Hippo, a startup taking aim at America’s biggest home insurers, is going public through a SPAC.
- The startup filed its S-4 document with the SEC on Thursday and outlined its growth strategy.
- Insider spoke with Hippo’s cofounder and CEO, Assaf Wand, ahead of the S-4 filing.
- See more stories on Insider’s business page.
Home-insurance startup Hippo announced its intention to go public in early March via a deal with special-purpose acquisition company Reinvent Technologies.
The blank-check company is backed by two of the biggest names in tech: LinkedIn cofounder Reid Hoffman and Zynga founder Mark Pincus.
The deal values Hippo at $5 billion and is expected to generate more than $1.2 billion in cash for the startup, making it one of the largest insurtechs in the US.
Insurtech is also a space that has become increasingly crowded and more high-profile in recent years. Several insurance startups have gone public, including MetroMile and Clover (both of which have also debuted via a SPAC this year) and Lemonade and Root (which took the more traditional IPO rout to the public markets in 2020).
However, those companies’ stock prices haven’t soared upon their arrival to the public market, with MetroMile, Clover, and Root all now trading at prices lower than their initial market debuts.
While Assaf Wand, Hippo’s cofounder and CEO, told Insider that “of course” he’ll look at the stock price when the insurtech goes public, there’s only so much he can control.
“If the market’s going to go down or up by 40%, it doesn’t mean that the company is better or worse. I can only focus on delivering on the numbers that we presented in the S-4,” Wand said.
On Thursday, Hippo got one step closer to going public with the filing of that S-4 form with the Securities and Exchange Commission, a document that lays out a company’s plans upon a merger or acquisition. The insurtech will trade under the ticker HIPO.
Here are the five key takeaways in Hippo’s filing that stand out as the insurtech prepares to go public.
Hippo sees home insurance underwriting as a continuous process
In a CEO letter included in the filing, Wand highlighted that he views Hippo’s aim as modernizing, not disrupting, the home-insurance industry — which means upgrading insurance technology across every phase of the underwriting and claims cycle.
“It was probably one of the hardest things pitching VCs at the beginning. VCs are so wired on finding a silver bullet,” Wand told Insider.
“I need to do my call center better. I need to do my claims better. I need to do my policy management system better and my data better and my user interface. It’s not even doing all of them better. It’s making sure that they’re all speaking coherently with each other and valuing interconnectivity,” he added.
To that end, Hippo’s business model is built on using as much data as possible about the life and health of a home, a key part of the “continuous underwriting” process. A flexible, agile offering means customers are better-protected and can avoid future claims.
That means constant updates, such as knowing if a homeowner has installed a pool (so they can add more liability insurance) or a new roof (so they can pay less in premiums).
Wand said Hippo is taking a proactive approach to regulation as it expands
In its S-4, Hippo detailed the augmented-intelligence capabilities built on data that help the insurtech to determine pricing and risk management for homeowners.
Hippo and other insurtechs’ approach to leveraging big data in underwriting and pricing has raised questions around whether the use of AI tech in insurance requires additional regulation. Wand said Hippo’s view has always been to embrace, not avoid, regulations — something he also highlighted in his CEO letter.
“Our data is third party, verifiable data, not data that we’re collecting. I need to be consistent, non-discriminatory, available, all of these things,” Wand told Insider.
It’s an approach that grew out of the earliest days of Hippo, Wand said, when the company saw other startups like Uber and Airbnb take a more combative approach to regulators in local markets.
“I think that we had the realization early on that at the end of the day, the regulator’s job is to take care of its constituencies and the people that live in a certain state,” Wand said.
“They’re not there to be annoying. They have a role. And if they’re doing the role, we think it will actually quite align,” he added.
Hippo’s betting big on the cloud and connected smart homes
In 2019, Hippo acquired Sheltr, a home-maintenance company that allowed the startup to build out “Hippo Home Care,” a virtual-concierge service that lets customers chat with vetted contractors.
The insurtech also offers a line of smart-home devices that customers can use in their homes to monitor key risks and check from their phones, like water, fire, and theft detectors. Hippo gives users discounts if they use the devices in their homes.
“We take a proactive approach to preventing claims through investments in smart-home technology and home services, and we will continue to launch and test new preventive approaches,” the S-4 filing said.
While Wand said that Hippo users have the option to not install the devices in their homes, he said that 75% of customers have opted in to using them — and that they’re self-monitoring, meaning the data isn’t automatically sent to Hippo but instead to the customer’s Hippo app.
The startup is banking on a public market debut to increase brand awareness
According to its S-4, new customers cost Hippo $350 to acquire. Hippo’s annual customer retention rate of 87%, meanwhile — as detailed in a separate presentation deck for investors — is higher than the industry average of 83%, according to market data company Statista.
Wand expects customer acquisition costs to decline as Hippo becomes a more visible brand, a product both of being in the market longer — Hippo was founded in 2015, while the largest five home insurers in the country were all founded in the 1930s or before — and becoming a publicly-traded company.
“There is a massive benefit that the longer you are in the market and the more your brand is known, your conversion improves significantly. Hence your customer acquisition cost goes down as well,” Wand said.
“The longer we are in the market, the more people actually purchase us. The model is word of mouth. Being a public company listed on the New York Stock Exchange gives a lot of credibility for a lot of customers who don’t know us. That was one of the reasons why we want to be a public company,” he added.
APIs underpin Hippo’s approach to distributing its insurance products
There’s no shortage of startups looking to leverage APIs, or application programming interfaces, in the fintech and open-banking space. APIs serve as the back-end piping allowing apps to communicate with each other. When it comes to fintechs, APIs are a key technology that lets customers connect bank accounts to payment apps, for example.
But a key part of Hippo’s business model as detailed in the S-4 filing involves bringing front-end, API tech into the insurance world by connecting Hippo customers to carrier insurance partners.
Hippo promises to “personalize coverage for a specific customer’s needs proactively and automatically,” the filing said. “Through adaptable APIs, we can deploy this capability across an ever-increasing number of channels, partners, and geographies quickly.”
Wand, meanwhile, said that the last year has focused the discussion in insurance around the “use of data, different customer experience.”
“During COVID, it almost sped forward by five years. And I think customer expectation, digitization, API-ization, I can throw you every other word with ‘ization’ at the end. They’re all true and sped up significantly during COVID,” he continued.
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