E31: A Conversation with Mike Gulla, Underwriting Leader at Hippo

What’s it like to be the first insurance professional hired by a tech company looking to create an ambitious tech solution for insurance? In this episode, I spoke with Mke Gulla of Hippo. Mike and I discussed what it was, what he dynamic is currently like and why it makes such a big difference. If you have a tech background and are looking to make a splash in insurance, you must listen to this episode. If you are an insurance exec and want to know what your culture needs to be like to innovate, then you need to listen to this episode.

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Transcript

Nick
And we're live. We're back. This is the Coverager Podcast. And I have a special guest today. Mike Gulla is joining us from...Texas???

Mike G
I am Austin, Texas.

Nick
Prepared for Hurricane Irene? Marco?

Mike G
Not dealing with California wildfire in Texas.

Nick
Laura?? I don't remember. It's Laura. Laura. Marco. Yeah. Mike, Nick.

Mike G
Maybe one? They're kind of making twins and deciding to come together maybe so.

Nick
Yeah, interesting time. I'm in podcasting headquarters in Naples, Florida, and I can't even tell you how lucky I feel. One is I am avoiding my second hurricane. So they're just like skirting around me. I don't know is that did I brush my teeth? I don't know. And I also feel very lucky because Mike reached out to me. We're we're always talking. But we had the This Week in Coverager interview with Assaf Wand, the CEO of Hippo, and Mike came up with like a roman candle of an idea where he said, you know, we should do a recording, where we can discuss what it's like to be one of the first insurance professionals in a tech company, and what that was like, and I was like, Yes!!!, we absolutely must. So, Mike, that was a brilliant idea. Thank you so much.

Mike G
No, of course, man, of course.

Nick
So for those of you that haven't seen it, I highly recommend it. I walked away very impressed. And I think we're going to talk about a lot of the details of Hippo, but this isn't necessarily a Hippo interview. So yes. Mike Gulla works for Hippo. He's an insurance professional that's there, but this isn't a Hippo thing. This is more about how insurance professionals and tech professionals can engage so we can collectively move together. So Mike, I'm going to have you rewind the tape first, give a brief introduction before Hippo. Who was Mike Gulla?

Mike G
Oh, man. first lesson of working at a startup for four years I don't remember who Micke Gulla is prior to Hippo man. It's kind of how...

Nick
Weeks blend together...year blend together....

Mike G
The years blend together at this point now like you said, Man, I am. You know, I consider myself an insurance guy. Right? One of those people who never anticipated, never knew the first thing about insurance, never had any desire to get into insurance. I left school moved to Atlanta, was working in Atlanta at a furniture delivery place and ended up renting a car from Enterprise rent a car and that is actually where my insurance career started. It was like, Hey, you should come work for Enterprise. It's a great place to get a company start and get good background and training experience. lasted about six months in their rental management division and then quickly migrated over to their Insurance Services team spent about three and a half years working in Insurance Services with them in the southeast, got to do some catastrophe management on Hurricane Katrina and vehicle recovery. And it just became interesting. It was kind of like, gosh, I never thought I would enjoy working on auto insurance policies and working with customers in that space. But you know, like anything else in insurance when when catastrophes happen, and you get to see what insurance truly is meant to do, you see insurance in a whole different light, right. And I had an opportunity met somebody at Nationwide Mutual Insurance ended up moving over into their claims team worked on total loss and auto claims, which is just a miserable job in the sense of, it's sad, right? I mean, you're talking total losses. So it's one day you're arguing with somebody about their 1984 Honda Civic that they think is an excellent condition. And then the next day after that you're working on a fatality claim or unfortunately, somebody lost their life and you really, you know, it's tough in those moments, I had an opportunity to jump into underwriting very quickly after I joined Nationwide and I've been in underwriting ever since. So I did you know, mainly on the property space, I've done catastrophe management, portfolio management, auto, home underwriting, then I moved out west to work for Allstate and esurance and launch their homeowners, their homeowners program for a few years and built that out. And then one day I got this random email from this Israeli guy named Assaf Wand who wanted me to come over to the Bay Area and learn about this company Hippo that he was starting that turned out to be, you know, the greatest decision I've ever made on something that I thought was going to be a complete waste of an afternoon.

Nick
Okay, so before we jump into Hippo, how much did your How much did the claims experience that you required across your various entities help you with underwriting?

Mike G
So it's everything. The experience I got from claims is everything I ever got for insurance, and I say that Nick in the sense that one of the first responsibilities I hadn't claimed was to read an insurance contract, right? It was the very first piece of training, which you got to know the contract. If you're going to pay claims, you got to understand what the contract is. And that was where I really understood, kind of the legal entity and the legal side of all the different case law and all the different arguments going back a ridiculous amount of time, and what actually drives insurance. And I realized that everything I ever thought about insurance and why claims got approved or denied or why people even had insurance in the first place. I knew nothing about and it became interesting and then I started to learn a little bit more and then when you actually deal with claims and understand at the end of the day where insurance, you know, comes into play, it really hits you, you know, it really hits you hard when you understand it at that level, even from the deniability, right. I mean, a lot of times you see companies that have great NPS scores and everything else on the support side is because they know how to explain the insurance process to a customer. Not everything is covered with a contract. It's not always the insurance companies decision on what's going to get paid and what's not going to get paid. It's the contract that will make that decision in a lot of cases. And the more like, the deeper I went into that, on the claim side just made underwriting so much easier because I was able to assess the risk based on what the actual risks are dependent on what it is right, whether it's an auto policy, and umbrella policy, a coastal, you know, a house the second row from the beach versus a house that's in the middle of upstate New York, right? It's, it's a totally different thing. But you have to be able to think about insurance and you need to be able to think about underwriting claims and the consumer experience across the entire United States, which to me is different than any other place in the world. Because here we deal with every type of catastrophe that there is pretty much on the planet, right? Whether it's a volcanic eruption, a sinkhole, a hurricane, a flood, tornadoes, hail doesn't really matter. The US has pretty much every type of catastrophe there is to offer. It impacts every avenue and every piece of insurance that there is and it's It's, you know, I'm an insurance nerd, right? I've listened to all these different blogs, I read all these different things. I love what I do. And because insurance is a very important thing, and a lot of people need it, and they don't realize how bad until, you know, catastrophe strikes.

