Yesterday a $70 million dollar round of funding was announced for tech-enabled property insurance company Hippo. The company has been showing off its proactive approach to protecting its clients during this particularly bad fire season by contacting any of them that might have been threatened by the blazes and automatically filing claims for many of its customers affected. These are just a few examples of the many ways that the company is taking the customer first approach to property insurance. It also marks a departure from what has always been a bit of an adversarial relationship between insurer and insured. If Hippo is able to continue its skyrocketing growth (since the start of the year it has seen a 30% month over month growth in policy sales) it might force the entire industry to reexamine how it approaches the claims process.
Almost every article about Hippo’s funding included the fact that the nation’s largest homebuilders Lennar was one of the major investors. A homebuilder taking such a keen interest in a property insurance startup is an interesting development, especially since they decided to sell off their asset management division Rialto just a few weeks ago. They still have a large portfolio of multifamily communities and luxury condominiums so they might be looking to find an insurance product like Hippo’s that can add to their brand image rather than be seen as a commodity by their renters.
What wasn’t mentioned in most news of the event was that built world VC firm Fifth Wall was also an investor. Since Lennar is an LP in Fifth Wall it is likely that they had quite a bit to do with the homebuilder’s participation in the round. In January Roelof Opperman, principle at Fifth Wall wrote about their strategic partnership with Hippo. He mentioned his firms ability to connect Hippo with some of the largest real estate developers in the US, including Lennar, but admits that, “While partnerships and insurance agents are being used heavily in the early stages to grow Hippo’s customer base, Fifth Wall is deeply bullish on Hippo’s unique direct-to-consumer online sales strategy as a long-term customer acquisition channel.”
Roelof also talks a little about the unique nature of Hippo as a customer liaison and policy marketplace rather than a traditional underwriter. He wrote, “Hippo is a modern brand for the smart consumer, offering premiums up to 25% less than the competition. As part of its investment in smart home technology, Hippo provides a water leak sensor with every policy, giving homeowners the ability to detect leaks early and avoid expensive claims that would impact not only the homeowner, but the company’s bottom line. It’s small but meaningful tech innovations like these that have made Hippo unique in the marketplace, as well as its claims advocate concierge team that provides amazing customer care throughout all claims and support. Furthermore, partners with nearly 200 years of experience and $200 billion in assets underwrite all of Hippo’s policies. Strategically, this means Hippo doesn’t incur the risk from underwriting, however, shares in the upside when underwriting creates a profit.”
Much like many modern tech companies (Expedia, Airbnb, Uber, Handy, etc.) Hippo managers the user experience but outsources much of the hard assets needed to create its service. As Roelof said this is a good place to be because it limits risk while maximizing profit. As Hippo grows the insurance industry will likely learn what the travel, taxi and service industry are coming to understand all too well: the closer you are the to the person writing the checks, the better able you are to carve out a margin and build brand association.