267 Mail-Right Show With Special Guest Sean Harper Joint Founder of KIN
Kin exists to change home insurance from what it is to what it should be
Founded in 2016 by seasoned financial technology entrepreneurs, Kin is a fully-licensed home insurance technology company that provides affordable coverage to homeowners in catastrophe-prone regions like Florida and California. Our financial stability rating of “A — Exceptional” from Demotech, Inc. means we have the financial strength to help our customers through everything – from everyday claims to catastrophes.
With just a customer address, we instantly access thousands of property data points to customize coverage and prices through a super simple user experience. We handle the complexity of home insurance so our customers don’t have to.
Jonathon: Welcome back to the Mail Right Show. This is episode 257. We’ve got Sean Harper with us. So would you like to quickly introduce yourself to the listeners and viewers?
Sean: Yeah, sure. I’m Sean, I run Kin, which is a tech company that does insurance and I’ve been doing this sort of thing for a long time. I’ve been running Kin for four years for almost my whole career. I’ve been doing this by building a financial services company. And my last one was a payments company. This one is an insurance company. And you know what we found is that at the center of every bank or trading firm or insurance company or whatever, it’s, it’s actually all software, right. It’s all done on a computer.
It all could be. And so this is our pattern. Like, we basically take, take a financial product and we build a new bank or insurance company, or whatever from scratch entirely, which is really fun. And most banks or insurance companies have been around for like a hundred years and they don’t have good technology. And so that’s what makes it exciting is you can sort of like, just do it much better. Kind of because we’re smart, but also because we have the benefit of a blank sheet of paper. So that’s what I’m up to at Kin, we ensure homes in places that are exposed to catastrophes.
Jonathon: That’s great. I thought we would have Sean on the show because of his technology background, when you read his CV is extremely impressive. And I thought we would learn about his company and some of the struggles he’s had with it. But also talk about how he sees the technology companies in the real estate industry. I’m sure he has his hands on what’s going on and I’ve got my great co-host, Robert. Robert, would you like to quickly introduce yourself to the listeners and viewers?
Robert: Those of you that could not see, I flashed you a peace sign because we need a little bit of peace and Zen in the world today. But anyway, my name is Robert Newman. I’m the founder of inbound real estate marketing, which is just what it sounds like. It’s the only company inside of real estate. That’s focused on inbound marketing. You can find out more about me at inboundarem.com. I’m very excited to be meeting with Sean. I actually knew who he was long before you booked been very disappointed that these near misses that we’ve had has taken us a while to get him on the show. Can’t wait to talk and hear what his insights are in technology as it relates to his personal space right now with Kin and maybe some insight that he might have on technology.
Jonathon: I’m the founder of Mail Right. We get you leads through the power of Facebook. And an integrated platform that follows through with the lead and has a number of elements, and it really works. And it’s great. So go to the Mail Right website and learn some more about it. Before we go into the main part of the interview. I just want to say to the new listeners and viewers, thank you so much for joining us. Last month was our biggest number ever for the show. It’s over the past seven months, the numbers have doubled obviously you’re telling your friends about the Mail Right show. And I think me and Robert and our guests have been offering some great value to you. So Sean, what made you decide to start Kin, and what does it do that the other insurance there’s a lot of insurance companies in this space of how you mean insurance, and you’ve got the big car insurance companies in Reno as well. How did you think, why did you choose to go into this competitive sector and how did you feel that you could offer something that they don’t.
Sean: Yeah. So what Ken does is a little bit more specialized in that we ensure homes that are exposed to extreme weather. A lot of our customers are in Florida where hurricanes hit you know those sorts of Gulf States where hurricanes hit the United States.
Jonathon: And fires as well?
Sean: We do fires. California is a state that we entered recently because of the wildfire exposure there.
Jonathon: Just to get a clear picture, you might be dealing with people that I can’t find any, it was impossible to get insurance or find the very hard from a very journalistic provider.