Nick
So, that question was leading the witness because we're going to jump into Hippo now. And my sense is that I'm going to go into the interview piece. I'm really interested what that was like. But my sense is that those experiences have translated. Like what I see from Hippo seems like an insurance product that I think cares about the customer is the wrong phrase. It's customer centric. And there's touchpoints there, where you understand that ultimately your product is the claims paying but you have you have a other opportunities ahead of time where you can avoid the conflicts?

Mike G
Yes

Nick
That can occur at claims time. And I think that's a weakness in the I think most product design is done from an underwriting standpoint. And I think it loses some of its human and customer effect, when it's not done. With the claims in mind. I almost think you have to start with the claims and work backwards, like, what is it that we're trying to do, and then work backwards to almost get there. And if you read a traditional insurance policy, it's very confusing because it's written by underwriters and lawyers. And so it almost inevitably creates claims conflict. So before we get into the interview, which I'm dying to find out what that was like, can you link claims-helps-you-become-a-better-underwriter? How did those experience help you become a better product developer in creating that overall customer solution that exists at Hippo.

Mike G
Yeah, I'll tell you very simply, right? It's a customer. It's not a policyholder, you'll hear a Assaf say this, you may have even set it on, you know, your your interview with him, right? We have customers, they are a customer of Hippo. We are there to serve our customer to the best of our ability, right? There's contract limitations, there's things that we're legally not able to pay, right. There's things that the Department of Insurance is going to mandate and make sure that we cover, you know, COVID-19 is a great example, all the different moratoriums that have been going on with payment, cancellations, and all the different things that we've had to do as an industry to help consumers. You know, for us, it's the customer experience. We want to try to find ways to make sure that we're there to help our customers and understanding the claims process and having empathetic claims people to make sure that when it ultimately gets to that point that we're there to help them. We try to be as proactive as we can Nick right and making sure that we're preventing loss. That's a big value proposition. I'm not going to sit here and try and sell this as just this is a value add of Hippo. I mean, obviously it is this is what we try to do. We try to be proactive, you know, modernize home insure. But but the ultimate goal there is to create a customer focused experience so that when they do get to a claim, we do everything we can to make sure that they're covered. If they're not, we're going to go and do everything that we can to make sure they understand why, you know, what is the reasoning, what is the coverage limitation, and this is why we've built from an underwriting aspect, a contract that includes additional endorsed coverages, right, they're not based package coverages. Always, a lot of times it's endorsements and things that we have to add. But we try to provide a policy that actually offers the coverages that we feel that people need to protect themselves to the best, you know, that they can run out of the gate, not a slimmed down, stripped down, we just want to have a you know, we just want to sell the business and we don't care about the coverage and we'll deny the claims. That's not an experience that anybody wants to provide. And that's, you know, unfortunately, the reason why our industry has gotten you know, a bad name and a lot of instances because those things have happened in the past. But consumer experience has changed dramatically over the last 10 years. And it's going to continue, people actually read the fine print and pay attention to things more now than they ever used to. So the customer experience piece for me is the most important part. And that goes all the way down to the underwriter. Right? If I'm making a decision on somebody's home, I shouldn't necessarily just cancel somebody because they have dry rot and their facial boards, which when I went through training years ago, it was like, if it's a hazard, it's a hazard. They always take action on hazards. And that's it. But why, right? If I have somebody who's a very good customer, they've owned a house for 30 years, and that dry rots been there for 20. And they've never filed a claim. Why is that a bad risk? Right? You have to think with the customer in mind first, not the insurance policy in mind. First, you assess the risk, you assess the customer, and you find ways to create an option for them to cover themselves. And we've done that very, very well throughout, you know, throughout the history of Hippo over the last four years.

Nick
Yeah, so there's the inevitable, you know, plus, you have to avoid the moral hazard and adverse selection. So you're walking the tightrope. So you want to be extremely customer centric, but there are customers out there that don't, you know, aren't going to reciprocate. They don't view themselves as customers of you. And so it's a delicate balancing act. Right. And so I think I loved your answers you asked why. I don't think we do enough of that. I don't think there's like, even something as simple as Why does it? Why does a Deductible exist? I think most insurance professionals can answer that, but it's like No, no. But why? Why does it exist? Like go back in time? Why does coinsurance exist? Go back in time, and we've had now you know, 100 plus years of this conflict between insurers trying to prevent the wrong customers from getting in,even with even if they have the best of intentions, and so talk about that a little bit to like how how do you think about the fraud? The fraud piece, you know, getting the wrong customer you want to service them. But what if you're servicing the wrong customer?

