Tim Worboys shares the strategies behind the success of a leading US insurtech company.
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:
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:
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.
Key points include:
- Consistent growth
- High average premiums
- Simpler supply chain and less complexity of claims vs Auto
Read the full article, Hippo – getting a lot of things right – sustainable profitability the final challenge, on LinkedIn.