(Rick McCathron, Chief Insurance Officer, Hippo. Source: Hippo.)
Earlier this week, Hippo the Palo Alto, Calif.-based, unicorn-status InsurTech homeowners insurance distributor, announced that it had raised $150 million in a Series E funding round, bringing its total capital raised to $359 million. Since it began selling policies in 2017, the company now does business in 29 states representing about 70 percent of the U.S. homeowners population. The company has expanded its product portfolio with insurance for landlords, now available in 15 states, and for new construction, currently available in 12 states. The company now reports total written premiums of $270 million, growing at 140 percent year over year. Like other startups, Hippo’s marketing has included language touting a transformation of its insurance product area, for example, saying its goal was a “significant redesign” of home insurance. In Hippo’s case, that proposition is validated not only by its digital customer experience and emphasis on transparency of coverage, but also by its focus on proactive interaction with customers to prevent losses in the first place. Insurance Innovation Reporter caught up with Rick McCathron, Hippo’s Chief Insurance Officer, to discuss Hippo’s status and plans in the wake of the new funding.
Insurance Innovation Reporter: What would you call out as the chief metrics of Hippo’s success so far?
Rick McCathron, Chief Insurance Officer, Hippo: From a consumer’s perspective, I would refer to our rapid top-line growth and our Net Promoter Score, which runs to the upper 70s—about 50 points better than industry average. Those two things certainly demonstrate consumer adoption not just brand but what we can actually do for them including beyond insurance. If someone has a claim, we’ll try to give them the best possibly experience—our true purpose is to help our customers avoid the claim entirely.
Looking more broadly, I think our business results demonstrate our ability to respond to the needs or requirements of customers, reinsurers and regulators. We’re pushing $270 million in written premium in just over three years, as well as having raised $359 million in capital.
IIR: How did the latest funding round came about, and what will it mean for Hippo strategically?
RMcC: We started this fundraising around four months ago. It was difficult do to during time of COVID-19—not with our existing partners, but we did bring in new investors. The primary objective of the round was to finance our acquisition of Spinnaker and to enable further geographic growth. We’re in 29 states now—representing about 70 percent of the U.S. population—and our goal over the next 12 months is to be in states that represent 95 percent of the U.S. population.
Our plan has been and continues to be the modernization of the entire value proposition of homeowners insurance, while meeting customer needs—and producing a positive underwriting result. We’re enjoying the benefit of the hard work we did early on to modernize not only the user experience but the also the product.
IIR: What would you identify as the business principles behind Hippo’s success so far?
RMcC: I think it’s pretty straightforward: we’re in a constant mission to make sure our customers have coverage that needs their needs as modern consumers. And more than simply copying what others have done, we have added new protections and interesting services that didn’t exist. For example, Hippo Homecare provides proactive home checkups that are simultaneously a service to the customer and a means of working to reduce claims.
IIR: How would you describe Hippo’s technology philosophy? What’s different about it, and how does that serve as a foundation for the company’s success?
RMcC: We believe that to really control your destiny you must build your technology in house. We don’t believe you can reach your ultimate ambitions without completely controlling your full stack. In this day and age that’s becoming even more important. Because of the general uncertainty of the times, you need to have a nimble technology stack to adjust in an ever-changing world.
IIR: How important is smart home technology to Hippo’s strategy, and what kind of insurer/policyholder relationship does that imply?
RMcC: The use of IoT devices allows us to proactively identify challenges in people’s homes and address them throughout the life of the policy—not just at the point of sale or when there’s a claim. Hippo’s vision of is one of holistic home protection: if you’re a homeowner and you have anything to solve, you call Hippo and we have a solution for you.
IIR: Would you say that with this approach Hippo aspires to take homeowners insurance beyond the traditional indemnity proposition of insurance?
RMcC: Yes, but by adding what has been used in the commercial arena for many years, which is loss control. We’re essentially providing loss control. It’s the same thing because, at the end of the day, if the customer has a claim, they have a deductible to pay and they are displaced or otherwise inconvenienced. If we can help them prevent the claim, it saves their deductible and saves their inconvenience—while also saving our loss ratio.
IIR: How should we look at Hippo as an insurance entity, in light of the new funding? In a conversation in October 2019, you described Hippo as a bit of a hybrid, technically an MGA but with full stack components of a carrier—with the exception of bearing significant underwriting risk. In its announcement about the Spinnaker acquisition, Hippo said that it would continue to operate as an MGA. Is there a plan to change that at some point?
RMcC: We are absolutely going to continue to embrace the MGA model, which we think provides flexibility and optionality to us and our customers. Having our own balance sheet via the Spinnaker acquisition allows us to grow, while putting risks on other carriers’ balance sheets that have different risk appetites. Spinnaker lets us infuse capital to grow the business, but with our status as an MGA, we have the ability to grow into new products and geographies with partners who have balance sheets better suited to certain risks.