There’s been a rash of activity and a big influx of new capital into insurtech. Insurance almost feels like it was the last holdout to be targeted by fintech firms. That’s because it’s a really big problem to solve.
Today’s guest, Assaf Wand is the founder and CEO of Hippo Insurance. Hippo isn’t Assaf’s first startup and he doesn’t shy away from big problems. To hear him tell it, Assaf wanted to be in the insurance business since he was a little kid. But startup technology costs were always too prohibitive, the lack of historical consumer data prevented him from competing, and customers just weren’t ready to switch.
That’s all different now as Hippo is attempting to change the way home insurance is sold (spoiler: the buyers aren’t just millennials). Hippo’s Assaf Wand is my guest today on the Tearsheet Podcast.
The following excerpts were edited for clarity.
You’ve had previous success as an entrepreneur. Why now target the insurance industry?
I’ve wanted to be in insurance since I was four years old. My father is in the industry and as a McKinsey consultant, I studied big problems. It’s takes just as much energy to attack a small problem as it does a large one. But I didn’t get into the industry because startup costs were prohibitively high, the lack of historical data a startup would have would make it hard to compete, and consumers weren’t ready to switch.
When I sold my previous company about three and a half years ago, I revisited insurance and a lot had changed.
Why address P&C insurance specifically?
When I start a company, there’s generally one data point that stands out for me. For P&C, the average agent is 60 years old and there are less than half the agents there were 10 years ago. We can see this in many industries, and when you double click on it, you see that 85 percent of newcomers to the industry leave within three years. Millennials are still buying houses.
So, our hypothesis is that the simpler lines are bound to go direct. Geico and Progressive increases its marketing spend every year and while everyone chases them, they’re the only companies getting market share. So, at Hippo, we started out building a company that, like Geico and Progressive, sells home insurance direct to consumer.
Who are Hippo’s customers?
Home insurance is a $100 billion market, growing at like four to five percent a year. I’m not saying that tomorrow morning, 70 percent is going to go direct and that we’re going to kill Allstate and State Farm. What I am saying is that there’s a significant growing part of the population that continues to feel more comfortable with digital solutions and goes online to purchase financial products. You can build a really, really big company just on a subset of this population.
The second thing we found was that we thought our customers would be new home buyers and millennials. What we actually see is that Hippo’s customer demographic is actually the U.S. demographic. Take a map of the U.S. and we have the same distribution of people. Eighty percent of our policy holders are actually home switchers, not first time buyers.
What’s Hippo’s acquisition strategy?
We have three main channels. The first is direct. It’s Google, Facebook, lead generation. This works really well for us. It’s high intention activity. Zack is not going online at night, through the full funnel for home insurance, just because it’s cool.
The second channel is via other insurance companies selling Hippo. Why would Allstate sell Hippo? That’s because there aren’t carriers that cover all 50 states — there are always gaps. There are also gaps in underwriting. And as carriers reevaluate risk on an ongoing basis, they pull out of markets. So, you’re left with agents that sell different products and need to supplement.
The last channel we get customers is via B2B2C. In context, you never really buy home insurance — you buy a home. So, when you buy a home, you get a mortgage and need a proof of insurance. So, we work with everyone who works in this industry, like inspectors, title companies, and home builders. Out of context, we have a big partnership with Comcast for IoT devices — we monitor your home on an ongoing basis.