Why Wildfire Insurance is Broken—And How Stand is Fixing It
Dan Preston is the co-founder and CEO of Stand, a brand-new startup property insurer providing homeowners insurance for climate-exposed properties. They’re launching with a go-to-market focus on higher-end properties in California—homes that are otherwise unable to obtain affordable rates or any coverage at all due to wildfire risk.
Stand claims that their differentiation, as Dan will explain in depth, comes from how they assess fire risk at the individual property level and help homeowners take proactive steps to mitigate those risks as part of the underwriting process.
Dan is a seasoned entrepreneur with a win under his belt in InsurTech. He was previously the CEO of Metromile, which went public on the NASDAQ in 2020 via a SPAC merger and was later acquired by NextGen insurance company Lemonade in 2022.
Stand recently raised a $30 million Series A, co-led by Inspired Capital and Lowercarbon, and came out of stealth at the end of 2024 to begin underwriting properties.
Insurance risk is being priced and managed in ways that no longer match today’s realities, and we loved hearing from Dan about how Stand is tackling the challenge.
Episode recorded on Feb 11, 2025 (Published on Feb 20, 2025)
In this episode, we cover:
[3:49] Dan’s background in computer science and machine learning
[7:00] The catalyst for starting Stand
[9:22] How insurance companies typically evaluate risk
[11:05] Challenges in measuring wildfire risk
[17:32] Managing fire-prone communities and the importance of collective resilience
[20:53] The role of private firefighters in insurance
[22:08] Stand’s mission and focus on climate-exposed properties
[26:53] Progress since launch and early traction
[27:39] Stand’s product, technology, and risk modeling approach
[33:18] Why legacy insurers have struggled to adapt to wildfire risk
[38:35] What "perils" mean in insurance and why they matter
[41:47] Stand’s $30M Series A funding and future plans
-
Cody Simms (00:00):
Today on Inevitable. Our guest is Dan Preston, co-founder and CEO at Stand. And boy, this one feels really relevant right now. Stand is a brand new startup property insurer providing homeowners insurance for climate exposed properties. They're starting with a go-to-market focused on higher end properties in California that are otherwise unable to obtain affordable rates or any coverage [00:00:30] at all due to wildfire risk stand claims that their differentiation, as Dan will explain in depth, comes from how they assess fire risk on individual properties and help property owners take proactive steps to remove or reduce those risks as part of the underwriting process. Dan is a seasoned entrepreneur with a win under his belt in InsureTech already. He was previously CEO of Metromile, which [00:01:00] went public on the NASDAQ in 2020 via a SPAC merger, and then was acquired by NextGen Insurance Company, Lemonade, in 2022. Dan's founding team at Stand is also impressive, including Jason Mueller, the former Chief Product Officer at PolicyGenius, Sam Shank, the former CEO of Hotel Tonight, and Bill Clerico, the former CEO of WePay and current managing partner [00:01:30] at wildfire tech venture firm,
(01:33):
Convective Capital. Stand recently raised a $30 million series A co-led by Inspired Capital and Lowercarbon, and they came out of stealth at the end of 2024 to begin underwriting properties. After having lived through the recent devastation of the January, 2025 fires here in Los Angeles. This topic seems more relevant and personal than ever, especially [00:02:00] given the reporting that has emerged on the number of impacted homes in those fires that were recently uninsured or only insured via California's last resort Fair Plan insurer. There's clearly a huge problem with how insurance risk is typically priced and managed in our changing world, and I loved hearing from Dan about how Stand is planning to navigate all this. But before we start from MCJ, I'm Cody [00:02:30] Sims, and this is Inevitable. Climate change is inevitable, it's already here. But so are the solutions shaping our future. Join us every week to learn from experts and entrepreneurs about the transition of energy and industry. Dan, welcome to the show.
Dan Preston (02:56):
Great to be here. Thanks Cody.
Cody Simms (02:58):
Dan, I have been really looking forward [00:03:00] to this recording. As many regular listeners of the show know I live in Los Angeles. Luckily my home was not impacted by the fires, but we were evacuated for a few days. I know so many people who as many of us do, who were not as lucky as us and have had significant loss as a result of the recent fires here in LA. We scheduled this recording before that event happened and I've been sitting here waiting to learn from you about the insurance industry and in particular [00:03:30] how wildfires are impacting it. So thanks for joining us.
