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Growing Up

Developing insurtech P/C writers show market traction.
  • October 2019
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The nascent insurtech movement is building a presence in the U.S. property/casualty carrier space, as six insurtech carriers reported $146.8 million in direct written premium for first-quarter 2019, up from $37.6 million for the same period a year earlier. Losses also rose at approximately the same rate.

Those figures are from quarterly National Association of Insurance Commissioners statements received by AM Best. The carriers represent a range of coverages, including automobile, homeowners, commercial and flood.

In the first quarter, five of the six insurtech carriers posted a net loss. TypTap was an outlier, with $373,000 in net income. Sonnet Insurance, a seventh insurtech, had only annual, rather than quarterly, results.


Metromile Insurance Co.

Metromile will begin incorporating driving behavior in rates it charges following a $1.7 million net loss in the first quarter, compared with a $6,100 net income in the prior-year period, spokesman Rick Chen said. So far, customers pay variable base and per-mile fees based on factors such as the age of the driver and where the vehicle is housed. Driving behavior was collected but was not built into individual rates. However, a test trial underway adds driving behavior to rates charged in Illinois, initially with discounts for better drivers.

The pay-per-mile insurer is licensed in the District of Columbia and every state except Tennessee, but wrote personal auto coverage in eight states: Arizona, California, Illinois, New Jersey, Oregon, Pennsylvania, Virginia and Washington.

Direct premiums written increased 39.4% to $26.7 million in the first quarter. California accounted for the majority of those premiums, with $16 million. The carrier wrote $2.7 million of DPW in its second-largest state, New Jersey, according to BestLink.


Root Insurance Co.

Direct premiums written at Ohio-based auto carrier Root Insurance increased 11-fold to $88.7 million in the first quarter. The net loss deepened to $27.9 million from a $7.8 million net loss in the first quarter of 2018. Direct losses paid rose to $38.3 million from $1.8 million in the prior-year period. Root decides whether to offer a quote only after a driver downloads the company app and uses it long enough to attain a driving score. Co-founder and CEO Alex Timm said that score helps determine individual premiums.

Root was licensed to write coverage in 37 states, although it operated in 27 in July. It wrote the most direct premium in the first quarter in Texas, $22 million, followed by Kentucky, $12.1 million; Ohio, $5.5 million; Arizona, $5.4 million; and Missouri, $4.9 million. Root's annual combined ratio 186.3 totaled in 2018, according to BestLink.


HiRoad Assurance Co.

State Farm launched direct auto subsidiary HiRoad late in 2017 in Rhode Island, a state where the nation's largest personal auto and homeowners carrier doesn't have any agencies. It remains focused on that one state, spokeswoman Anna Bryant said.

HiRoad Assurance Co. views direct insurance as a lifestyle choice, according to Bryant. Customer want to choose a product that fits their lifestyle. “At HiRoad, our customers are interested in managing many aspects of their life digitally, including their auto insurance.”

HiRoad customers pay monthly premiums based on miles driven and driving behavior, all of which is measured from a smartphone app. Direct premiums written jumped to $5.9 million in the first quarter from $908,700 in the prior-year period and direct losses paid rose to $2.6 million from $22,000. The net loss widened to $5 million against a $1.1 million net loss in the first quarter of 2018, according to BestLink.

HiRoad's loss and loss-adjusted-expense ratio accounted for 171.9 points of a 253.8 combined ratio last year, according to AM Best data.


Lemonade Insurance Co.

Lemonade began as a homeowners and renters carrier in New York more than two years ago and last year was the 48th-largest multiperil homeowners writer in the state, with $7.3 million of direct premiums written, according to BestLink.

In the United States, direct premiums earned rose to $19.3 million from $7.5 million while direct losses paid tripled to $6.5 million from $2.15 million in the first quarter of 2018.

A $2.5 million net loss in the first quarter compared with a $1.4 million net loss in the prior-year period.

The company's annual combined ratio improved substantially last year, to 102.4 from 271.8 in 2017.

Lemonade takes a flat fee for its operations and gives remaining underwriting profit to nonprofit organizations.


Next Insurance

Next Insurance has concentrated on building its managing general agent business but also started its own small-business insurtech carrier last year. The insurer is licensed to write in 17 states but reported direct premiums written in just one, Delaware, and that was for $936 in the first quarter. The insurer posted a $106 net loss, compared with a $23,783 net income.

The company plans to gradually shift new premium to its own carrier—starting by year-end—while renewing existing MGA accounts with fronting carrier State National, said Pogreb. As an MGA, Next started in general liability and has since added commercial auto and professional liability classes.


TypTap Insurance Co.

Net income at TypTap declined to $373,000 in the first quarter from $673,000 in the prior-year period as direct premiums written nearly rose to $6.2 million, all in Florida, from $2.2 million, according to BestLink.

“We tip-toed out into flood in other states,” said Paresh Patel, Chairman and CEO of HCI Group, the parent of TypTap, a digital homeowners insurer and private flood insurer. TypTap currently writes non-Florida flood through sister subsidiary Homeowners Choice. Those states include South Carolina, California and Texas.

Direct losses paid declined in the first quarter to $335,440 from $623,481 in the prior-year period. And last year TypTap's annual combined ratio had already improved to 57.5, compared with 103.5 in the prior year, according to BestLink.


Sonnet Insurance Co.

Sonnet Insurance, a direct digital subsidiary of Canadian mutual Economical Insurance, began operations in 2016. Its net loss in 2018 narrowed to C$3.8 million (US$2.89 million) from a C$5.2 million net loss in the prior-year period, according to BestLink. Annual direct premiums written climbed 78.2% to C$127.6 million. Sonnet writes personal auto and personal and commercial property lines in most provinces. The carrier's underwriting ratio improved slightly to 112.8 last year, compared with 113.2 in 2017.

Best's Review will cover insurtech financial news as statements become available.

—Renée Kiriluk-Hill

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