Fixing an industry broken by climate change.
As convective storms, wildfires, and floods get more frequent, more intense, and more common in areas that were previously in the “No worries, guys, we’re fine” zone, property owners are becoming more dependent on insurance. But just when they’re needed most, insurance companies have been leaving owners high and dry — or submerged under water, depending on the season. In the last few years, familiar names like Allstate, State Farm, and AIG have dropped policies, slammed the brakes on writing new ones, or pulled up stakes altogether and left disaster-prone areas.
As a result, states are freaked out about the potential collapse of insurance markets and are looking at ways to try to alleviate the crisis. California, for instance, just introduced new regulations that attempt to force insurers to consider a property owner’s mitigation efforts when writing their policy. But it’s too soon to tell how these new regs will work, with some consumer watchdog groups pointing to loopholes and language in the rules that allow for some pretty opaque pricing.
Fortunately, there’s one company that won’t need to radically change how it does business to insure property owners because it was purpose-built — with exactly the right tech in place — to price policies based on mitigation efforts. Meet Stand — an insurance company that doesn’t quit when climate hits. Launching this week in California, Stand will start with wildfire coverage for folks up and down the Golden State whose homes are at disproportionate risk of burning down.
Stand’s big idea is kind of a no-brainer: build a tech-first insurance company that can adjust premiums based on detailed assessments of property owners’ mitigation efforts. In an age of predictably unpredictable climate disasters, it seems like every insurance company should do that, right? Well, there’s a reason other insurance companies couldn’t offer a product like Stand’s, and why, even with these new California regulations, they are still ill-equipped to handle today’s climate reality.
Turns out, looking backwards is a lousy way to see future disasters coming.
In a world where so-called “100-year-storms” now happen nearly every year, modeling risk based on decades of 20th-century weather trends is a recipe for disaster. But for decades, that’s what the big carriers did. They looked at historical data and estimated the likelihood and potential cost of future events. Of course, when so much of your data is from the climate before-times, you can’t help but massively underrepresent your risk. And in the absence of strong risk models, insurers could no longer underwrite profitably and were forced to jack up premiums to stratospheric levels, or get out of Dodge entirely.
Now, under the new rules, these legacy carriers will have to turn on a dime and try to figure out how to factor climate risk into their models — something Stand was built from the ground up to do.
Plus, when property owners take real action to mitigate climate risk — say by cutting back vegetation or installing fire-resistant roof tiles — legacy insurance companies will struggle to turn these fortifications into premium reductions. They simply don’t have the historical data on mitigation efforts that their actuarial models require.
Even if homeowners shell out real money to make their homes more wildfire resilient, they’re still going to get slammed with higher and higher premiums. Or even dropped entirely. Mitigation just isn’t part of the way incumbent insurers are built.
Shouldn’t safer homes be cheaper to insure?
For years and years, the legacy insurance companies didn’t seem to think so. But this is Stand’s North Star, and with tech that lets them flip the script on risk modeling and mitigation, they’re able to help protect homeowners against disasters while actually lowering premiums. With Stand, if you don’t like the price of your coverage, you can choose from a drop-down list of fortification actions tied to specific reductions in premium. The more you protect your property, the less you pay. It almost makes too much sense. Sure, under the new rules, the other carriers will have to take into account some mitigation efforts — but only enough to satisfy the rules. For Stand, taking mitigation into account is their whole damn value prop.
Moreover, Stand aligns incentives with property owners so that everyone is working toward the same goals: saving properties and saving money. And it’s not like this is charity for Stand. Doing everything you can to reduce losses leads to substantial returns, with some estimates putting the ROI on risk reduction at 300%. Not bad, especially considering it comes with priceless co-benefits like keeping people in their homes and potentially saving whole communities.
By partnering with property owners to help design resilient homes and structures, Stand is poised to bring sanity back to distressed insurance markets and make some real money in the process.
Property modeling, down to the last shingle.
Stand’s game-changing approach is powered by equally innovative tech. They use a supercharged physics-driven AI model to create high-fidelity, 3D digital twins of individual properties. Imagine a digital replica of your house, from the foundation to the shingles to the flammable hedges out front. Recent advancements in computer vision, physics AI models, sensors, and weather modeling — to name just a few — have given Stand the ability to simulate how weather events will impact specific structures with an astonishing level of detail.
By analyzing every last detail of a property, down to the placement of a single tree — even taking into account the species of tree — Stand creates customized resilience plans that keep properties safe in a way that works for owners.
A team that’s already batting a thousand.
So, great product? Check. Great team? Check, check, check, check. These four founders have been through the startup grinder with successful exits to prove it. Dan Preston was the CEO of auto insurance provider Metromile, whose pioneering use of sensors enabled a pay-per-mile model that incentivized not just less driving but safer driving — creating savings for both driver and insurance company. His co-founder and CPO, Jason Mueller, came over from PolicyGenius, where he built a marketplace for millions of property and casualty products. Bill Clerico is the founder of Convective Capital, the world’s best wildfire venture tech fund, and Sam Shank was the co-founder of HotelTonight, a leading marketplace for travel and hotels. With their previous exits, Stand’s founders have already shown they’re great at leveraging new tech to outpace incumbents.
Building a future that can take the hits.
With their California launch, Stand’s initial focus is on high-value homes in wildfire-prone areas. As you can probably guess, these tinder-dry pockets of the All-Too-Golden State make up a highly distressed market. Homeowners need insurance in the face of large-scale fire risk. Still, their only options are the state’s last-resort FAIR plan — hardly an option considering its sky-high premiums and limited coverage — or going with legacy carriers forced to follow the new rules. And you can bet that companies scrambling to satisfy new regulations won’t be focused on satisfying customers. Indeed, in this high-need market, Stand will have an immediate, profound impact.
Stand’s launch isn’t just big news for California. Soon, they’ll be helping people all over the climate-ravaged parts of the country protect what matters, and rebuild when protection is not enough. All this goodness in the face of so much disaster gets us excited to support this team as they transform climate risk into data and action, saving homeowners millions and saving millions of homeowners.
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