Sean: That’s exactly right. So actually, if you look at the top market share homeowners, insurance companies, Allstate state farm, et cetera, in Florida, for example, they used to be around 80% of the market share. Now they’re actually, this was in 2005. Now they’re less than 25%.
And so what has happened is these big homeowner’s insurance companies, the ones that you know of, they have television commercials and everything. When things get volatile and things get a little bit riskier, they leave that’s right. They just leave. They absolutely do. They’re running from California as fast as they can right now because I think in 2005, 2006 people realized like hurricanes are coming more often and stronger than they have before.
Jonathon: So I’m going to ask you the obvious question, Why, what, you know, you’ve got these people running, but you’re trying to enter that. So, is it that you just offer really expensive insurance? Because these people just can’t get insurance or if that’s not the case, how do you make a profit? Because they’re not idiots. They might be lazy and they might be so large that it just can’t be bothered with it. But how do you know if you’re not offering very expensive insurance? How do you make any money out of it?
Sean: Yeah. So ours does tend to be more expensive than in places that are not catastrophe exposed, right? It’s like the average cost to insure a normal home in Florida is almost two and a half X. What is here in Illinois, where I live. So on average, it just is more expensive to get insurance in these places. But what we do that allows us to write business profitably, there is we pull in a lot more data about the homes and not all of these homes are equal. And so if you look at the way that these legacy insurance companies do things, they make a lot of assumptions around the home and they rely a lot on the users to tell them about it. And so if the way that I’ll use an example. For a lot of legacy insurance companies, their level of geographic resolution is a zip code. Zipcodes are really ticked. The fire risk at one end of the zip code could be totally different than at the other end of the zip code. That’s just one example.
Jonathon: Oh, I’m totally following what you’re saying because it actually, I’ve got a friend. She’s a friend and also she works for me occasionally and she lives in Florida and she was brought up in Florida. And she has no intention of moving from Florida. And her partner has just bought a new house and they’re making sure she’s got this generator and it’s been built up higher. They know more when she got these shutters that can close. So she’s invested a lot of money in this new house to make it resistant to hurricanes. So I suppose your company because you asked a lot more questions you have access to. So you, you can take in, is the homeowner invested a lot in making it more resistant to exposure basically? Am I correct?
Sean: That’s exactly right. The one caveat there is we do not ask more questions. I think asking people questions about their home is a really bad way to get reliable data. Because people don’t know. And they also, well, they, they selectively. Yeah, exactly. Like is your
No, my roof is in great shape. It’s brand new. No, it’s not like I can see, you know, their shingles, this thing. But when we pull in a lot of objective third-party data sources, we use aerial and satellite, we treat trained the machine learning algorithm to actually analyze the state of the home. And it can make a big difference. Like the way the home is constructed has a huge impact on its resilience to wind and flooding, et cetera. Also, the micro geography of where the home is, has a huge difference. Like my risk on this side of the block could actually be really different than the fellow living, you know, a 12th of a mile away, you know, one, one block away. Maybe I’m six feet taller, six feet higher makes a really big difference. So we just pull in all of this data and it allows us to make better, more granular pricing decisions.
So that’s a big part of what we do. Another big part of what we do is that we’ve actually pulled a lot of costs out of the system. And so if you look at most areas of financial services, they’ve all gotten cheaper. How much does it cost to trade a stock now versus 30 years ago, it’s free? How much does it cost? You used to cost you like 30, 40 bucks to make one, to make a trade, a single share of stock. How much does it cost to do a cross border remittance? It’s like three bucks now. It used to be 30. All of these things have gone down in price because of course computers. What’s happening in property insurance is actually the percentage of the policy premiums that are wasted basically, that they don’t go to paying claims.
They go to the overhead of the insurance company is stayed constant at 35% for 50 years. That’s crazy, right? Well, everything’s getting cheaper except this. Well, what’s even crazier is the average price. The average premium has gone up more than three X during that time period. So actually the insurance companies are being so wasteful. They’re spending three times as much money on overhead per policy than they did 50 years ago. And so we can do it a lot cheaper. And so that’s one thing that you can do, especially on these bigger policies. The fact that we’re much lower costs, much lower like actual costs to manufacture these policies. We can pass a lot of that cost onto the user. So there are two things going on one, we’re reducing the average cost because we’re moving overhead by automating and using technology.