Mike G
Yeah. If you think about it from a relationship standpoint, right? Like, would you want to be friends with somebody who doesn't necessarily want to be friends with you, right? You don't just go out and make friends, you meet people you understand what their likes are, what their dislikes are. When we talk about consumer experience and how we create relationships with our customers, right? I'm looking at it as an underwriter. And I'm using data and all these different things behind the scenes to try and make that assessment, right Great example, our smart home strategy, right? We've invested a ton of time and money into smart home. We're not getting a ton of data back right yet on exactly what the long term impact is. But I'm creating a point with this customer that is getting them to invest in protecting their house right? Regardless of whether or not it's stops the claim, prevents the claim makes the claim severity $5,000 instead of $10,000. Take all of that stuff and just completely take that away. That's not the focus. The focus right now is how do I make consumers interested in actually protecting their property? Right? That's kind of the first piece from an underwriting aspect. And from there, you start to add on all the different data elements, all the different consumer interaction points, all the different things that people do, and you can start to build this kind of somewhat of a painting a picture of what this customer is going to be like, right? What is the long term relationship that we're going to create here as a proactive insurer to help people, you know, buy into this. And then on the flip side, you're very easily and very quickly from an underwriting in able to identify more customers who don't fit that mold, right, Nick, that's where you start to go down that path of like, you start to see these different things of like, Well, why isn't this person interested in protecting their house? Why do they not want to be in this you start to ask the right questions of understanding, this is a risk for Hippo. This is a risk that's going to impact the rest of my book of business, who want to be profitable customers and use insurance for what it's intended, therefore, a catastrophic loss that they can't afford to make themselves whole from. That's the intent. And this goes back, obviously, you made the great point of understanding where insurance started, what how we've gotten to where we've gotten to now, what is the intent? What is the point if we can try to prevent the claim and try and prevent the insurance policy itself the policy coverage from being needed? How do you help the customer invest in this ginormous asset that they've made this huge purchase that's going to be one of the biggest in their life. I always use auto as my analogy because I've worked auto claims that work in that space for a long time and now property for a very long time as well. People think about their car like it's this great asset and wash it all the time. They get the oil change, they rotate their tires, they get their brakes checked, they do all these different things to the item they spend $10,000 on that they're going to have for three years, and the house that they spent $500,000 on for 30 years. They don't ever want to do anything to it, right? That's not a blame against the customer. It's the blame is against the industry, the home insurance industry, the Home Builders say, all of these different things. We've never built that mental "You need to do this", You need to have home maintenance. Should you buy a warranty on your house? Should you buy a package that comes out and does home inspections on your house? All of these different things that you'll hear Hippo talk about all the time, is in the effort of making sure that the customer has a vested interest in protecting their own assets? That in turn will lead to less losses, or better results for Hippo not just because, obviously do we want to be a profitable insurer, of course, that's the whole point. Every insurance company wants to be profitable. But I want to do it in a way that is working with our customers, that's partnering with our customers, that's using our claims organization and our service and support organization, and all of these front end initiatives that we do to make sure that we're at least doing the best we can to make sure that we're helping these customers avoid loss at the end of the day.

Nick
I think the entire business model revolves around alignment of interests.

Mike G
Yep, exactly. Hundred percent.

Nick
That's it. And I think we've gotten so far away from that. And it's, so it's, it's, you know, for both the insurer and the property owner, neither one of them wants a claim. Neither one of them wants a loss. So there's an alignment of interest there. But you can't have the policyholder can't be thinking that I went several years without a claim...and I wasted my money. Like they there needs to be a connection of dots saying Well, there's a there's a, you know, financial benefit from this, and this is sort of an investment and it's hard to do with the product. So let's tiptoe into what technology can do, what Hippo is doing, what others are doing as well, changing that dynamic where it's not where the customer doesn't feel as though they're wasting their money because they went a year without claim. You know, it's sort of what they wanted, but you know, okay, so this Israeli gentleman reaches out to you and asks you to come in. You walk in, what are you thinking?

Mike G
So I'll take it even a step further back, right. Assaf's and I original connection was through LinkedIn. I get a random LinkedIn

Nick
So you met online???

Mike G
Yep. Online. Online. Right. And, and no idea what this is the only thing that there was about hippo.com or myhippo.com at the time when I looked it up when I got his invite was a giant green screen. That said, What's like 47,000 times bigger than a gecko? a hippo...and that was it. And I thought it was the corniest thing ever, but you know, Assaf is a persistent guy we finally connected. We got on the phone. I'm not kidding. And Nick were on the phone for a minute and a half. And a Assaf is like, Look, I just want you to take a day off. You live, I was living in Sacramento at the time, he's like, come over to the Bay. Let's have a cup of coffee and just have a quick chat. So I finally you know, caved in after a couple of weeks of back and forth picked a day went out there. I walk into this tiny office on Castro Street in Mountain View above a tortilla restaurant that had just the total cliche of like startup man. It's like the attic of a restaurant, a 900 square foot thing with just two desks, two tables with a bunch of monitors. I walk in, there's one person there speaking Hebrew.

Nick
Are you are you rolling your eyes?

Mike G
Oh, I was like, I didn't know what I was getting into. But I've always been one of those people. You know, I've lived all over the US. I've always, you know, my wife and I have always bounced around. We've always been open to change. So I was like, Well, what do you got to lose? Right? It was a time where even back then at Allstate at Essurance. The writing of what just happened with Essurance was kind of already on the wall Steve Lekas, who was a mentor of mine, had left essurance and went on to Verisk and now he's on to Branch and other stuff. So, you know, you knew that things were going to change. The defining moment for me honestly was about 30 seconds before I met Assaf somebody walked into the office, and I was like, Hey, I'm supposed to meet with Assaf. He was supposed to be here 15 minutes ago, and I was already mad that he was late. I'm like, I can't believe this. And he's like, Oh, he's like, we just got a call that this furniture that we had ordered for the office is in and it was up the street and he's like Assaf to pick it up with a couple of guys. And 30 seconds later Assaf to have our product guys one engineer and one product guy walked in carrying their own furniture. Like Assaf walked up the street with two other guys from the office to pick up this new couch and something else that they had gotten for the team to actually have something to sit on in the office and he was carrying it down Castro Street and across the street, I'm looking out the window and he comes into the office. And he's like, are you Mike? So Sorry, I'm late and like, drops this couch in front of me. It was like, come on back.

Nick
Have a seat!

