Fewer States Is Better: Why We Specialize First

In the world of startups, growth is everything. And many insurtech companies think that means expanding into as many states as quickly as possible.

Here’s a bold take.

We think it’s more important to serve people who have the greatest need for our solution first.

That’s why Kin is only in a few coastal states for now, selling homeowners insurance in Florida, Texas, Georgia, Alabama, and soon California. We’re prioritizing homeowners neglected by the industry or priced out of good coverage.

And we’ve found specialization is a growth strategy that works.

The Needs of the Few Matter, Too

Every company has to begin somewhere before it gets big. But growth itself shouldn’t be the goal — it should be the next step in meeting consumer needs.

Take Uber, for example, which famously got its start when Garrett Camp and Travis Kalanick couldn’t get a cab in Paris. Camp created the app to order up black cars in San Francisco, and the rest is history. Now Uber’s so big it’s essentially an eponym for calling a rideshare.

It’s easy to forget that Uber actually started small and focused. After being tested in New York with only three cars, it piloted in earnest in San Francisco in 2010. It would take until 2013 for Uber to be available in 35 cities, with lots of red tape to navigate along the way.

Growth itself shouldn’t be the goal — it should be the next step in meeting consumer needs.

It’s a good lesson that starting where the need is most pressing — in this case, busy cities where there’s always a need for more transportation options — can carve a successful growth path.

In Kin’s case, by launching our carrier first in Florida — where 2.8 million Florida homes were at risk for storm surge damage from Category 5 hurricanes in 2018 — we are going where the need is highest. That’s especially true as home insurtechs sidestep Florida and legacy insurance companies continue to drop Florida policyholders.

Florida homeowners need reliable coverage more than ever, and that’s why we started here.

Every State Should Be Its Own Product

Another reason it doesn’t make sense to go into every state at once?

You can’t customize a quality insurance product that way — especially not in bigger states with complex risks like Florida, California, and Texas. Accounting for hurricane and wildfire risk requires deep expertise in risk selection.

Plus, for insurance in the US, every state has its own regulations and compliance hurdles — some states more than others. It’s much more difficult to get approved to do business in states with more regulatory challenges, like Florida and California. And even when you get approval in these states, there’s no such thing as a one-size-fits-all insurance product. The process starts all over again for every state you sell in (though getting approval in “harder” states may make expansion into others easier).

There’s no such thing as a one-size-fits-all insurance product.

But these regulatory challenges are a real opportunity for innovators. If you take the time to specialize and understand the ins and outs of the state and its needs, you can optimize data sources for marketing, risk modeling, or rating. You can fine tune your underwriting and capitalize on new ways to improve the customer experience.

Then you can take what you learned and see how it applies — and how it doesn’t — when you move into new territory.

Being Cautious Is a Good Thing in Insurance

Regulators and reinsurers can help or hinder an insurtech. That’s a big reason for slowly growing state by state — it allows us to build and maintain important relationships with industry gatekeepers, which makes scaling later easier.

Expanding one state at a time helps us demonstrate our expertise, profitability, and capacity for handling volume. When we put effort into building our reputation with regulators and reinsurers, they trust us when we need rate filings approved quickly or when we want to grow into new territories and write new risks.

Calculated, cautious growth may not make for splashy headlines and may seem counterintuitive to the startup cliché of booming, overnight growth. But when it comes to sustainable profitability, steady expansion has a track record for success.

About the Author

Sean Harper is the CEO and co-founder of Kin Insurance, an insurtech startup and licensed insurance carrier that leverages technology to simplify homeowners insurance. Previously, Sean founded FeeFighters, a payments company later bought by Groupon, and TSS-Radio, an ecommerce company that became an Inc. 500 fastest-growing business. Before becoming an entrepreneur, Sean was a consultant at the Boston Consulting Group and an investor at Longworth Venture Partners. He earned his AB and MBA at the University of Chicago.