Now, the second thing is we’re actually being more granular on our pricing. You know, we’re pricing the risk more accurately, depending on the actual traits of the home. The actual traits of the geography, because we’re pulling, investing more data, we’re underwriting and pricing on thousands of variables that are all like objective third party data that you can trust versus our competitors are underwriting on 40 variables. And the way they’re getting that is by asking the user and or an insurance agent, both of which are not objective and not reliable sources of data.
Jonathon: It’s fantastic. And it’s really interesting for our listeners and viewers over to you, Robert.
Robert: So this is not your first go. So I’m with John, I think this is fascinating. And what you’re describing is you’re just basically describing a new metric leveraging technology in order to do an old business. Which by the way, this is the same thing that Yuan must do with PayPal. You know, sending money from one place to another is not new. The way that he decided to send that money from one place to another is new. And that’s what he revolutionized with PayPal. And that’s kind of what I hear you describing. You’re taking an old process and applying new technology and you’re improving the efficiencies. But if I remember correctly, this is not the first time that you’ve done something like this, is that correct?
Sean: That’s correct. I mean, this is definitely the largest scale that I’ve done. You know, but then this is the fourth business that I’ve started. And most of them have been in a sort of changing old industries. My last business before this was a payment processing business. So actually very similar to PayPal, it was similar. It was very similar to Stripe, which is sort of the next version of PayPal. And then the business before that was a rental car company, you know it also changing an old business. And then before that was an e-commerce company. It was my first one.
Sean: It gets easier as you go to be able to take bigger swings. I think,
Robert: Yeah. My, my first company was washing windows. So you’re a little ahead of me, man. I wasn’t technology savvy, but then again, this is so long ago that there were really no computers as we know them. The internet was not what it is right now. But having said that, so you’ve done these four businesses. You’re 10 has 300 people. If I remember somewhere towards the start of the interview.
Sean: Above 200.
Robert: Yeah. Okay. So you’ve got 200 employees working for you right now as we speak. Is that correct? What would you say? So you’re an old hand at doing this, but I’ve owned seven businesses, not as big as yours, but still I never run other businesses that are actually pretty big. And here’s what I’ve noticed. It’s like going to war, you walk into something with a plan, you’ve got your business plan and you’ve got everything mapped out in your head. You’re like, okay, this is an opportunity. I want to exploit the opportunity. But every single time you get into it, something happens. If there’s a variable that you missed or something that you thought was going to work one way, but it didn’t work that way that you thought that it was going to work. What’s been the biggest I don’t know a thing that has gone differently from plan to actual inception with Kin?
Sean: There’ve been two really big ones. The first is when we got into this. We saw it as more of a general homeowner’s insurance. Again in our model works everywhere. But the more we got into it we realized that these customers that live in these more catastrophe exposed areas. And it’s a lot like actually, if you, the areas that have catastrophe risk on the population of the United States, they’re very highly correlated because people are moving to Florida. They’re moving to Texas, they’re moving to North Carolina. They’re moving away from places like Illinois, even though we have safe weather and we have crappy weather, which is maybe why people don’t want to live here. You know, Florida is great right now. It’s sunny. And it’s really hard like their pain around this is, you know, it’s hard to get people to think about insurance here in Illinois.
You go to California right now, everybody is talking about their insurance. It’s so hard to get, and the prices are going up so much. And you really think about it. Cause you see smoke coming in over the Hills. You’d be like, oh crap. That could be me next. I got to really make sure my insurance is good. And so of the hundred billion dollars, that’s the market size for homeowners insurance in the US about 40 billion of that is catastrophe exposed. And those users really need our tech. And so we, we focused on that. We didn’t realize we were going to, we just sort of learned when you’re out there talking to users and we found the users that really care about this really needed something where these catastrophe gets. Suppose guys, like that, was one really big change. And then the other one was we thought that we could sort of do this as a virtual insurance company.