Mike G
I mean, it was just crazy to think I'm like, wow, this guy's the CEO of the company. And I looked into Assaf like, he's a successful entrepreneur. He's had previous companies that were you know, they were very successful. The fact that he was like, that was just one it was unbelievable that like, he was there with the guys and was going to pick up his own stuff and pay somebody to do it. Like the little things in my mind kind of clicked. It's like this is a brand new startup. He could be one of those CEOs that just pay somebody to do it and buys this expensive furniture, crazy stuff and just didn't. And we met that afternoon and we were supposed to meet for an hour and I ended up spending five and a half hours with him, Aviad Pinkovesky our chief product officer, Eyal Navon, who was one of the co founders of Hippo and we just white boarded this vision of what home insurance could look like. And you know, I'm not exaggerating this at all. If I could have taken a picture of the whiteboard that Assaf put up in front of me four years ago next month. It's uncanny how much we've stayed on the vision. Right. And when you talk about the key pivotal moments and different things, yes, things have changed. So many different things have changed, you know, and you and Shefi and Avi hit Assaf with this on your on your podcast with him. And he talked about those different inflection points of where we've made pivots. But the vision and the strategy that Assaf has always had is that the customer needs to come first, we have to find a way to create a relationship with the customer. And never that home insurance is broken or that we're going to do all this disruption and all these different things you never hear Hippo talk about disruption, right? We talk about modernization, Assaft has always had this, this uncanny ability to try and create relationships and it was never going to be abrasive. It was never going to be in us against them or their our competitor. We always look at everything of how can we work with this other company? How can we benefit from them, how can they benefit from us? How does it help the customer and we spend 5 hours that day talking through all of these different things. And the biggest piece for me obviously was on the insurance side, right? I was an underwriter. I was terrified of everything that he was talking about. Because I'm like, No, we can't do this. We can't do that. This is illegal. You can't say these things. And then and then, you know, we talked through it. And Assaf was like, Look, I'm hiring the insurance people because I need the insurance knowledge. So I'm going to tell you what I want to do. And then I need you to tell us how we can do it. And then, you know, shortly after I joined Rick McCathron, who's our chief insurance officer joined the company. And then Angela Grant, who is our former head of compliance, joined and Assaf was really, really, really smart in knowing that technology was going to drive the back end what we were going to do, but insurance knowledge was going to drive how we were going to do it the right way. And setting up from a very, very early stage, square one, no policies, compliance is going to be key. Assaf always has this always had this fear of, you know, what, what are we going to miss from a compliance and we always gotta make sure compliance is forefront. And we've stayed true that I've been involved in marketing decisions and all kinds of things. You know, I'll tell you a funny story. My first day at Hippo. I walked into the office, I'm at my desk for about 20 minutes and one of our marketing guys comes up to us. He was a consultant named Jason. And he hands me this piece of paper about our claims experience through the TPA that we were about to start working with. And I'm looking at the whole thing and it's a pretty design all the stuff but all I notice is at the bottom and big bold print, it just says "it's covered...period!". That was it. And I just sitting there looking at it as an underwriter and knowing compliance and I'm like, please tell me you did not share this with any of our partners. And he's like why I shared it with our with Topa, who was our first insurance partner in California. I'm not kidding you within five minutes. Our underwriting rep from Topa called me and was like, What are you guys doing? This is crazy. You need to get this in line. And of course, man, it just from then on. It was just it's always been this big joke but but compliance has been number one. And after that initial discussion with Assaf, you know, I knew very quickly that he cared deeply about what we were going to build, but he was going to make sure that we did it the right way. You know, the problem we run into sometimes with venture backed capital is they push for growth, right? always push for growth. It makes people do and make rash, rash decisions. We've been very, very smart about the way we've raised capital, right. We work with partners, and we've been invested in by companies who are like minded and have, you know, associated interest with us, right. Comcast is one of our leading investors. They have millions of customers who are invested in smart home technology to their XFINITY Home program, right. We work with Lennar homes, which is the largest home builder in the United States, right from the very onset of when the house is built. What can Lennar do to make sure that 25 years from now that house isn't having claims no different than what Ford and Chevy did when they decided to start putting you know, rear facing cameras in cars and started putting sensors in bumpers and all these different things, right? we migrated. So it was a scary decision. When I when I decided to leave Esurance and join this eight man startup in Palo Alto and pack up my family and move to one of the most expensive counties in the United States. And when I got my first paycheck, and it actually showed up in my bank account, that day was an exciting moment. I still remember my wife calling me laughing. It was like, I still had it at 50/50. And I was like, Yeah, I did, too. But it's there now. And, you know, it's been, it's been, it's been a hell of a journey since.

Nick
Okay, so talk about the insurance/tech dynamic that has grown over time. So fine! Fine! Compliance is part of it. But I'm pretty sure there are probably a lot of tech folks that are just like, but why, well, why can't we Why can't we? Which is, I think is extremely healthy. Right? I don't think I get asked, it gets asked enough. But I think it's one of the differences in our industry versus others. Is that we are in a box, right? It's highly regulated as you know, company after company they don't get slapped on the wrist when the regulator shows up they lock the door, you can't get in. It's not like what happened to Uber or Airbnb...they lock the door. So talk about the interplay in the in balancing asking why and when you shut off Why? Like I can't ask why anymore because this you're just not going to get that like the regulators are never going to allow it or they've already said no or whatever. Talk about that interplay.

