Assaf Wand - Innovation in Static Industries – [Founder’s Field Guide, EP. 36]

At a Glance

Assaf Wand (Co-founder and CEO of Hippo) discussed how to drive innovation in a highly regulated insurance industry that has remained unchanged for a century. Founded in 2015, Hippo announced its intention to go public via a SPAC merger in March 2021, with a valuation exceeding $5 billion. Core insights include: building brand trust by establishing a direct relationship with homeowners to unlock business model opportunities; in a static industry, innovation must focus on improving product design and distribution channels rather than disruptive technology; the defensive nature of the insurance industry stems from regulatory barriers and customer stickiness. Wand believes insurance is "one of the most static industries," but precisely because of this, it offers enormous opportunities for entrepreneurs—"you can build a giant company in a $105 billion market by simply becoming the 16th largest player."

Topic Sections

1. Innovation in a Static Industry: Not Disruption, but Evolution

Assaf Wand argues that insurance is "one of the most static industries," but innovation is not impossible; it requires an "evolution" rather than a "disruption" strategy. He points out that the insurance industry looked nearly identical in 1995, 2005, and 2015 because it is highly regulated, requiring approval in every state, and cannot iterate as quickly as internet products. Therefore, Hippo's innovation focus is not on technological disruption but on improving product design and distribution channels.

• Historical Context: Wand considered starting an insurtech company as early as 2005, but faced three major obstacles: 1) Building the backend system would require $300-400 million and 3-4 years (relying on traditional vendors like Oracle and Accenture); 2) Lack of data to compete with Allstate, which had 115 years of history and 10 million household customers; 3) Consumer distrust of new brands. By 2015, these three obstacles had been eliminated: cloud services like AWS, Twilio, and Stripe drastically reduced backend construction costs; data became abundant, giving new entrants an advantage due to their lack of legacy systems; consumers had become accustomed to handling financial matters online (e.g., SoFi, Wealthfront, Robinhood).
• Mechanism Breakdown: Wand emphasizes that there is no "minimum viable product" (MVP) in insurance. Once you start selling insurance, you must simultaneously have call center and claims capabilities; otherwise, you cannot handle customer inquiries or sudden claims. This changes how investors view insurtech—it is not like TikTok, which can be launched and iterated quickly, as it involves customers' financial security.
• Implications: Wand believes the space for innovation in insurance lies in "evolution"—improving the customer experience through better product design (e.g., smarter policy terms) and more efficient distribution channels (e.g., partnering with mortgage lenders), rather than trying to disrupt the entire industry with technology.

2. Building Trust: Leveraging Brands and "Trust Agents"

Wand believes insurance is essentially a "promise"; customers are buying the "right to claim," making trust the core. To quickly build trust without a long brand history, Hippo adopted a "leverage" strategy—partnering with companies that have strong brand credibility (e.g., Chase, Comcast, Lennar) to gain initial customer trust through their brand halo.

• Mechanism Breakdown: Wand notes that most people buy homeowners insurance when they buy a house, and homeowners insurance is an accessory to the mortgage. Therefore, Hippo partners with all companies involved in the home-buying process, such as Better Mortgage, Blend (mortgage), Compass, Relogy (real estate), Lennar, and Toll Brothers (homebuilders). When Chase recommends Hippo, customers think, "If Chase is doing it, it must be good enough," creating a "trust agent" effect.
• Data & Cases: Wand mentions that Hippo's Net Promoter Score (NPS) is 75, and its claims NPS is even higher, but these metrics take time to accumulate. Until reaching sufficient scale, leveraging partner brands is a more efficient approach.
• Implications: Wand emphasizes that this strategy requires long-term maintenance. By bringing strategic partners (e.g., Comcast leading the Series B, Lennar leading the Series C) onto the board and granting them warrants, he deeply aligns their interests with Hippo's success, significantly increasing the success rate of business development collaborations.

3. Customer First: Shifting Perspective from "Agent" to "Homeowner"

Wand argues that the traditional insurance industry "forgot who the customer is"; its customer is actually the agent, not the homeowner. Hippo's core differentiation lies in refocusing on the homeowner, expanding its business from pure insurance to an ecosystem that "protects the joy of homeownership."

• Mechanism Breakdown: Wand describes the typical homeowner experience after purchasing a house: a rapid shift from romantic fantasies (kids playing in the front yard, weekend coffee in the garden) to reality (broken pipes, loose windows, a back door that won't lock). Hippo aims to be the "1-800 number for all the troubles at home"—handling not only insurance claims but also services like locksmiths, shelf installation, and refrigerator repairs. Wand believes a well-maintained home reduces losses, thereby improving Hippo's loss ratio while enhancing customer satisfaction.
• Data & Cases: Wand gives an example from the 2021 Texas freeze, where he personally found temporary housing for employees and used his own credit card to order 1,000 lasagnas for customers without heat. He emphasizes that this kind of "showing up when customers need you most" is key to building brand loyalty.
• Implications: Wand believes that by increasing touchpoints with customers (rather than minimizing contact like traditional insurers), Hippo can build stronger brand stickiness. Customers will remember that "Hippo helped me in my toughest moment," making them more likely to choose Hippo for their next insurance need.