Dan Preston (03:35):
Great to be here.
Cody Simms (03:35):
Why don't we start just learning a little bit about you and how you got into working on insurance in the first place, and then get into how that translated into specifically wildfire and climate risk insurance.
Dan Preston (03:49):
My background's all rooted in computer science and machine learning. So early part of my career was applying that to various scientific disciplines, astrophysics, remote sensing, computer vision, [00:04:00] interesting applications of machine learning in different places,
Cody Simms (04:02):
Just randomly astrophysics.
Dan Preston (04:04):
This is one of the most fun jobs I ever had. We were looking for micro lensing events. These were objects that didn't emit light, that pass in front of stars and we could discover them. Time series for that. It was a lot of fun. Wow. That was my first job out of college actually. So after that, I was the co-founder and CTO of basically it was a payments company, did mobile self-checkout, and we sold the company Intuit in 2012, and that's when I met the early Metro Mile team. We think we were [00:04:30] maybe half a dozen or a dozen folks at the time. The product was just getting launched and Metro Mile is a per mile auto insurance product. Basically you pay for the miles you drive as opposed to paying one flat fee. And the core idea was being able to look at the way a car moves physically and counting how often it is actually exposed to risk as opposed to using all of the standard demographic variables that I think insurance typically uses across most types of products.
Cody Simms (04:58):
Seems like that would especially apply [00:05:00] to lease holders who are very conscious of their mileage.
Dan Preston (05:04):
Yeah, and in fact, two thirds of people, two thirds of drivers actually drive less than the average.
(05:09):
So people live in cities who take public transit to work. It's a great product for it turns out actually most people. And the other part of it too is as you can measure driving, you can also look at the quality of every mile driven. So I had no background in insurance when I joined Measure Mile. I was just interested in finding a way to build a different kind of product [00:05:30] or business by using machine learning at its core and very obviously incredible businesses that have been built that way. This is back in 2012 when most of the field was kind of focused on ads optimization and things that I felt a little less compelled by. And what was really exciting at the time as we were gathering all this really interesting data about car health, like your sensors that would give you information about your engine location, accelerometer, gyroscope, all of the things that you would need to measure how the car was actually moving around.
(05:59):
And [00:06:00] the idea wasn't just for my insurance, it was how could we help drivers with everything that they were struggling with, whether it was the cost of ownership or maintenance, et cetera. And so my excitement was really about how we were going to use that data to build a fundamentally different kind of product. So I actually joined initially as the CTO of the company to build out the data science team, engineering team, et cetera. Became the CEO about a year after that, and with the team grew the company to IPO in 2020 and then we told the company to Lemonade [00:06:30] a couple of years ago, it's a great fit. The two companies are really highly aligned and we ended up sliding in really well as they have this broad platform for homeowners, renters, et cetera, et cetera. It's been an exciting journey. So after that was exploring really a lot of different places, whether that was across different sectors, whether it was energy or climate and other areas that had interest in wanting to build something of meaning and spent a bunch of time with our now co-founders.
(07:00):
[00:07:00] So Jason, Bill, and Sam, we were exploring a number of different ideas with really one core idea that I think it's been compelling to us for a long time. Insurance companies and the customers that they insure are highly aligned at avoiding the thing they're insuring against. Your car insurance company doesn't want you to get into a car accident. You don't want to get into a car accident, and if somehow that insurance company can help you avoid that, well they can also then offer you lower rates because it's not going to happen as often. And this idea is in our view, very under-explored. [00:07:30] There are some really interesting places where it gets applied. In cyber insurance, you see this often where cyber insurers will have internal teams that will do like pen testing and other security vulnerability testing for the company to make sure that you don't have issues down the road.
(07:44):
There's actually an older company called FM Global that does some really interesting work with boiler rooms and power plants and they help them redesign them to be less risky. And as we explored actually a few concepts with that core idea, we got to know the challenges in [00:08:00] property insurance markets, wildfire, convective storms and flood, and the incredible amount of distress that these markets are in today. And our fundamental view is that there's no way to just cherry pick your way out of the problem. The last 10 years of data that we have about these types of events are telling us very little about the next 10 years. And so the traditional way that you would solve this problem is you would remodel it based on the historical data project that forward and try to identify the properties that you think would perform well [00:08:30] in an insurance portfolio. But if you have unreliable data for that, it's really challenging to be able to actually identify those homes. And so as these events are happening more and more often and more and predictably what you're seeing is most insurers leaving the market overall.
