Alpha data, no agents and accurate pricing key to Kin’s California wildfire expansion

By George Abbott

March 4 - (The Insurer) - Direct-to-consumer property insurer Kin has entered the California market and is now writing insurance across the state.

Speaking to The Insurer TV ahead of the company’s announcement, CEO Sean Harper pointed to Kin’s advanced utilisation of data and avoidance of agents as critical components in its ability to accurately underwrite California wildfire risk.

The announcement of Kin's expansion into California comes at a time when many insurers are limiting their exposure in the state due to wildfire losses and the challenging regulatory environment.

“We're really high-tech, so rather than relying on some of the traditional data sources for underwriting and pricing, we're creating our own data sources, which are much more accurate,” said Harper

“We have a direct-to-consumer business model, and that helps us avoid agents, as 95% of homeowners insurance is sold through local agents.”

He told The Insurer TV: “The problem is, when you sell through agents, if you have a good agent and you're slightly too competitively priced, you end up insuring that whole neighbourhood. We've seen examples, like State Farm being very over-concentrated in the Palisades. They probably had a great agent there.”

As of February 26, State Farm had received more than 11,750 total fire and auto claims related to the California wildfires and paid out nearly $2.2 billion to its customers.

According to Harper, Kin's setup allows it to appropriately price risks in the Golden State that had been underpriced by many carriers in the lead-up to the wildfires.

“I was looking at a rate filing of … one of the major home carriers in California – the average price for insurance in Altadena (an area affected by the wildfires) was only $1,700.

“My house is in the Chicago suburbs, it is not a super fancy house, and we obviously don't have wildfires and also building material is cheaper in Chicago, yet my insurance is twice that amount.

“So a number of these homes in California are actually very underpriced in terms of insurance,” said Harper.

NON-ADMITTED MARKET ONLY POSSIBLE CHOICE

Harper explained that Kin will operate via the excess and surplus channel in California due to constraints in the admitted market that prevent quick adjustments in rates based on catastrophe models and reinsurance costs. He added that he does not anticipate any new entries into the admitted market in California.

“You need sufficient flexibility in your pricing and underwriting to do that, and you just don't have that in the admitted market in California right now,” Harper stated.

“For now, E&S is the right answer for us, and I think that's true for most people looking at the market.

“The admitted market (in California) is basically closed,” he added.