest obstacles to growth?
We are not a full-stack carrier. We are an MGA [managing general agent], so we do everything that a full-stack carrier does except we do not bear any of the underwriting risk. We have to have insurance partners that will bear that underwriting risk, and with our growth trajectory, it is always an exercise to make sure we have enough reinsurance capacity to continually fuel our growth.
How do you get your name in front of homebuyers since that business is often done through prior relationships in the homebuying process?
Our direct-to-consumer business uses search engines, paid search, AdWords, all of those kinds of things. We also partner with other insurance companies that may have underwriting limitations in specific geographies. They want to monetize the 75% of the customers that they do not close. So we partner with other insurance companies that actually sell policies. We also partner with some large independent insurance agencies with whom customers have trusted relationships.
Then we have what we call our B-to-B-to-C channel, which is where we partner with different types of companies such as homebuilders, loan originators and real estate brokers. We have various aspects to simplify the home purchase transaction because homeowners insurance is a requirement in that transaction.
We also have partnerships that are not necessarily involved in buying homes but have a significant customer bases that want to add value for those customers. So utility and entertainment companies, like Comcast, which is one of the investors. They have their Xfinity Home package, their smart home package, which resonates very, very well with our connected home and [Internet of things] strategy.
Valuations for startup insurtech companies have been expanding to the point that some consider inflated. What makes Hippo worth its $1 billion estimated worth?
We think that our use of all of the different components to truly improve the homeowners insurance value chain. We are involved in how a customer gets a quote and the payment of claims. We also provide proactive solutions and have a unique outlook and approach to risk, including using data to help price risk and incorporating risk-mitigation devices. We think there's a lot of substance behind what we're doing. It's not just a slick user experience.
So in our context, we think that the investment community has recognized the substance as building a long-term, viable, sustainable business, thus the valuation we have received.