Cody Simms (08:45):
Just to sort of butt in, what I'm trying to relate this to my own experience and when I think about my own homeowner's insurance, there's a section I'm supposed update or check at least once a year or so, which is the various definitions of my [00:09:00] own home characteristics. So it'll ask me questions like what kind of roof do I have or how many bathrooms do I have or do I have a patio connected to the home or this, that and the other? But as I think about it, none of it really asks me specific questions about risks is just asking me to define things and then I guess they're going to draw their own risk conclusions based on that, but it assumes that it's asking me the right stuff.
Dan Preston (09:22):
For sure. Those types of risks like leaks and other types of damage you may have in the home, which happen often, there's large bodies of data that [00:09:30] you can pull from and just say statistically, this is how often this happens based on the age of the home or the types of components you have. And so that's pretty well understood. The real challenge with climate based risk is that it's changing very rapidly over time. The geography itself where these disasters are happening because of the unpredictability of that, it's really challenging to bake in the last 10, 15, 20 years of data to say, we can statistically assume that this is going to happen this amount of time in the next 10 years. And so while [00:10:00] there are frankly a lot of great models that have been built and are being built to predict what that will look like over the next 10, 20 years, the core challenge is that the likelihood is so high and the cost associated with reinsuring it is so high that now we're starting to see hundreds of thousands of dollars of costs for just a single insurance policy for a lot of homeowners.
(10:23):
And so our core view is that the only real way to solve this problem is to physically intervene [00:10:30] and work with homeowners to actually change the characteristics so that if a wildfire were to get there in the first place, you could actually avoid losing the home and that will fundamentally change what your risk is. And one of the challenges that I think most insurers are facing right now as well, it's pretty well understood that these kind of resiliency based characteristics, whether that's defensible space around the home or right kind of siding, et cetera, will reduce the likelihood of a home being lost. The efficacy [00:11:00] of that's not well understood. There's not a lot of historical data you can draw from you can for leaks and other things.
Cody Simms (11:05):
Let's draw this back to some of the examples you gave earlier of insurance companies and homeowners being aligned and often even trying to put plans in place that can reduce overall risk and policy costs. I mean, some examples that exist today are you have to say, do you have a burglar alarm in your home? Do you have monitored fire alarm in your home? If you think about your car, it's like, do you have a car alarm? Do you have a system that tracks where your car is if it's [00:11:30] lost? But when it comes to asking those questions about fire risk in particular and then acting on them, that is not a step that insurers do today. Why not? Why can't they just do that?
Dan Preston (11:41):
Homeowner insurers will still ask some questions today about the resilience and characters of the home, and in fact, you can get some of this from satellite data. You can see how much defensible space there is around the home. Oftentimes you can't see some of the really important characteristics of things like vents or flashing around the home or other things where embers can come inside. [00:12:00] So you need to ask a homeowner of these questions. One of the core challenges, just the lack of understanding means that the questions that they're asking are really cumbersome. So oftentimes we'll see from the homeowner's insurers that are providing insurance availability today is looking for 200 feet of defensible space around the home looking for no vegetation anywhere around the siding, a set of changes to the siding of the home
Cody Simms (12:27):
Basically. Do you live in a concrete bunker? If so, [00:12:30] great. You still get a policy.
Dan Preston (12:31):
Exactly. And a lot of times that 200 feet, your neighbor's home is within that, right? So it's really challenging to hit a lot of these requirements and it just changes the aesthetics of the home and a lot of the reasons why you bought it in the first place, and I think frankly has a big impact on the home value. It's very rare for homeowners to ultimately be able to meet a lot of these standards, which is why it's so important to find other ways of making the home resilient.
Cody Simms (12:54):
Just hitting on some of the trends you were starting to talk about in terms of how wildfire [00:13:00] in particular, I can say climate risk I guess more broadly are looking to impact the entire home owning process.