Mike G
Yeah, so So first and foremost, the Why is the most important question always with us. Right? That is one of the things that we've encouraged the team has always asked why especially and more importantly than anything else from the technology side because in insurance and you're an insurance guy you understand legacy systems and everything else. A lot of the reason why we can't do a lot of the things that we want to do is because of the technology capabilities. And a lot of the reasons why the regulator's come back and say you can't do something is because a lot of times it's very difficult for an insurer to make it fair for everybody, right because their programs don't work the same way. They're compartmentalised. So what you do in Northern California may be different than Southern California, even though it's under one product filing. You have a group of product managers that work in one region. When I was at Nationwide, I worked at Southern states, right, we had an area of responsibility. I worked on a lot of projects there, but they weren't projects that overlapped into other regions. It was specific to the states that I worked in. The very first thing that we made the decision on and we made this decision in my interview with Assaf and it was one of the reasons he had connected with me originally was our policy administration system itself did not want to buy an off the shelf solution. They had one that they were looking into, and very quickly realized that you can't, you can't do all of the things that we are now doing as Hippo, the IoT side, the partnerships that we have with smart home companies, the coverage changes and the ability to add and remove endorsements easily and quickly and calculate premiums and all these different things. You couldn't do that if you're relying on somebody else for a policy administration system, even some of the better companies out there that build the off the shelf solution. You also run into the same issues with those companies in the sense that we're this little company Hippo, right? We're a $12 million startup in Silicon Valley. If State Farm goes to one of these companies tomorrow and says, Hey, we're ready to upgrade our policy admin system. Are they going to give me their best resources? Are they going to give State Farm their best resources? Right, so no matter what, any way you slice it, it was a lose/lose situation. We were very lucky to have the co founder/CTO that we had at the time. Eyal is one of the you know, one of the most brilliant coders I've ever worked with. I mean, my first three months at the company, we basically sat locked in a room me, him and one other developer that we had, and we built a policy admin system. And we sat with the why for I can't tell you how many days Nick have Why can't an insurance company work with a smart home company? Why can't they integrate with them? Why when a compliance audit comes into they have to be on site and it takes them 10 weeks for them to get through 100 case files for them to look at. Like we thought about all of these different things, moratoriums, there's a catastrophe coming, Why does it take so long for us to shut off different areas of business, or communicate to our customers and send emails to let them know that they're in harm's way? So we tried to think of as many whys as we could, and we built a back end platform that allowed us to do this, right, from a data aspect on the technology side, there's tons of great data sources out there. They're not accurate across the entire United States, right, I might find a data source that's got really good accuracy in the Bay Area, but they have terrible accuracy in Texas. But I still want to integrate with them. And I have to make it cost effective for me to use that data source across my entire program, even if I'm not right. So then it becomes a negotiation tactic on how you set up your cost structure of how you pay for these things. But the the original idea of having a cloud based system that had you know, unlimited capabilities from an API perspective, you know, I use the analogy all the time of a power strip, right? My past lives in the legacy system, there's a power strip with six plugs, right? Those six plugs are always filled. If I ever want to plug something new in, I always have to detach something else to be able to add whatever it may be, whether it's a new data warehouse, or a new underwriting system. I went here with the whole mantra of we need a cloud based system, and it needs to have unlimited outlets. So if I need to get the same data source from 50 different data providers to make sure that I have as much accuracy as I possibly can, I can do that. And then I also have the technical know how on the back end to aggregate those data sources so that I know when I want to use them, whether it be a confidence scoring metric, or we use AI for whatever technology we use to make sure we have those things, you know, working the correct way for the correct policies. What was the early onset and we've morphed that now into our consumer focus, and have leveraged bound/claim side, we built our own claims management tool that's built into our policy system. It's the integration point for all of our partnerships that we have on the IoT side, how we track and maintain our discounts, the level of rate sophistication that we have when we do product filings and updates, as well as our ways to work with the regulator's, right when we're going through these things. And we're trying to do a product filing and understand what the impacts are and our actuarial team doing analysis on all the different data that we have. You know, it's it's helped immensely. And the second part has been the partnership side of us not being a disruptor. Right. I love insurance. I've worked with regulators my entire career, we've always had a very proactive relationship with NAIC. I still remember in Mountain View, California, our first our second office, there was a NAIC convention in San Francisco with all the insurance commissioners and Angela who is our head of compliance time and a soft came up with the idea of like, we're going to do this open house and we're going to invite them in to see it, we're just going to open everything up. Let them, see the office, let them meet the teams, let them come in. And we did. And we had probably seven or eight regulators that showed up in this little tiny office and sat in one of our tiny little conference rooms. And we gave them a live demo of our web page, we gave them a live demo of our policy system. And we were like, give us feedback. What do you think? What is going to get us in trouble in your state? What are the things we need to think about? And we've continued that focus, right? When we go into new states, we have calls just like a traditional carrier would have calls with regulators to understand that it's not necessarily just the regulator, I want to know their team, because their team is the one who's actually going to look at our filing, and I'm going to make a decision based on everything else. The commissioners come and go, it's their teams that have been there for 20 or 30 years that have the knowledge and the experience that you want to get access to. And a lot of tech companies aren't going to know to go that way about it right. They're going to think about it from pure tech. And we've always had an insurance mind in the house and we've been here long, and we've continued to add to the team right now. We haven't Nicole who's, you know, one of the most brilliant people I've ever worked with, from a risk management standpoint, just understanding catastrophe exposure and management of rates and filings and all these different things. So as we continue to evolve, I have no doubt that we'll continue to invest in making sure that we, you know, that we continue down that path.

Nick
So you've done some risky things, you know, listening to this, when it comes to policy management systems, when it comes to claim systems. My guess is there's a lot of VC pressure to be like, well, if it's not adding value, to to what it is you're doing, if the customer doesn't realize that this is a value add, you should probably outsource that. And I think that's the that's probably the knee jerk, you know, the default rule of thumb reaction that most companies starting this would would take. And so I'm curious, like, when you heard about the policy management system? Were you in line right away? Where you're just like, yeah, you're gonna have to build it. Or how much pushback Did you provide in that? Like, this is complex? Yeah, no, you can't just like show up and create a policy management system. There are, you know, companies worth hundreds of millions of dollars that do this on a day to day basis. They, you know, kind of own the industry so to speak, and you know, what companies I'm talking about, you don't just show up and build it. What was, how straightforward was it for you to sort of agree that it needed to be done? How much did you push back on this is risky. This could be a distraction to what it is you're trying to build?

