TypTap Insurance Q&A: Florida, tech, U.S. expansion

April 25, 2022 6:20 AM

Homes next to a water inlet in Hialeah, Florida, U.S., on Tuesday, April 13, 2021. The U.S. economy is on a multi-speed track as minorities in some cities find themselves left behind by the overall boom in hiring, according to a Bloomberg analysis of about a dozen metro areas. Photographer: Saul Martinez/Bloomberg

Digital Insurance spoke with Kevin Mitchell, president of TypTap Insurance Company about market conditions in Florida, technology and the company’s plans for the future.

The following responses have been lightly edited for clarity.

Can you tell me about your work TypTap?

I joined HCI Group Inc, in 2013 in the role of vice president of investor relations and reinsurance. When we launched TypTap in March 2016, I became more involved in the operations and marketing of the company. I continued to take on more roles and responsibilities. In 2019, I became the president of TypTap.

How is the company using technology?

Oftentimes, insurance companies will ask policyholders to fill out pages and pages of underwriting questions to receive a quote. These questions vary from the age of a roof to the year a home was built. Some homeowners may or may not know the answers.

At TypTap we were confident that our technology could simplify the customer experience by only asking a handful of questions for a quote. The technology gathers underwriting information and analyzes each home to determine coverage decisions. The tech allows us to solve a challenge that most insurance companies face—predicting the future cost of goods sold. The technology also allows us to remove geographic limitations and select profitable policies.

We believe that the technology must drive a better underwriting result and that has been our focus since the launch of the company.

In the insurtech space, most companies are focused on distribution but being able to improve underwriting results, we believe, is the key to long-term success.

Any insights into the Florida market?

Florida has always been a challenging state to do business from a homeowners insurance standpoint. You have hurricane risk, severe convective storms like thunderstorms and hail and there are sinkholes too–a whole host of challenges that make doing business as a homeowners insurance company challenging.

Weather risk also creates opportunities. TypTap’s first product in the state was flood insurance for single-family homes. We had policyholders contacting us asking for help with flood insurance. We started offering flood insurance in Florida in March of 2016.

From a technology standpoint, you only need a few key variables to underwrite flood insurance, for example, the exact latitude and longitude of the home, first-floor elevation and estimated replacement value of the home. We liked the flood insurance business but it has a limited market of only $5 billion, across the U.S., and we wanted to further accelerate growth.

The next logical step was building a homeowners insurance offering. And in 2018, we launched the first product and wrote about 1,000 policies that first year.

Why has the company paused new business in Florida?

In late February, TypTap decided to pause new homeowners’ business in Florida. An approach we have applied since 2018 to manage our capital for the benefit of existing policyholders. This approach allows us to be a stable market for Florida homeowners.

The approach is a part of our long-term business philosophy. We often place a pause on new business in Florida each spring because we experience rapid policy growth in the first and fourth quarters of each fiscal year. A new business pause gives TypTap the time to evaluate the book of business to make sure it is performing to expectations.

What’s ahead?

TypTap announced a national expansion in August 2020. We currently operate in 12 states and more are set to launch this year.

We started in Florida because our headquarters are here. We learned a lot of important lessons by launching in Florida. We’re applying those lessons learned in other states. The success in Florida gives us the confidence the technology is working and we’re onto something special.

We will resume writing policies in Florida upon establishing reinsurance prices and with a clearer understanding of the upcoming hurricane season. We’re keeping our commitment to providing quality service and simplified insurance.