What began as an assignment to the research and development team at American Family Insurance Co. now stands alone as an independent company and today announced its first major customer.
Arturo, a Chicago-based insurtech startup launched by American Family three years ago, said in a press release that it has penned a deal with Hippo Insurance to provide “real-time” analytics on property characteristics.
“Hippo’s partnership with Arturo has allowed us to pre-fill very valuable property data and information directly into the customer’s application including roof material, pool presence, and more,” stated Michael Gulla, senior director of underwriting at Hippo. “These insights streamline the client’s onboarding process, while helping us define a highly accurate initial rating and top-quality underwriting requirements.”
Hippo, based in Mountain View, California, began working with Arturo from its very start as an insurance provider, and even before Arturo became a company.
Aviad Pinkovezky, chief product officer for Hippo, said in an interview that Arturo’s analytics allow the company to provide quotes to customers within 60 seconds. He said that Hippo started using Arturo’s artificial intelligence program in the “experimental phase” and has benefitted as its partner steadily improved the algorithm that delivers property information using data from a variety of sources.
In a press release, Arturo said it obtains property information from aerial photos, drones and ground-level images.
Pinkovesky said Arturo provides far more information that a conventional search for property data would reveal. For example, the program knows the composition of the roof as well as the condition, a major predictor of potential losses. Arturo can also discern whether overhanging vegetation poses a fire hazard, or whether there’s a trampoline or swimming pool on the property.
Pinkovezky said other property information products don’t provide nearly as many details.
“They are great at providing the average exposure and the expected exposure,” he said. “What they fail to provide is what are the specific circumstances of your property? How far is the property from brush that could be ignited? Is there a swimming pool or trampoline on the property?”
Pinkovesky said Hippo uses Arturo not only for the initial sale; it also runs its entire book of business through the program periodically to catch any possible underinsurance issues that can increase revenue. For example, Arturo can find out if a homeowner has added a room or a pool, he said.
He said Arturo data also has some claims applications, but he said Hippo isn’t prepared as yet to provide details. He said in general, the wealth of data provided by the system allows claims adjusters to deliver empathetic “high touch” customer service.
According a blog post on Arturo’s website, the company got its start when American Family — based in Madison, Wisconsin — asked its Data Science and Analytics Lab if aerial, drone and ground-level imagery could be combined with artificial intelligence could improve the quality and accuracy of property data used in quotation, underwriting and renewals. Dr. Martin Bucheim led the research team and is now an Arturo advisory board member.
Arturo said after 18 months of development, the team found that “deep learning models” using images brought far more recent information about property characteristics than sale and tax assessment records.
John-Isaac Clark joined the company in August 2018 as chief executive officer. Under his leadership, Arturo formed alliances with other tech firms, including Kin Insurance and Openly, and teamed up with with Nearmap and Maxar to provide content for its analytics program, according to the company.
American Family officially spun off the startup in April. Arturo announced that it was seeking seed money from other investors in May. American Family is now a lead investor in the company as well as a customer.
That arrangement makes gives Arturo a connection to the nation’s insurance establishment. American Family is the nation’s 15th largest property and casualty insurer, with $8.9 billion in direct written premiums in 2018, according to National Association of Insurance Commissioners data.
Hippo is pea-sized in comparison. The company launched in April 2017 with a promise of offering “the most fundamental redesign of home insurance in modern times.”
But Hippo isn’t actually an insurance carrier; it’s a managing general agent. All of the policies it sells are underwritten by three carriers: Topa Insurance Co. in the western U.S. and Spinnaker Insurance Co. in the east. Altogehter, Hippo sells insurance in 17 states.
The third carrier, Canopius US Insurance, writes Hippo surplus lines policies in California and Texas.
Topa reported $107 million in direct written premiums in 2018, but the NAIC data does not reveal what percentage of those polices were sold by Hippo. Only $10.5 million of that came from homeowner’s insurance, which is Hippo’s primary product. The majority of Topa’s net income came from commercial and private passenger auto.
Topa’s net income has plummeted in the past three years, from $1.96 million in 2016 to a loss of $2.16 million in 2017 and a loss of $1.22 million in 2018.
Spinnaker reported $79.96 million in direct written premium in 2018, $72.32 million of that from the homeowner’s line. Again, the amount sold by Hippo is unknown.
Unlike Topa, Spinnaker reported a boost in net income after partnering with Hippo. The carrier reported a $4.03 million loss in 2016 followed by a $1.1 million loss in 2017, but a $5.12 million profit in 2018.
Pinkovesky declined to discuss specific numbers, but said Hippo has been growing rapidly.
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