(13:06):
I've come across three articles in the last month or two in Wall Street Journal, New York Times, et cetera, that have some pretty eye popping headlines, right? Wall Street Journal had one last month, oh no. This month in February, 2025, "Climate change to wipe away 1.5 trillion in US home values." The New York Times, one of my favorite investigative reporters, Abram Lust Garden at the New York Times wrote an opinion piece [00:13:30] "That giant sucking sound, it's climate change, devouring your home's value," and then another one from the New York Times about insurers are deserting homeowners as climate shock worsens, and they have some stats in here that are incredible. They talk about change in home values expected over the next 30 years and really highlight places, I guess you might expect. It's like the Tahoe area of California. It's sort of Florida and coastal Florida up through North Carolina, [00:14:00] and then places you might not expect, which is kind of the Midwest, I guess, tornado alley corridor of Texas, Oklahoma, Kansas, and then the insurance rate changes. Some of those places I just mentioned, they're forecasting 300% plus insurance rate changes, which just makes the math of owning a home very different when you're factoring in the percentage of your total monthly payment that's going to insurance.
Dan Preston (14:23):
Yeah, so it's absolutely an issue. We talk with a lot of realtors and builders who are really struggling with insurance [00:14:30] availability for the homes that they're selling, and we've seen a lot of cases home values being knocked down in the market because their insurance contingencies attached to it, and the cost of insurance is oftentimes on par with the mortgage cost itself and in general, one of the ideas that we've been working with some of our realtors on is actually designing the home or reflecting the design of the home in the way that it's actually resilient today. So you could then effectively have a pre [00:15:00] underwritten insurance policy, so you can see that actually as you purchase this home, there is insurance availability today. So I think what you're going to start to see that that's actually going to be part of the sales process for a lot of the homes in the US that have this kind of exposure, which is a huge fraction of them.
Cody Simms (15:14):
Oh, interesting. So as you're marketing the home, being able to market the resilience measures you've taken, which might be just as important as your Viking stove or whatever it may be.
Dan Preston (15:25):
Yeah, I mean especially as you start to see these types of resiliency characteristics impacts [00:15:30] the price itself. If you know that that home can be insured for a fraction of the price is another one, well your cost of ownership is going to be dramatically lower.
Cody Simms (15:37):
Now with wildfire, one of the challenges as I understand it is it's not just the work you do, it's the work your neighbors do as well, right? So you could spend hundreds of thousands of dollars making your home as resilient as possible, but if your neighbors still have dead forest growing in their yard, highly flammable or whatever, you're at serious [00:16:00] risk still.
Dan Preston (16:01):
One of the biggest challenges with wildfires, especially some of the recent ones we've seen, is this concept of urban conflagration or urban firestorms where the biggest risk in one of these storms is the distance of your home to a neighboring home. If someone's house is on fire 10 feet away from yours, it's very, very unlikely there's anything you can do to your own home to be able to allow it to survive. So if we were to rebuild these neighborhoods in a truly fire resilient way, you're going [00:16:30] to have to have some collective action both between the town to be able to build defensible space around where the brush meets the border homes and homeowners actually taking care around things like defensible space, tempered glass windows, et cetera.
Cody Simms (16:43):
Which is counter to a lot of what we hear in urban planning around climate change, which is we want more density because the more you spread out, the more you're creating emissions footprints of these neighborhoods.
Dan Preston (16:55):
You can still have density and resilience. It's just a matter of how you build the homes in the first place.
Cody Simms (17:00):
[00:17:00] So from a new construction perspective, my prediction is much like we saw all these seismic codes become requirements after the Northridge earthquake in I believe 1996. Today, we're now going to start to see a lot of fire resilience become part of building codes, particularly for new construction, but maybe also for retrofitting. But even with retrofitting, you're not going to be able to move your neighbor's house 20 feet over. How do we manage the existing millions and millions of homes that already [00:17:30] exist in these fire prone areas?