Mike G
Yeah, so great question. And and I wish I could say that I take some credit for this but I'm going to give 100% of this to Assaf and to Aviad and to Eyal when they made this decision right when I came in to interview with a soft, one of the things on my resume that he had seen was the fact that I worked in the policy management system at Essurance. Right, we had built our own program and whatnot, way back when. So I had some experience in it. And when I came into my interview Assaf told me candidly, like, we need to build a policy management system. And I was like, Okay, I'm like, you know, this is a pretty big lift. But I started to think about it, you know, and he ran me through these scenarios with like, Look, why is it been an issue for, you know, Allstate to do this, or even Esurance to do this, he's like, because you have all this legacy knowledge. And everybody always wants to revert back to how things work. Right? We didn't have a program, we didn't have a product yet. We didn't have a single customer yet. So it's Assaf viewed that as we have a clean slate, we can build something special. However, we want to build it. I need somebody to come in and tell us every single piece that we need to build, I can get the developers and I can get some of the best tech talent that there is in the world that's going to help us build this. I just need a mind to help map it out. And I was intrigued, right? I was super excited. I'm in, you know, an insurance guy. This is a new opportunity to actually build something special. And I was getting involved. And this is where the conversation started to go. And I was like, awesome. I'm like, what's the timetable on this? He's like, we need to have the policy admin system up and running and live in April. And this is November, right and talking about me starting in January. And I'm like, that's not possible, man. Like, it's just not possible. And he's like, no, it is possible. He's like, if we put the right resource into it, and we map it out correctly. He's like, we can make it happen. And and we just kind of morphed the conversation. And he's like, you'll make it happen. All you got to do is tell us what we need to do, and we'll build it. And it just became a challenge man. For me. It was super exciting. I was like this. There's no way we're going to do this. But okay, like, I'm like three guys are going to build a policy admin system and, you know, 14 weeks and have it viable and working and don't get me wrong, right. I mean, it was a stripped down system that we went live with. It has mophed but I can tell you that Pod which is our policy admin system is Still, you know, the heart and lifeblood of the back end of every product and everything that we've launched. And we've gotten to that point as an organization as a company where we've started to migrate different pieces and know that there's certain things that, you know, I'm never going to build a specific piece of this solution better than some of the other companies out there that have done this stuff for a long time. But we invested in it right away. We mapped it out right away. And when you work with tech guys who don't come from insurance, who've built platforms and helped launch LinkedIn and Facebook and other stuff, they don't see it as a as a problem that can't be solved, right? They see it as a Why didn't you think about it this way, I remember going through and one of the functionalities that we have that is to me is unbelievably sophisticated. And these guys made it seem like it was a joke was was cross term functionality and out of sequence endorsements on policies. And when I explained it to them of why it's been such a problem for the industry for so long when you have rate versions and new filings and you have to do Rate capping on renewal and like, these guys look at it as a mathematical equation that can just be solved and, and you don't have to migrate millions of customers that are on all these different billing platforms or on, you know, a contract that was approved in the Golden Bear age 20 years ago that's still there, like, it was easier for us to do. And you know, that's why it's a lot harder and why a lot of the bigger improvements now we're having a go forward strategy for new business, and some of the legacy issues still with their renewal book. Right is exactly that. But we had a clean slate. It was a challenge I was ready for and we invested in it. And it was, you know, at the time, I think probably the most important decision Hippo's ever made. It wasn't easy. Don't get me wrong, we've had bugs, we've had issues, having to sell it to specific partners. I still remember flying to Calabasas and meeting with Topa my third month with Hippo and sitting in a room with their leadership team talking about how we built our own policy admin system. And they looked at us like we were you know, from another planet. You can't do that. It's been three months. There's no way you did it. And then we gave him a demo. And they gave us a bunch of test cases on policies and asked us to rate them and the system rated them. We made changes, we did endorsements, everything calculated, they had their actuaries go back through and calculate to make sure everything work. And you know, it's been, you know, it's been there ever since now.

Nick
Okay, well, now I'm going to get into meat and potatoes because what I think might be the riskiest move, the riskiest decision, simply because this particular one involves lawyers...is policy form. And your policy you've deviated you know, the again rule of thumb is you come in and the fastest way you can come in as you can go to one of the bureaus, you can go to ISO or AAIS licensed their stuff and kind of go licensed their forms and go and you've taken a different tact and We were you know, we laughed about it in the conversation with Assaf because those forms cover pewter bowls, fur coats, stock certificates like to stuff that just doesn't fit. And that was that was that like, I think the first moment where it was just like Hippo isn't just one of these digital tech companies that's coming in saying, Oh, you know, you stupid insurance people we're going to, we're going to show you how business is really run. That was the first moment that I thought Hippo was doing something different here...that is gutsy. Because the for those that are listening, it's gutsy because it's a contract. In one of the advantages you no one ever got fired for buying IBM. No one's ever going to get fired for licensing ISO forms, right? Because it's been vetted. It's been proven. It's gone through the courts. And so you know, they make changes where necessary, but it's gone through the courts. You're creating a new form. There had to have been lawyers that were just like, why don't you or or someone along the way, so why don't you just use an ISO form?