We had sort of the same way that PayPal isn’t a bank sort of thing. We thought we could sort of rent the insurance infrastructure from another company. And we did that for a while or you realize was it didn’t allow us to solve enough of the consumer problem. And we ultimately needed to raise money to become an insurance company ourselves. And have our own credit rating, have our own relationship with the regulators. You’re really giving us full control. Which is not like I never expected I’d be the CEO of an insurance company and is a regulated industry with all this red tape and stuff like that. But, we did that. It was good that we did because it’s really important that we have that sort of freedom to do things our way, the way that a legacy insurance company does it.
Jonathon: Sorry to interrupt. We need to go for our break. We will be back in a few moments and we will continue. I’ve really enjoyed the interview so far. Anyway, I think this is going to be a really good. We will be back in a few minutes.
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Jonathon: We’re coming back. We have had a good discussion. Back over to you, Robert.
Robert: I had a follow-up question based on what you just said and thank you very much for the answers that you gave, but it did raise a fascinating question. So you didn’t expect to be an insurance company. I know a lot of people out there haven’t owned as many businesses or work for as many businesses as I have. So let me just tell you for those that are listening, like not thinking you’re going to be an insurance company and discovering that you have to be, that’s a huge difference. That’s a massive difference. It’s a much-regulated industry. So when you discovered that change, because you pointed out that there were some pain points that you couldn’t address, can you give me an example, Sean, of what one of these pain points was that was so dramatic that you literally decided you were going to basically increase your own personal effort, by least a hundred percent, because now you’ve got to raise money.
You got to get your float, you got to do all these things to get accredited as an insurance company, that’s an incredible amount of work right there. Plus you’re on the hook to whoever you raise the capital from whether that is venture capitalists or private investors, it doesn’t really matter. You now have to answer to somebody who as an entrepreneur, I would personally hate, excuse the cursing. So like, what were those pain points that were so important for you to address?
Sean: Yeah it was really two things. And the first was just generally the speed of decision making was really, we were really hamstrung. Because we make decisions fast. You know, we’re a tech company. We can make new things. We do make new things every day and we have really clean data. So we’re looking at, oh, the users did this. It’s not working. We’re going to ship X, we’re going to make this change and our insurance policy, we’re going to make this change in the language. We’re going to make this change and our underwriting criteria. And what we were finding is we were coming up with these things. They made a lot of sense, right? It was like, okay, we’re looking at the data. This is very, obviously the thing we should do. But if you’re renting the infrastructure of another insurance company, well now you got to go convince them. And they don’t view things the same way we do. They, their questions are, well, we’ve always done it this way. Why would you do it differently?
And you can convince them, but it’s just like, it’s so hard. And so time-consuming, it was slowing us down and, you know, stuff that should have taken us days was starting to take us months. And we’re never going to be able to like, yeah, it’s just, it’s not going to work. I mean, it was good to get started. We were able to do like sort of a proof of concept and we got a lot of customers and it was a good start. But we kept running into it. We kept saying, oh, the, the next insurance partner is going to be different. And they all want to be right. Because no, one’s like, I’m not innovative. I’m stuck in the mud. Like, no, they all say that they’re innovative. Like, yeah, we’re really fast-moving, really smart.
But then they, they, they just can’t get out of their own way. So that was a big reason. And the one thing that’s sort of a subset of that was when we were a virtual insurance company; we weren’t in charge of doing our own claims. And that’s such a huge part of it. Cause like, if you’re giving people this like super modern, super sleek, super-efficient experience when they’re buying the product, when they’re logging in to make changes to it or whatever, and then they have a claim. And you’re like, yeah, we’ll be out of your house in a week. We’re going to send Joe in his truck. It’s not what they expect. Or they call up and they’re like, what’s the status of my claim? Or like, I don’t know. Let me get back to you on that.
