In the past few years, the finance industry has seen an explosion of startups that use emerging technologies to take on established players in payments, lending and savings.
To Chicago serial entrepreneur Sean Harper, insurance is the next frontier for fintech innovation.
“Insurance is really far behind other areas of financial services, in terms of technological sophistication,” said Harper. “In lending, Capital One can send you a mailer with a $50,000 credit line that you can click and be underwritten in seconds. Square can send you a dongle that you plug into an iPhone, and you’re able to process financial transactions in seconds.”
By contrast, 94 percent of homeowners insurance policies are still sold through local insurance offices.
If an insurance company does offer a digital application, said Harper, it's usually just an online version of the paper form you would fill out at the insurance agent’s office.
Harper’s new startup, Kin Insurance, wants to make the application process simpler.
“Kin was started with the idea of making the process of buying homeowners insurance as simple as one click or a checked box,” said Harper. “Could we actually give that to the customer?”
The answer to that question, it turns out, is yes. Because so much information about people and properties is available online, said Harper, Kin can essentially fill out the entire insurance application for the customer.
In addition to improving the user experience, this approach gives Kin thousands of variables upon which to base its marketing, underwriting and pricing decisions.
“It’s really important to have a model that handles all three of those, and it’s not something that legacy insurance carriers do,” said Harper. “That leads to a lot of waste. For example, it’s very common for a legacy insurance company to send marketing materials to a customer even if they know they aren’t price competitive for that customer — or even if they know that they aren’t going to underwrite that customer.”
Kin’s co-founders bring a lot of experience to the table. Harper’s last company, FeeFighters, was sold to Groupon in 2012 and provided the foundation for Groupon Payments. CTO Lucas Ward was the co-founder and CTO of Rippleshot, which uses machine learning to help financial institutions detect data breaches. COO Jason Heidkamp has more than 20 years of experience from the insurance industry.
“For us, the technology has been the easy part,” said Harper. “But in order to get into the insurance business, you have to figure out how to get an insurance license and insurance capital backing the risk. Those business relationships are something you have to spend a lot of time navigating if you’re starting out new as a startup going after the insurance space.”
Although Kin is headquartered in Chicago, its insurance products are currently only available in Florida. The company’s expansion plans include a number of coastal states frequently struck by storms and hurricanes.
“When you have a big data advantage, like we do, a lot of the time the best places to apply that data advantage are with riskier customers,” said Harper. “A lot of our customers are risky because they are in areas where storms hit a lot.”
The U.S. homeowners insurance industry has yearly revenues of around $100 billion, Harper said. Given his company’s competitive advantages in marketing, technology and overhead costs, his goal is to capture a substantial share of that market.
“I haven’t seen an opportunity this big before, where you have an intersection of really complacent competitors and a huge industry that’s super-profitable,” said Harper. “All of the fintech patterns apply to insurance, but even more so.”
Although a number of startups, including Lemonade, Jetty and Quilt, are taking on the renter’s insurance market, Harper said home insurance has seen a lot less activity. Kin only went live a few weeks ago, and Hippo, a Silicon Valley-based Kin competitor, has yet to launch its first product. That said, the sheer size of the home insurance market leaves plenty of room for multiple companies to operate comfortably.
Kin currently has 8 employees, but Harper expects that number to grow to 15 by the end of the year. The company is backed by Chicago Ventures, 500 Startups and Commerce Ventures, as well as a number of angel investors.
Image via Shutterstock.
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