TOKYO -- Sumitomo Mitsui Insurance will invest $350 million in U.S. home insurance technology company Hippo, looking to tap the "insurtech" startup's expertise in artificial intelligence to help policyholders minimize damages from fires and other disasters.
Sumitomo Mitsui will purchase convertible bonds from the company, which follows a separate investment in July made through Sumitomo Mitsui's venture capital arm. Japanese company will also enter into a strategic partnership with Hippo, valued at roughly $1.5 billion.
Hippo, founded in 2015, combines information technology and insurance services. A free smart kit provided to policyholders can shut off water lines remotely when it detects a potential leak or send smoke alerts to the customer's smartphone. By preventing and mitigating issues before they happen, the company can offer insurance at lower prices.
The Japanese company faces growing headwinds in its mainstay casualty insurance business, with the increased frequency of typhoons and other natural disasters. Sumitomo Mitsui hopes to introduce a smart sensor system like Hippo's in Japan so it can monitor different risk factors separately. It eventually could offer benefits such as discounted coverage for buildings with strong disaster mitigation measures.
Sumitomo Mitsui also wants to incorporate Hippo's know-how on digital services, including on communicating with customers and accelerating the application process. It currently takes the Japanese provider several days to process a new policyholder.
Following the bond purchase, Sumitomo Mitsui will send an observer to Hippo's board. The Japanese company also will reinsure Hippo policies, in a bid to expand its presence in the U.S. market.