That’s not what they expect. You can track the status of a pizza delivery online. You should be able to check to track the status of an insurance claim for your most important asset for most people online. As we really wanted to own that whole sort of claims experience. And you really can’t do that unless you are your own insurance company. And it is like an Epic amount of brain damage to pick up an insurance company. So we did not take that lightly. It was really hard. I mean it took us a year and like 30 million bucks to do it. It was not easy.
Robert: Yeah, no, I knew in advance. I will tell you this though, Sean, whether you intended to, or not with this conversation, you may have acquired yourself a new customer because it, all the things that you’re singing to a tech guy are like the suite sounds like the amount of that I’ve gone through being a car owner with insurance in California. I’ve been hit twice when parts, do you know how much work that takes out of my day when some chick texting, I’m not discriminating. And it just so happens that in both cases, there was a woman. And in one of the two cases, she admitted she was texting. So I had a little bit of anger about that, but anyway, she’s texting, she hits my car, you know what? I ended up having to do months’ worth of work.
They lose my check and this is true stories. So you’re seeing to the choir, if you’ve fixed that, if you’re like, Oh, you can track something. I’m not Holy. I’m your next customer, whether you intended it or not like, but that’s brilliant stuff, John, I’m going to turn it over to you, bud. But I have a request for both Sean and John. I would love to hear your thoughts. We do a little bit of extra time at the end of the show, 10 minutes max, or sometimes it looked like something like that. And we put it on our video town. And I’d love to hear how like pick out a pinpoint inside the more traditional real estate business at ends and you’re thought. Just an idea about how you think technology could.
Jonathon: It’s really uncanny that I and Robert had the same thought at the same time. Sean but while I was actually going to, I’m actually in this bit of the show in the bonus content. I don’t know if you know, you probably don’t have time because you, you know, your but I like to put this to you in the real estate industry. We’ve got Zillow and we’ve heard a few, the Mail Right Product is basically sending texts and font of fruit. And it gets leads by using the Facebook platform. And there are a few bits and I think Mail Right now has a decent market fit. And I think you’ve described that is that you’ve had to kind of move your business. So you actually get market fit. And it’s been the same process on a lower scale with Mail Right.
But in the lead generation side of digital marketing, there’s a lot of companies talk about artificial intelligence, big data. They bounce these terms. But when I actually look at the companies, either using Google ad words or Facebook, we have a CRM, that’s it. But that just seems to be a lot of people bouncing these terms around. A, would you agree with that? And B can you give us some insight into why it is necessary to use artificial intelligence and the big Bay area in an effective way? And now to the second question is a very large question. But maybe you can give some insights.
Sean: Yeah. I mean, like machine learning is a really overused term. Cause it sounds cool. Yeah. So if you have any way to position what you’re doing, especially in learning, you know, you used to say AI, now you say machine learning, people try to say that because it gets attention. You know, when we found in our business is there are still some things that are good to have a human do. But there are lots of examples of that would be like, actually we don’t do like chatbots. We found for customer service, having a human do it actually really helped. Like our customers felt better about it. They gave us better reviews. We sold more you know, humans are good at explaining things and language and empathy and all the stuff that you need to sell. We found a big use for machine learning in, you know, we’re really underwriting like every property in the whole state before we even market to them. And that way we can sort of know what customers we want and what customers we don’t what customers will a good match be for.
And you can’t do that. Or if you’re talking about millions of properties, but you know, tens of thousands of data points per you can’t have a human do that. You sort of need machine learning for it. The other area that we’ve done a lot with it is image recognition. So in insurance, a lot of the time there are these documents that it needs to be like a forest and red. And then there’s also a lot of data and images. So if you think about, you know, I need to know how expensive it’s going to be to rebuild your home if it burns to the ground. Where can I get data on that? Well, one really good source of data. And in order to know that, I need to know like, how good are your kitchen cabinets? And like what kind of bathroom fixtures do you have and stuff like that.