Mike G
Yeah, so it's a it's a great philosophy, philosophical reasoning behind it right. And I can take this back to my interview in my conversation I had with Aviad. When I met Aviad the first time, the very first thing we talked about was the thousand or so customer complaints that he had looked at on the Department of Insurance website. Right. Mind you, you know, Hippo was founded in 2015. Right, I didn't join the company until December of 2016. So you have, you know, this 13 month period where these guys all they did was research on home insurance. And it's impressive the amount of knowledge these guys got in insurance for never having worked in insurance, but the focus they had on the claims experience and understanding what was always denied. Right, and it never comes back to you and I've heard Assaf say this so many times in the past was the regulators are never going to let you deny a policy for coverage when covered was actually afforded. Right? It's always that people think that they have coverage for things that they don't have coverage for. So I would actually say that it's not so much of how much we changed the base contract, right? We've found ways to change and work with the base ISO form to remove different things from our rate plan that were just unneeded around policy fees, and all those different pieces, as well as those base coverages, right for pewter bowls and other things. And then we still use a lot of the internal language around, you know, home electronics and whatnot. It wasn't that the language is defined that bad. It's been updated in recent years and, you know, even our modified isoforms that we still have access to having our policy contract gives the definitions pretty much the same. It's just the levels of coverage that's included in the base form are increased, right, but the bigger piece was understanding what can be bolted on to that base contract where the exclusions lie around service line, equipment, breakdown, water backup, these are the types of things that ultimately, people have a ton of claims for especially in California, right when it rains and the wind blows trees up root, pipes and different things and they're old and we're put in, you know, many years ago. So the idea they had was, these are added coverages. We're not going to force people to take them, but we're going to quote people, right? If you go to myhippo.com, and get a quote with Hippo, you know, you're going to see a quote, it's going to include endorsed coverages that aren't required, that are going to make your premium higher. But we're going to quote the policy with these coverages to make sure that we're at least showing you what we think you should need, right? At least at the base form. It's ultimately the customer's decision, or the agent that's helping them along, pick what they need. But the intent, Nick, was to make sure that the customer ultimately is covered. You know, from a legal aspect, of course, I mean, Topa came back and had all kinds of different things they push back on and we reviewed and understood like, what are the risks and a lot of the things that we change weren't the risky parts of the contract, right? It's not the basis of how the claim gets paid or denied or you know, if fire following happens after an earthquake, we were talking about those, those high frequency/low severity issues that people have. And then the coverages that are in a base form that people pay for that they're never going to use, right, and having that shift and an alignment, and then a rate plan, right, that allows us to charge premium based on perils and multiple perils, so that we can actually have a sophisticated enough rate plan to collect the premium that we think we need for the exposures.

Nick
It's beautiful, honestly, so let's talk about the internal culture. Now. How big is Hippo now?

Mike G
I want to say we're over 300 people, I can't confirm that but I'm pretty certain we are at least very close to that number now.

Nick
Okay, so it's a as Assaf said in the interview, it's a complex mix, which I think you'll find with a lot of these Insurtech startups, so started out with a lot of engineers and then you know, you're the the insurance person that comes in and you have to build an Insurance team. But there's also it's digital. So there's always going to be an engineering team. Assaf talked about the call center and things of that nature. And so what is the challenge? How does Hippo How do you think you guys handle the ability of tech folks to understand insurance and insurance professionals understand tech, trying to get trying to get that, you know, that marriage where the intersection crosses and there's the other side has enough empathy for the culture, the process, ultimate the mission for what what it is you're trying to accomplish? And you there's not that pushback, just due to ignorance, you know, just the inability for a tech person to understand insurance and insurance person, not respecting what the tech person has to do.

Mike G
Yeah, so So I'll tell you an inside joke I've had with my wife is laughing that after Hippo, I'm going to be an insurance professor. You know, we spend so much time and you've met Nicole in the past, right? Like her and I love talking insurance. We could do this stuff all day every day. The collaboration and the culture is what has made Hippo as successful as it is, right? Our tech guys understand insurance. Every person that starts with the company, I meet with, I have a whole training curriculum of stuff that I provide on our contract. Everybody reads our rule manual. They understand our underwriting guideline, even I won't say understand they at least see it. Right? They have to understand the framework of insurance, especially from an engineering side. The very first engineer that helped build our policy admin system is still here with Hippo. him and I spend a lot of time talking together about how we define things. And it's funny now, because we go back and we look at the way coders define, define insurance terms. And it's like, what the hell does this mean? Like, that's not what loss ratio is. And it's like, well, no, that's what they looked up on Google and then No, no. So, you know, we've built out a data warehouse and had to go back through and remap everything. But from a cultural standpoint. You know, one of the reasons I'm in Austin is partially the culture of Hippo right when when I left California to come down to Austin, we really started to expand this team. You know, Rick, and I spend a lot of time traveling back and forth between the two offices. And it was great for the culture for me to come down here, after spending, you know, almost three years in Palo Alto office with that group out there and working with the engineers, being in Austin and now working with customer support team and on a daily basis and our claims group and our billing operation and our sales team. So there's a lot of collaboration that takes place. Our engineers come down free COVID of course, when when traveling was a little bit easier, used to come to Austin all the time, really just on a meet and greet and a learning thing we just did one a couple of weeks ago, we had four or five members of our engineering team basically did a rotation through all the teams within our Austin office so they spend time with claims. They spend time listening to calls and spending time with customer support with underwriting with our sales team, because they have to understand and see how the systems get used at the end of the day, right and know how that impacts what they're doing on the code side. So when there's a bug and it takes them two weeks to fix versus two hours to fix, they need to understand what that impact is to the person that's on the phone with the customer saying, Hey, here's why I can't do X or Y for you right now. And it's important and Assaf has always been a huge proponent of the culture at Hippo. You know, our company takes care of the employees right or from from the top down Assaf has always made sure that every person that said Hippo, know, loves Hippo enjoys working at Hippo and knows that Hippo cares about them, and Hippo is here to take care of them. You know, COVID has been a great example of that we've all come together and had to migrate home, basically overnight, right? We left the office one day and didn't come back and haven't since but we've done a lot of things from an HR standpoint to make sure that everybody's taken care of whether it's helped with with with schooling stuff and, you know, work environment. And all these different things has been, it's been incredible to see. And it's been, you know, it equally is incredible to be a part of.