Dan Preston (17:32):
There's a lot you can do, and actually some of the building codes that changed even 15 years ago helped move things forward. As an example, one of the most important things you can have on your home if you have neighboring homes close to it or vegetation, is tempered glass windows, which can survive fires much, much better than float glass windows, windows. There are a number of mitigation techniques that don't require you to have to rebuild the homes entirely. Replacing windows with tempered glass windows, having good defensible space around [00:18:00] homes and ensuring that you have the right kinds of vents and flashing so embers can't get inside the home. If you did these plus potentially a couple other key changes, these are thousands of dollars, not tens of thousands of dollars of changes to most of these homes, and if you do that across a whole neighborhood, the homes themselves will actually not be lost and then you don't have this cascading effect. The challenge is that if you have single points of failure where one or two or three homeowners haven't done [00:18:30] that, that's where you see the really big challenges.
Cody Simms (18:32):
And so for you as now an insurer, we've come to your actual product and everything you're doing here in just a minute, but are you looking at the resilience footprint of individual homes at a time or are you also trying to draw sort of a community resilient score that is helping to reduce the risk on individual properties you might insure?
Dan Preston (18:49):
So most of the homes that we look at have enough space around the home to make them defensible. With the right materials, you can be somewhat close to your neighbor, you don't need a hundred feet, [00:19:00] but you might need like 25 feet.
(19:02):
So in most cases, we have the ability to work with a homeowner to just change their parcel in such a way that it makes the structure resilient to wildfire coming through. In the cases of very dense neighborhoods, we have found some characteristics of homes in those neighborhoods that can be resilient. There are certain examples where there are these stucco walls that actually redirect the heat and that an angle passed that in the neighboring homes.
Cody Simms (19:29):
Oh, wow.
Dan Preston (19:29):
Which has been [00:19:30] really helpful in certain circumstances. It's certainly not a cure all by any stretch, but between that really good integrated sprinkler systems of which there are a couple of good products in the market, tempered glass windows and others, there are ways to statistically reduce the likelihood of these homes being lost, where ultimately that can help unlock insurance for a lot of these homes. That said, the true solution which is neighborhoods and communities doing the work to make the whole neighborhood resilient is where you can really unlock opportunity for [00:20:00] insurance availability.
Cody Simms (20:02):
We've been talking mostly about preventative work you can do, but also during the active fire, I saw reports of kind of two, and there's probably more day of last resort type of things people did that seemed relatively effective. One really cheap, which was rooftop sprinklers, just like having a large sprinkler connected to your hose or a pump to your swimming pool that was spraying water over the property and then the other was [00:20:30] not cheap, which was essentially private firefighting forces. And the question I have there is are we going to get to the point where insurance companies are actually employing their own fire resources that are going day of on a red flag day or whatever to make sure the homes in the area that are at risk have cleared leaves out of their gutters and done just basic sort of prevention things.
Dan Preston (20:53):
The idea of having private firefighters associated with insurance has been done for a little while now, maybe 10 years or so, and it sounds like it [00:21:00] has some impact, but it's more and more like it's marginal, especially in these really big events because you have lots of firefighting forces coming in to try to draw lines between neighborhoods and make sure that they're actually containing the fire overall. So most of what's really helpful is upfront preventative work and then some of the sprinkler systems can be really impactful. You just need to make sure that it can operate under a lot of different environments. So loses power [00:21:30] loses internet. There are homes that we saw in those fires that were exposed to flames for like three days straight,
(21:37):
so you need enough water and retardant to be able to coat the home for a long period of time, and so the products that have those characteristics can really help with a home, but it may not be enough in certain circumstances where you have say another home that's five feet away from yours.
Cody Simms (21:53):
Let's move into your product at Stand and what you guys announced in December more specifically. So you are [00:22:00] focused primarily right now, I believe on wildfire, and how much is California sort of the initial focus for you?
Dan Preston (22:08):
Over the long run, we're building a property insurer focused on climate exposed homes, so that's wildfire across the flood and hurricane everything, but the focus to start is on wildfire specifically in California, so it is the most distressed insurance market in the US right now. If you have a wildfire exposed home in California, in many cases, the only option for you will be the [00:22:30] California State Fair Plan, which is the public program. And so what we're focused on are the homes that actually fit outside of that program. There are limits to the fair plan.
Cody Simms (22:38):
Fair plan is I think what a $3 million property limit today, something like that. At least today, it's almost surely going to change. Now given what just happened in Los Angeles, I would think.
