Request for Startup: Climate-Centric Property Insurance

How Michigan can help reinvent home insurance for a changing world

Team Coral are longtime residents of the PNW. One of us was born in Washington, the other relocated from the East Coast just before Covid shut down the world and his promised outdoor adventures (ed. Nice timing, chucklehead). It’s been an interesting time to live here; The summer of 2019 brought smoke so thick that visibility in Puget Sound dropped to a few dozen feet, summer 2020 turned the sky orange, Mt. Rainier was bereft of snow for the first time in decades, while the coastal low-lands have seen bi-directional temperature spikes and outsized freezing precipitation. As is so often the case when contemplating the complex interconnected cascades of climate change, one is left with the image of a pot beginning to boil over. 

Introduce enough energy into a closed system, and shit starts to get wild. It’s therefore unsurprising, and likely inevitable, that home insurers are fleeing our neighbor to the south, a phenomenon which we expect to spread nationally over the coming years. California is ahead of the curve, mostly because perpetual earthquake risks have long sent insurance premiums into the unsustainable stratosphere, but any small insurer operating in a state with wildfires, ice storms, or hurricanes is undoubtedly watching California with great interest. 

Why smaller insurers especially? To summarize a very long story; Insurance companies make money through a combination of profit on premiums, and investing the float (ie, the interest-free loan that customers pay in the form of premiums, which the insurer holds en masse until it needs to be paid out for claim coverage). Larger companies have better modeling data, the brand to command higher premiums, and access to better investments. The industry as a whole has also experienced a higher regulatory burden in the wake of the 2008 market crash (a good thing!), the tightening of reinsurance loopholes (essentially, the insurer buying insurance against high claim payouts), and an overall flight to quality in the form of the brands who already bought SuperBowl commercials for their largely commoditized offerings. 

We’d love for this not to be a problem, and for the interconnected-fusion + DAC future to save us all from having to think about adaptation to a warming world. Until that happens… people need to buy & insure houses, home ownership is already catastrophically expensive, and we think elegant technology can help. 

Request for Startup

The current property insurance industry is a study of top-down financial modeling. Even theoretical tech disruptors, like California-based One Concern, are focused on creating virtual-machine models of the earth which can be used for… more financial modeling. While this data is directionally accurate (Allstate made $45bn in revenue last year), it lacks specificity, nuance, and the ability for consumers to affect their own premiums. 

So, what would good and modern look like in this market? We see a few tenets;

• Accurately measured, dynamically updated property-level risk data. Temperature as compared to historical averages, precipitation, power outages, equipment replacements, seismology, grid-demand fluctuations etc. Yes, this requires an onsite sensor as well as a data-entry interface. 

• Assessments from property inspectors, and all municipal workers passing the property (think, the folks who come to repair sewer leaks and remove downed trees from power lines) as to ongoing risk factors. Again, updated dynamically and as often as possible. 

• The employment history, income, credit score of the property owner (this is, of course, already captured by insurers and baked into premiums).

• The presence of onsite power generation or storage. Solar, Tesla powerwall etc. 

Hey… wait… Don’t EVs have tons of sensors and big screens?

Car + Home Insurance, Reimagined

Our loyal readers are undoubtedly wondering what happened to Detroit month, and why we’re prattling about one of the world’s biggest, most boring businesses. Thing is, the company we’re talking about would need to start in Detroit.

It’s a bundled home + auto insurance company, selling only to the buyers of EVs. The company offers a sliding-scale range of insurance products, with the introductory level being traditional policies, and the most detailed requiring the consumer to opt in to allowing their EV to serve as a data-collection hub regarding their home. Let’s break it down further. 

1. EVs are equipped with complicated sensor + thermometer + camera arrays, which can be trained to capture precipitation and temperature data in real time. Said data is then streamed, under heavy encryption, to proprietary risk-analysis models held by the insurer. 

2. Yes, the above requires a closely integrated partnership with the auto companies. That’s why this is a Detroit business. We imagine that being able to resell a cheaper, more comprehensive, tech forward (and therefore marketable) insurance policy to EV buyers would be of considerable interest as a value-add to their struggling dealership networks. 

3. Houses cost a lot more than cars, and the insurance is commensurate. “Buy an EV, make up the cost premium by lowering your home insurance” is an excellent pitch for car companies to capture millennial buyers with disposable income, in case that demographic is of any interest. 

4. Further partnerships with municipal governments allows for the capture of risk data touching on electrical grids, sewage, and nearby trees. Yes, it’s a complicated GTM and partnerships motion. Suck it up. 

5. Consumers have the option to enter significant changes to their property via an app or the EV tablet interface, along with uploading supporting documents. Switch out your legacy boiler for a heat pump, replace the roof, cut down the dangerous tree? Feed it in with a few clicks and watch next month’s premium reduce. 

6. Open API for everyone! Create integrations with smart thermostats, heat pumps, and any appliance connected to the internet. Gather data and automate workflows wherever possible. 

7. Insurance companies are bloated and inefficient. Compete with software, trained models, and automation in order to reduce the reliance on investment returns, and instead live on profits from the float. 

8. Pull all of this off, and the company will have a world-class database on consumer behavior, EV buyers, home construction practices, and smart-technologies. There are a lot of ways to monetize this as a secondary revenue stream.  

Closing thoughts

This is a difficult, complicated, expensive company, but one we think needs to exist. It is often said in the software world that all companies are replaced on 7-10 year cycles. The insurance business has had that, but in decades. It’s time for something new, and we’d be delighted to help any founders who want to tackle this problem.