So you can get a lot of that data out of the images that are coming out for the real estate industry. And so actually by pulling that data in and sending it through an image recognition algorithm, you can start to make conclusions, the same way a human would. Oh, this house is of superior bills, or this house has a roof that has a really complicated shape. So that’s going to be more expensive to build, or the foundation of this house, you know, has 12 corners versus six. So that’s going to be more expensive to build. So those are two areas that we, we are very actively investing in machine learning, and it makes a giant difference because a human just can’t and our scale, you can’t have humans doing that. I would need to have like, hundreds of thousands of people doing that.
Jonathon: You have explained it so well, I might be summarizing this, but would I be correct? Because of all the data points that you’ve got, can you actually, I thought if you’ve done this as an intellectual exercise, or I have no idea. But we thought the data points that you’ll collect too. Can you predict when somebody is actually thinking about moving?
Sean: Yeah. We think that you can, I mean, there are a lot of vendors who supply data that you can buy a signal like that. You know, one thing that we’ve found is we don’t need to predict when you’re going to list your house for sale because of where we sort of sit in the value chain. I need to predict.
Jonathon: If you told, so your background’s, I would believe it when you told me I’m a little bit skeptical about a lot of these other vendors. Because I know the amount of data that, and the amount of data points that you would need to get any kind of.
Sean: I think if you had access to their bank account, you can tell. You can do an integration that one of these. You have to get the user to give you permission.
Robert: But John, Sean, before we move past it, I’m going to give a gorilla marketing wreck right now to those of our listeners who are listening. And I happen to know for a fact that I’ve got at least one guy, who’s a top flyer in San Francisco listening to this show right now. And I’m talking to you, Mike, because this is your recommendation right here. When you start talking about technology-forward cities, such as New York, Los Angeles, San Francisco, Sean, whether he intended to or not just gave you a little something that you could throw into your listing presentation. And what I mean by this is that we’re having a conversation about machine learning and images. And we are talking about protecting the asset once it’s been moved, either on the sell side of the buy-side. So here’s the thought you’re a real estate agent. You’re doing this presentation.
If you say, inside of your presentation, I’m going to use X technology to produce a couple of hundred digital photos, taking an image of every single element of this asset, not just for the MLS, but for the enduring value of the home. My personal feeling as a tech-forward home resides, I don’t own it. But if I did, this is a selling point for me, I’d be like, Oh dude, and you’re going to take 200 pictures for me. Cool. You have a slight, maybe a five or 10% better chance to get the listing from me personally, as a person that understands tech, then agent, that’s going to come out and say, oh yeah, we take five to 10 photos of the property.
And then we move on because if you take a picture of, and, and correct me if I’m wrong here, Sean, but if you had somebody a home, let’s say, cause I heard you say you’re scraping the MLS or the pictures that realtors are taking. So if you have a home that you have 200 photos of and somebody is taking the time and the energy to photo every single element of the outside of the home, the garage, all the fixtures, the inside, the home, what the tile is, what the walls are, bandwidth, the sills. If you have all that data, does it not make it easier for you to do for your machines and for you collectively your humans and your machines to get an understanding of the risk associated with them.
Sean: Robert, absolutely. More images are definitely better.
Robert: We’re going to wrap up the podcast part, the show. Hopefully, Sean can stay on for another 10 minutes for a couple more questions. Are you okay with that?
Sean: Yeah, absolutely.
Jonathon: We can just wrap up the podcast part of the show. What’s the best way for people to learn more about you and your company?
Sean: Best place to find us email@example.com. It’s K I n.com. It’s Kin like family. Who would you rather have insured your home than your family? We’ve got a lot of really good content on our blog up there. And you know, we also have some really excellent insurance. If you live in one of these areas where it’s hard to get insurance.
Robert: And amazing social media reviews, bud, because I’ve already seen them before you ever came on the show. So you’ve got amazing dialogue happening from your clients to them. And I suggest everybody go and check it out.
Jonathon: That’s great. We’ll be back next week with another great guest or internal discussion between me and Robert. We’ll see you soon folks. And remember we’d be having another 10 minutes of this interview and you’ll be able to see their interview on the Mail Right YouTube channel. We’ll see you soon. Bye.