The Future of Insurance - Rick McCathron, President & CEO, Hippo (Live from ITI)

The Future of Insurance

Richard McCathron is CEO and President of Hippo Insurance and has served as a member of the Board of Directors since February 2017. Prior to Hippo, Rick held senior executive positions at various insurance companies including First Connect Insurance, Superior Access Insurance and Mercury Insurance Group.

Rick is both a Chartered Property & Casualty Underwriter (CPCU) and a Certified Insurance Counselor (CIC) and sits on the board of directors of Spinnaker Insurance Company and First Connect Insurance. He is an advisor for several other InsurTech companies and holds a BS in Finance from Oregon State University.

Highlights from the Show

• Rick's insurance career spans a lot of areas, including different carrier functions, distribution and more, and has been at Hippo for 8 years, including his current role as President & CEO
• 2023 reminded Rick of the Northridge Earthquake and the impact that had on the industry
• Hail was a major driver of loss in 2023, which coincided with a trend to buy net quota share insurance (QS with a cap for CAT losses) and Excess of Loss (XOL) coverage above that
• There weren't big events that would trigger XOL coverage, but the small losses exhausted the QS coverage, so many carriers found their balance sheets impacted
• There's a fundamental shift in insurance around our financials but also consumer behaviors
• The pricing pendulum swings wildly because cost drivers move fast, but rate filings and approvals move slowly
• Tech solutions at carriers are helping to narrow the time gap to help with this, especially tech-driven carriers like Hippo
• Hippo also mixes its approach to the market between their own product, their fronting business that brings in revenue from other players and lines of business, and their distribution arm, First Connect, that brings commission revenue from selling other carrier's products
• Growth in this context is imperative to be about profitable growth, and Hippo has focused on this now, whereas there was an initial push to grow, generally
• That means having more specific offerings to specific buyers, like those who would adopt IoT to protect their property
• Embedding insurance into new home construction, but using its agency to ensure they don't end up with aggregation issues when working with a builder to insure a new development
• Rick watches reinsurance profitability as a sign of where primary insurers will end up since there's a disconnect in when reinsurers move prices and when primary insurers are able to price that into their filings
• The fundamentals of insurance aren't changing, but the rate of speed that you have to adjust how you write and the customer demands and expectations continue to change constantly
• Rick shared his view on AI, where it is real today, but the AI being used now won't be anything like what we will use in 2 years given how fast it's evolving
• The traditional coverages the industry is selling are increasingly disconnected from what the exposures they insure are and what consumers actually need for protection (and the affordability of the coverage they can get)
• People want genuine customization in all aspects of their lives, and to know that what they're getting is genuinely built for their needs
• Embedded insurance – we have to meet customers where they are, like embedding pet insurance in the adoption process or the purchase process for homes or cars
• Remembering the fundamentals, but that there's a customer at the other end of this, and we have to serve them if we want to ultimately succeed
• We talked about being proactive on claims
• Using Parametric coverage is one way to do that since coverage can be delivered instantaneously (or very quickly)
• Reaching out to customers when we think there's likely to be a claim (like when there's 2" hail in their area), which historically people think leads to buying claims, but Hippo has seen that the claims would come in anyway, but they'll come later and with some form of representation (attorney, public adjuster), so you end up paying more for the claim in the end than if you had handled it correctly from the moment the loss occurred.

This episode is brought to you by The Future of Insurance book series (future-of-insurance.com) from Bryan Falchuk.

Follow the podcast at future-of-insurance.com/podcast for more details and other episodes.

Music courtesy of Hyperbeat Music, available to stream or download on Spotify, Apple Music, and Amazon Music and more.