Home insurance is a product that no one wants to buy — but must.
And the insurance companies? Well, they want to sell it, of course. But they hope you never use it (because that would mean paying out claims).
Yet things go wrong. Leaks spring in basements, wind shears shingles and roofs, sewer pipes burst.
In an interview with Karen Webster, Hippo CEO Assaf Wand made the case that online platforms can solve the pain points of getting claims paid, but also set up a steady oversight of home maintenance that keeps trouble spots to a minimum.
Through preventive measures, through a network of information and contracting professionals, Hippo can keep claims from having to be filed in the first place (or if they must be filed, keep them relatively small).
At a high level, said Wand, insurance means “you are buying the right to file a claim that is supposed to make you whole, if God forbid something happens…it’s a safety net, but over time the safety net becomes smaller and smaller.”
That shrinkage is due in part to the fact that as time goes on, people shift the contours of their homes, adding decks and swimming pools and other creature comforts. Wand said 87 percent of homeowners are “underinsured” when they don’t call their carriers to update their policies.
But now, he said, the stage is being set for a reimagining of what home insurance can — and should — be, regardless of whether the demand is spurred by sales, refinancing, first-time homebuyers or new construction.
This Time Is Different
In the wake of the pandemic, homeownership is different. First-time homebuyers are about 30 percent of the market (after the market, overall, was “dead” as the virus hit), and working from home is now a standard expectation.
But no matter where we put down roots, there are always risks — the type that grabbed headlines this year — fires in California, hail in Texas, tornadoes and hurricanes.
In addition, said Wand, most homes, and the appliances in them, were not designed for use 24/7.
“My fridge is not set to be open and closed 5,000 times a day,” he said. “Things break down.”
And so, he said, claims have been increasing in terms of frequency and severity.
Home insurance is mandatory, required by mortgage lenders — and all told, there usually are as many as 20 million customers in the U.S. housing market (out of 130 million households in the entire country) that are looking for new insurance.
Wand told Webster that the market opportunity for tech-driven home insurance — and a range of personalized, follow-up services during the life of the policy — is significant, and it moves beyond simply generating and tracking claims and getting them paid.
Hippo, he said, “wants to be a 1-800 number for everything in your home.”
Perhaps not surprisingly, Amazon is the benchmark here, not what State Farm might be doing. And the Amazon “expectation” — digital conduits, ease of use, fast responses — demands a digital transformation of the claims process.
“The main driver is people want a different experience from the service provider, period,” said Wand. “COVID-19 has sped up digital distribution by three to five years.”
The Hippo platform helps homeowners get insurance coverage and quotes, choose carriers, and then assigns concierges that walk homeowners through the claims process.
He described the company’s growth as less hockey stick than linear progression as Hippo expands its geographic coverage and also partners with purchase and title companies, and insurance partners, such as Neptune Flood.
But drilling down into what’s on offer — the scope of the safety net — “It’s a different coverage,” he maintained, “more electronics… focused on your home office and things like that. We reduced a lot of fees. We have significantly more comprehensive coverage. All of the stuff that you think you’ll cover, but you’re not covering,” such as service lines that connect municipal sewage operations to homes.
Additional Services (And Sensors)
And it is not just in the claims and the coverage where digitization can make a difference, he said, but in what happens after the policy is in place.
By and large, there is not much difference between AllState and State Farm — and both spend about a billion dollars in marketing every year to compete for customers.
But it is in the broader range of services that Big Data and Internet of Things (IoT) help shape a relationship that extends beyond monthly premiums. Hippo Home Care can help customers through virtual appointments and consultations, and in person visits if needed, choose contractors and maintain their homes.
That proactivity stands in direct contrast to the traditional insurance model where a customer onboards, pays their premium and crosses their proverbial fingers that they will not have to file a claim down the road.
Bringing In Data Via Devices
The company also provides IoT devices to help monitor water pressure and flow, smoke detectors and gas lines, shutting off leaks and other problems before they do damage and result in claims. There’s an ancillary benefit here, too, as not having to pay on claims that are never filed saves costs.
“Once you have a customer, they are with you for several years, especially if you take care of them, if you give them the IoT device and the tele-maintenance,” he said.
He noted that Big Data — the information that Hippo tracks and analyzes through aerial imagery and other methods — can help ensure that homeowners’ insurance is appropriate, that it has scaled to include home renovations. The pool that has been put in may need a policy upgrade, with coverage that protects against liability in case the neighbor comes over in the dead of night, intending to take a dip, and is injured. Or maybe the roof needs replacing, and the homeowner should consider tapping into the tele-maintenance center.
The company recently announced $350 million in funding. Looking ahead, Wand said, Hippo will “deepen” its presence inside the home, with an eye, perhaps, on appliance warranties and even payments.
On this latter point, he said, claims and repaid may push homeowners toward financial straits, so much so that prepaid credit cards may be of use.
“We want to be your home caregiver,” he said, adding that “we call it proactive insurance. It’s avoiding a claim from happening in the first place. We are doing everything to help you best take care of your home.”