Nick
Sort of my final question, depending on how you answer it. You know, it's what you see there's a lot of pressure from venture community to grow. That's not surprising. And I don't think you guys are afraid of that. The general process to do that is to go laterally, horizontally. So if you do something successful in one line, you just pick up that process and sort of bring it into the other. I think that's the biggest surprise that I had in my conversation with Assaf was when I asked him that question he didn't bite. He, you guys are dedicated, dedicatedly devoted towards homeowners. And so if anything, if you're if If you guys are moving laterally, it is bundling elements into the homeowner's policy that aren't insurance, you know, that aren't specifically about insurance like the smart home, like the warranty. And it what struck me in and this has come up in other This Week in Coverager discussions is the, you know, whole thing of bundling and unbundling, and he was thinking of it as the unbundling. I was actually thinking of it as bundling like he the warranty and the other stuff is it's not insurance, but it's a it's a different bundle. And it makes it pretty much Mike, a different business model. Like you guys are beginning to get escape velocity and become something that's really outside of insurance where I would say the vast majority if not all of your competitors are staying in the insurance sphere and just sort of transporting what they've done successfully to others lines, you guys are laser beam focused on that one line. That of course carries risks with it. But can you talk about since the beginning, has that always been the case? And if it hasn't, when did it start? Like what what sort of precipitated the decision making to decide this is it that we're gonna we're going to focus on the homeowner population, and we're going to take care of them or as Assaf says, if they get locked out of their house, I want them to call me to let them back in.

Mike G
Yeah, so so they want my very first day talking to Assaf, it's always been about home insurance. It's never ventured off of that, to my knowledge, and all the conversations I've had, we've talked about every kind of product that there is in the industry, but it's always back to on winners as the main focus, right? This is a huge, huge growing industry. I'll give you my insurance perspective. To me, I feel like auto is going to be gone in 10 or 15 years, right? It's going to be by a car and it's going to come with some sort of a policy based on, you know, the little bit of driving that you're actually still going to be doing right with autonomous vehicles and everything else that's there. The catastrophe space is changing dramatically, and home insurance and commercial products are going to be what ultimately gets impacted and where insurance is heaviest. The difference being to me, and I'm going to give you my insurance answers as quickly as I can, since we're running out of time, is the focus within the industry has always been add products, right? You bundle to get auto and home together because it increases the lifespan of the policy, you're gonna make money off the auto, you may sell a life policy, you're making the agent happy, all these different things. We have a different focus, which you hit on and I think Assaf hit on this so many times is you can have a much better impact on your actual loss ratio reduction instead of trying to add products to bring your total profitability to a profitable number, right? Why can't we focus on home and bring our water loss ratio From 30%, down to 15%, right? When you think of the insurance profitability of your combined ratio, right, and that whole variance between being at a 98 and having an amazing year versus 102. And it not being a great thing, you know, and the homeowner space, right, you can have a profitable book if you do it the right way. And we're finding ways outside of the insurance product itself to drive down those ultimate loss ratios. And luckily for us, the investors that we've had in the VC community that Assaf gotten us involved with, right, they understand profitability, they want to understand what loss ratio means. They want to understand us growing in specific areas. And, you know, what does SCS mean? If I said that to the board, I bet you 100 bucks, they could tell me exactly that it's a severe convective storm, because we've talked to them about Texas exposure, and they actually understand our business model in our learning insurance of what we do. I mean, you can go through and look at our cap table of all the different investors that are out there that invest in Hippo and you'll notice a very common theme about them having either Smart Home technologies, investments in Smart Home technologies, investments in real estate, investments in home building. So the focus there is this is a massive, massive industry. Why do we need to focus on these other products when everybody is unbundling and when Assaf says on bundling I can tell you almost guaranteed that he's saying it more in the sense of products, right? Insurance products are bundled in your home and your auto and those types of things. We are absolutely trying to bundle every home protection type product that we can to make sure that we get one experience to our customer.

Nick
Well, we'll end it there. I hope for the audience that you know this wasn't a hippo...we didn't put Hippo on a pedestal here. It's you know, it's their trade offs that need to be managed. There's risk and I just thought it was it was just it was just an awesome idea to sort of come in and talk about how insurance and tech relate but I think we went deeper how insurance in the whole Insurance business model and tech, how they need to relate to one another. And I just very much appreciate the thoughtfulness of how you guys are doing it. It's different. It's not for everyone. And I think Assaf said that and so there was a great story, I hope you guys have some sort of historian in place that can, you know, taking photos and writing all of the key details down.

Mike G
I'm one of those people man, I got all the old office photos on my phone of every office we've ever been in. So you know, and and right back actually, honestly, I appreciate what you know, you and Shefi and Avi and all the other people that are covering Insurtech have done you know, it was great. One of the best moments in that whole entire interview you guys did with Assaf was when him and Shefi. Were talking about ITC four years ago when there was like 150 people there now and last year, there was what 10,000 or something ridiculous just how this industry has changed. But you guys, you know, you paint with a broad stroke and try and include everybody which is good. You know, it shouldn't just be about the techs. It shouldn't just be about the insurance. It shouldn't just be about the customer, right? There's so many different aspects of this that are touching right now and hitting all of them is super critical and network.

Nick
Let's just solve problems. However we do it. Let's, there's going to be a bunch of different ways. Let's do it. So awesome, awesome story. Thanks, Mike.

Mike G
Absolutely, it's my pleasure. Nick's always great catching up, man.

Transcribed by https://otter.ai