Dan Preston (22:46):
Yeah, it'll be interesting to see how things evolve for sure, but today it's limited that $3 million,
Cody Simms (22:52):
That's a lot of coverage. So you're talking very high end homes to start with. For you, you're currently offering the Tesla Roadster sort of product to the market it sounds like.
Dan Preston (22:59):
I mean, California [00:23:00] is an expensive place to live, so there are a lot of homes in this three plus kind of zone, but it's actually typically 2 million homes and above plus contents and other things that are on the home. But really the goal for us in the long run is I'll share more about technology in a moment, but we want to demonstrate that the platform really works, that if you can work with a homeowner to reduce the underlying risk, that actually it means that those homes will survive more often, and the more we demonstrate that means our costs will come down, which means our pricing over the long run will be lower for homeowners. So [00:23:30] we'd like to be in a position where we can actually offer this product, which is a combination of resilience and insurance to any homeowner and actually be the lowest cost solution. But that will take some time, right? It'll take us some number of years to demonstrate that our technology is leading to those lower losses.
Cody Simms (23:46):
Initially, there's some tipping point where the cost to ensure for a wildfire is greater for a legacy insurance company than just basic damages a home is going to navigate over the [00:24:00] course of its regular life, like broken pipes and floods, and the water heater is leaking and you have whatever damage. You're sort of betting on the fact that there is this crossing the chasm moment when that begins to happen. It sounds like.
Dan Preston (24:14):
I think there's a fundamental difference. If you are able to get a home to the resilience standard that we would help a homeowner get to, now, the likelihood of losing that home might come down by 50, 60, 90%. If that's the case, maybe 70 or 80% of your insurance [00:24:30] costs are related to your wildfire risk. So you could see that costs get cut in half over time.
Yin Lu (24:36):
Hey everyone, I'm Yin a partner at MCJ here to take a quick minute to tell you about the MCJ cCollective membership. Globally startups are rewriting industries to be cleaner, more profitable and more secure. And at MCJ, we recognize that a rapidly changing business landscape requires a workforce that can adapt. MCJ Collective is a vetted member network for tech and industry leaders who are [00:25:00] building, working for or advising on solutions that can address the transition of energy and industry MCJ Collective connects members with one another with MCJ's portfolio and our broader network. We do this through a powerful member hub, timely introductions, curated events, and a unique talent matchmaking system and opportunities to learn from peers and podcast guests. We started in 2019 and have grown to thousands of members globally. If you want [00:25:30] to learn more, head over to MCJ.vc and click the membership tab at the top. Thanks and enjoy the rest of the show.
Cody Simms (25:37):
It strikes me that there are some home insurance products that truly are only focused on total loss. Earthquake insurance comes to mind. It's not affordable. It is not something you're using as a policy just in the event you have minor damage. Like if you have minor damage with earthquake, you're probably paying for it out of pocket, but given the size of the premium and [00:26:00] the deductibles that are required, you're really only triggering it if you have catastrophic damage to your home. Why not approach wildfire in that regard as sort of a secondary insurance product?
Dan Preston (26:12):
A good question. I mean, I think there could be room for a product where you're just supporting the wildfire component. That's how the fair plan works, especially when we're working with customers with larger assets or larger homes. A lot of times you don't want to have to work with multiple companies, and in many ways that's [00:26:30] a customer experience question. The whole idea of interventional insurance anyway, of being able to work directly with homeowners to reduce that risk doesn't just stop at wildfire, make an impact. Things like internal leaks, the home and stuff like that as well. It might not be as game changing as being able to reduce the wildfire risk, but we hope to be your holistic solution as a homeowner property owner.
Cody Simms (26:53):
Where are you in the rollout?
Dan Preston (26:54):
So we just launched about a month and a half ago.
Cody Simms (26:56):
Congrats.
Dan Preston (26:57):
Thank you. It's been really exciting. It's been a [00:27:00] remarkable time to be talking with homeowners because I think the events of the last month have really put an exclamation point on the importance of the availability and resilience, et cetera.
Cody Simms (27:09):
I know for me personally, after the events here in LA, I've since increased my own coverage in my own home and I'm honestly kind of holding my breath for when my policy renews in terms of what's going to happen from a pricing perspective for me, assuming I continue to be covered, I'm sure I'm not alone in this.