4. The "Trench Warfare" of Entrepreneurship: Mindset, Speed, and Culture Building

Wand describes entrepreneurship as "trench warfare"—difficult, chaotic, and full of uncertainty, but also "the best thing ever." He believes the core advantages for entrepreneurs are the ability to choose what to do, who to do it with, and what kind of culture to build. He shared his experiences in leadership, speed, and culture building.

• Mechanism Breakdown:
• Speed & Urgency: Wand believes speed is a startup's core advantage over large companies. He instills urgency by "leading by example"—he likens the CEO to a "gravity field"; wherever he focuses, the team follows. For example, when sales issues arise, he personally gets involved in sales, guiding the team's focus.
• Culture Building: Wand emphasizes that culture is "what you do, not what you say." He builds trust by "walking the talk" and believes the biggest executor of culture is "DNA"—hiring people who fit the company culture and letting them become its ambassadors. He admits that maintaining culture becomes increasingly difficult as the company scales (from 30 to 500 people), especially during the pandemic when new employees never set foot in the office.
• Product Roadmap Management: Wand shares a practical tip: reserve 25% of capacity for unplanned changes and sudden demands. He also introduced "quality sprints," dedicating one out of every four sprints to fixing bugs, preventing the accumulation of technical debt.
• Implications: Wand believes entrepreneurship is a marathon, not a sprint. He no longer demands 24/7 work from his team but encourages employees to balance life while completing their work. He believes a happy, healthy team can maintain its fighting spirit over the long term.

Position Moves

Ticker	Guest Stance	Key Data
Hippo	Bullish (Founder's Perspective)	Announced SPAC merger in March 2021, valuation over $5 billion; US homeowners insurance market is $105 billion, growing $5-6 billion annually; Hippo can reach $1.5 billion in premiums within 3 years (less than 1% market share); NPS of 75
Comcast	Partner (Strategic Investor)	Led Hippo's Series B; has 28 million household customers
Lennar	Partner (Strategic Investor)	Led Hippo's Series C; one of the largest US homebuilders
Chase	Partner (Brand Leverage)	Recommends Hippo through its mortgage channel
Better Mortgage	Partner (Distribution Channel)	Mortgage platform
Blend	Partner (Distribution Channel)	Mortgage technology platform
Compass	Partner (Distribution Channel)	Real estate brokerage
Relogy	Partner (Distribution Channel)	Real estate services company
HomePoint	Partner (Distribution Channel)	Mortgage services company
Toll Brothers	Partner (Distribution Channel)	Luxury homebuilder
Allstate	Competitor	Has 10 million household customers, 115 years of history
State Farm	Competitor	Holds over 10% market share, the only insurer with a share above 10%
Farmers	Competitor	Customers remember the brand name but cannot differentiate the product
Travelers	Competitor	Same as above

Judgments Worth Remembering

1. "Insurance is the only product where the customer doesn't want to use it, and the seller doesn't want the customer to use it." (Assaf Wand)—Customers buy the "right to claim," not the product itself; this leads to a lack of innovation incentive but creates opportunities for customer-centric players.

2. "If you tie two rocks together, they don't float." (Assaf Wand)—Regarding traditional insurers' "bundling" strategy, Wand argues that tying two bad products together (e.g., homeowners and auto insurance) doesn't make them better. Customers should buy the best product for each need separately.

3. "80% of business development partnerships fail, but you can use them to raise money." (Assaf Wand)—Wand reveals a Silicon Valley unwritten rule: announcing partnerships with big companies like Verizon can attract VC investment, but most fail due to personnel changes, priority shifts, etc. By bringing strategic partners onto the board and granting them warrants, Hippo increased its success rate by "100 times."

4. "We haven't even started picking the low-hanging fruit; we're still picking the fruit off the ground." (Assaf Wand, quoting his President Rick McAthorne)—The US homeowners insurance market is $105 billion and highly fragmented (the largest player, State Farm, has less than 10% share). Even capturing just 1% market share would allow Hippo to achieve $1.5 billion in premiums within three years.

5. "The CEO is a gravity field—wherever you are, the team will be." (Assaf Wand)—Wand believes the CEO guides the company's direction by "leading by example." When sales need a push, he gets involved in sales; when a crisis hits, he is on the front lines (e.g., personally finding housing and ordering lasagnas for employees during the Texas freeze).

6. "Entrepreneurship is trench warfare, but you get to choose what you do, who you do it with, and what culture you build." (Assaf Wand)—Wand believes the three core advantages of entrepreneurship are the freedom to choose your mission, your team, and your culture. These three advantages are key to sustaining entrepreneurs through difficult times.

7. "Wealth creation is becoming 'absurdly fast'—27-year-olds can become billionaires in four or five years." (Assaf Wand)—Wand notes the unprecedented wealth effect of tech entrepreneurship, but he believes the real driver should be "learning," not money. He finds greater joy in seeing hundreds of ordinary employees (e.g., call center staff) become millionaires from the company's IPO.

8. "Respecting the customer means: honesty, transparency, and a long-term perspective." (Assaf Wand)—Wand gives an example: if a Hippo customer service agent finds that a customer's existing policy (e.g., from Farmers) is already good enough, they should honestly say so, rather than pushing a sale. This strategy of "giving up short-term gains to win long-term trust" ultimately leads to more referrals and customer loyalty.