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Growth during Decline: a case study


Growth during Decline: a case study


Tim Worboys explains how a leading insurtech company managed to be successful amid declining global economic conditions. 

Hippo, a leading US insurtech company, announced yesterday that they had raised $150M in a Series E round, valuing the business at $1.5B post fundraising.

As the global economic conditions continue to prove challenging due to the ongoing coronavirus pandemic we are beginning to see a split in the market – some insurtechs are going public or successfully raising significant amounts of funding and others like Metromile are either having to lay off and furlough significant numbers of staff or closing altogether like Coverly. So why are Hippo in the former group and continuing to be so successful? In my view there are three key reasons:

  1.     Hippo chose a great “niche”

All insurtechs entering a product market have to focus on an initial country and product combination (a niche). This niche is critical as it defines the parameters within which they operate and hence significantly influences their chances of success. Hippo chose to enter the US homeowners market – this market has a number of key advantages that help increase their chances of being successful:

  1.     Large size –at ~$100B there is a lot of opportunity for new entrants. Even at a retention rate of 85% there is $15B of new business premiums to compete for in a given year. Hippo at ~$270M currently will only be looking for 1-2% of that per year so can focus on the type of business/customer/states that they wish to target and have a lower chance of challenges such as adverse selection

  2.     Consistent growth – currently 2-3% per year; these growth rates seem relatively low but the compounding effect is powerful – the market has roughly doubled in size since 2003. Additionally 2-3% of a large market is significant as it adds $2-3B more premium to compete for annually”


Key points include:

  • Micro markets due to the state based nature
  • High retention rates
  • Ability to leverage technology vs Auto


Read the full article, Hippo – getting a lot of things right – sustainable profitability the final challenge, on LinkedIn.