Technology
Hippo President: Non-Insurers Like Amazon Pushing Into Insurance Space

• Renee Kiriluk-Hill
• February 2021
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Trusted non-insurers with significant brand appeal and deep tech pockets are encroaching on the insurance space and will likely ratchet up their efforts in the coming years, according to Rick McCathron, president of insurtech Hippo.

Automobile manufacturers and companies like Amazon, for example, will “absolutely” offer insurance to their sprawling customer bases as a bolt-on product, posing a potentially bigger concern for incumbent insurers than insurtechs, McCathron added. “The die is cast. This is something that makes sense.”

Last year Amazon joined Berkshire Hathaway and JPMorgan Chase to create a health insurance company designed to make coverage easy to use and understand. But last month the companies announced they closed down the venture. However Amazon is partnering with Acko General Insurance Ltd. to offer auto and motorbike insurance in India.

Some auto manufacturers are partnering with insurers, and others have taken it a step further. For example, General Motors is launching a digital insurance agency through its longtime telematics subsidiary OnStar.

Manufacturers also could simplify auto leasing while deepening consumer ties by rolling physical damage and liability coverage into monthly payments, said McCathron, whose insurtech started as a managing general agency and more recently has added a property/casualty carrier.

McCathron said other connected businesses with large customer bases also could disrupt the insurance industry. “It is a massive market.”

During a recent earnings call, Tesla CEO Elon Musk said his company could use its technology to become the country's largest insurer, valuing insurance at potentially 30% to 40% of the car business. Tesla insurance would cost less and be better, Musk claimed, noting an internal applications team would simply create a software application that connects to the vehicle, assesses the data and calculates risk.

McCathron said he sees other outside players moving into insurance, in part related to rising natural catastrophe losses. “More creative capital structures” will arise to support the exposure, he said. “Most legacy insurers take all of the first-dollar risk” and reinsure excess of loss. New capital providers, attracted by higher premiums and diversification, could take on that primary exposure, McCathron said.

Insurance is known as an industry that evolved slowly. No more, said McCathron, although he acknowledged that large incumbent carriers may struggle with maximizing current portfolios while onboarding customers with new technology.

Insurtechs are pushing change from policy binding times and risk mitigation—for instance, Hippo homeowners policies, where allowed, come with a smart home monitoring system—to claims processing. They will continue to evolve and impact the industry, said McCathron.

“The pendulum has swung to a more modern, digitized experience” during the COVID-19 pandemic, he explained. “You used to run into your agent at the grocery store or a ballgame. That's not happening now. Relationships are forming and developing in a digital way.

“The ability to quickly adapt from a tech perspective does make a difference. Incumbent insurance companies may take 12 to 18 months for something that could take an insurtech 12 to 18 days,” he said. “Insurtechs by structure are nimble.” Incumbent insurers are addressing the disconnect by acquiring or partnering with insurtech companies, McCathron said.

Mitsui Sumitomo Insurance Co. Ltd. is investing $350 million in Hippo Enterprises to fund expansion, according to a November statement by Hippo. The capital will help Hippo's MGA operation reach 95% of U.S. homeowners over the next year, in addition to increasing capital for subsidiary Spinnaker Insurance Co., Hippo said.