Dan Preston (27:27):
No, a huge number of customers that reach out to us [00:27:30] have existing coverage today and they're just worried about what might happen. And this challenge, I think is really pervasive across California for sure.
Cody Simms (27:39):
Talk about then the product and the technology in particular.
Dan Preston (27:42):
The way we work with a homeowner is we'll first create basically a 3D model of the home. We'll ask you about the things that you love about the home, whether you have an olive tree that your grandfather planted once that's close to the home or gardening that you've put outside, that might be something you're using to cook dinner tonight. [00:28:00] And all of these are about the aesthetics and the utility of the home that oftentimes gets overlooked at these kind of larger 200 foot areas around the home.
Cody Simms (28:11):
I live facing west on a hillside and the sun that comes to our home in the afternoon in the summer is so hot. I have to have trees or my home just bakes. I think everyone has these kinds of setups, right?
Dan Preston (28:23):
Exactly. And a lot of people would rather go uninsured than destroy some of the character of their property. And so what we tried [00:28:30] to do is to understand those characteristics and then bake that into our model. And then what we can do is we take that 3D model and we can run a computational fluid dynamics model that allows us to simulate the events of a wildfire and then we can simulate that in all different conditions, 90 mile an hour winds, a hundred mile an hour winds, and see what on the property is the proximate cause of a potential loss. What is it that actually creates ignition on the home? And then we can design changes that hopefully can protect [00:29:00] the things that you really love about the home, but maybe it's instead of removing that tree, we can put tempered glass next to it as a way of being able to make sure that we don't lose that component of the home. That simulation gives us the ability to really customize it to a customer's needs and then prospectively understand what the likelihood is of actually losing it. This ultimately is a thing that breaks that dynamic that insurers always have, always having to look backwards what the risk has looked like historically. We can look forward by actually simulating it.
Cody Simms (29:29):
And so [00:29:30] Dan, is it a binary thing? It's like if you do these, you'll have a policy and here's the price or it's a menu of sorts of here's your current price and if you do these things, you can get to this.
Dan Preston (29:40):
We ultimately like to get there. So right now the way it works is we come up with a plan which is customizable. There are things you can change about it sometimes that ultimately can protect different components in the home, but right now it's just we put together a resiliency plan that comes with insurance. Over the long run because we can simulate it under these different conditions, [00:30:00] we can come up with a statistical view of each component on the property leading to some difference in risk. And so ultimately we'd like to be able to give you exactly that kind of menu. You love this tree, well, your insurance will be this much. If you're willing to cut that down, then it'll be this much, that level of customization we have the capability for today. But ultimately I think that's a little bit further down the road.
Cody Simms (30:21):
And just to be really clear for me and for our listeners, this is not a separate fire product. This is like you would be doing this in place of State Farm or [00:30:30] Allstate or Farmers or whatever you use.
Dan Preston (30:33):
Exactly. This would be the full homeowners product. It's a comprehensive homeowners.
Cody Simms (30:37):
And then if you still need or want something like an umbrella policy or an earthquake policy or whatever, you need to shop outside for those things.
Dan Preston (30:44):
We work with brokers and brokers will help you with the whole portfolio. You may have, it'll fit well within other umbrella products. You may have auto products, et cetera.
Cody Simms (30:56):
How much of what you're starting to do in wildfires [00:31:00] can be applied to hurricanes on the Atlantic coast or tornadoes wind and hail up tornado alley in the Midwest?
Dan Preston (31:09):
For wind. The same methodology we're using to simulate wildfire can be done for wind as well. So we expect to be able to offer that at some point soon. The types of risk obviously is different to not worrying about burning down. You're worried about components flying off of the home.
Cody Simms (31:24):
Tornado alley is not often catastrophic total loss. It's more damage to roof or structure, [00:31:30] right?
Dan Preston (31:31):
And it's not just tornadoes, it's just really intense windstorms and the last five years outside of the couple of really bad wildfire years, that's actually been one of the biggest challenges for homeowners companies. There was a map somewhere that I saw, I think might've been New York Times that showed the Midwest is actually where you have the largest delta between what the actual risk has been and what is being charged for insurance. So we're going to see really substantial increases in homeowner's insurance.
Cody Simms (31:56):
One of my family members told me who lives in the Midwest in Kansas, told [00:32:00] me that their policy went up 33% over the last year.
Dan Preston (32:03):
Yeah, it's too bad. Beyond that, towards hurricane and flood, there's actually been a fair amount of work on this where it's starting to improve. There are some building codes and other understanding of what actually makes a home more resilient in some of those, but there's still a lot of work to be done. Florida's had homeowners insurance challenges for a number of years now.
Cody Simms (32:24):
So it sounds like wildfires, A, you live in California, so it's personal to you near you [00:32:30] something you experience. And B, the measures that you need to take to try to protect a structure or a community of structures are more defined and more proven at this point in terms of being able to model against them and give people relatively low cost things they can do to increase the resiliency of their home.
Dan Preston (32:51):
I think that's exactly right. The challenge that we don't have that much data on exactly what works and how well we're learning more and more as some of these fires happen, but we don't want to [00:33:00] wait for another five years of wildfires to burn down homes to be able to identify resilience measures and ensure homes. And so this methodology that the team has built is allowing us to actually understand and quantify what the impact of those are prospectively as opposed to having to wait for some of these events.
Cody Simms (33:18):
Why are legacy insurers stuck? What's the inertia that's keeping them from being proactive here?
Dan Preston (33:24):
I think there are a couple of components. One is what we've been talking about here, which is there's just not a lot [00:33:30] of historical evidence to quantify what the impact is of anyone of these things. And by the way, it's typically a single point of failure if one of these homes. So it's not that one component reduces the risk by 5%, the other one by 10, it's that you kind of need to do a holistic change to the property. The second factor is a bit in the weeds of insurance and it's the way that the capital markets work for insurers. There's something called reinsurance, which is basically the insurance for insurers where they provide basically an excess [00:34:00] layer. Effectively if you have a really bad event, they will take 300 million to a billion dollars worth of risk beyond that and their pricing in not the average risk but the tail risk.
(34:12):
And so when you have events where you have lots and lots of homes or structures lost in one layer, you end up having to price that as part of your product. And so one of the core challenges that the insurers face is that historically [00:34:30] they've just been offering homeowners insurance across the state as they've identified homes that they want to ensure and as customers come to them. But now that we're starting to see that these events like urban conflagration or these urban firestorms will lead to so many homes being lost in one, the reinsurance costs which look at the tail events have come up so much that because they have such high concentration in these different neighborhoods, the underlying costs are very disproportionate. And so in order for insurers in California to [00:35:00] make the portfolio profitable, they actually have to reduce their risk proportionally across these different areas of California, and this is what's called accumulation or aggregation risk. In many ways, you kind of have a combination of issues. A, we don't understand very well how we can protect homes, and B, we have all of this concentration of risk in different parts of California that accelerate the cost disproportionately on the backend to able to buy reinsurance. It's these combination of issues that I think are really leading to a lot [00:35:30] of the distress,
Cody Simms (35:31):
And this is where you get insurers backing out of entire zip codes for example, or entire communities, even if you have the concrete bunker house that we described earlier that has 200 feet of defensible space all around it and is at quite low risk, it's going to get dropped anyway if it's in that zone.
Dan Preston (35:48):
And the way that reinsurance pricing is typically done is location based and look at a lot of the structural components and what the home looks like isn't really considered. And so there are these really interesting conversations that reinsurance [00:36:00] brokers are going through right now where they'll talk to insurance companies and they'll be like, no, we're filled up in this neighborhood right now. We're out of capacity in this zone. We can do some things somewhere else. And it's not something that I think has been in the forefront of anyone's mind for homeowners insurance in the US for a long time.
Cody Simms (36:16):
Does Stand rely on the same sort of reinsurance network underwriting you all?
Dan Preston (36:20):
We have a number of great reinsurers who have substantial capacity, a plus rated reinsurers. There's really no way to offer [00:36:30] catastrophe based insurance without a really good set of capital provider behind it. So we're doing the same thing. We have to make sure that we are distributing our product well across California, that we don't build up too much risk in particular areas. And so that's part of the reason why we really want to be brought. We want to be able to offer this to as much California as possible. The goal over the long run is that our prospective view becomes a retroactive view. That over the course of a few years as these events happen [00:37:00] and the homeowners we've worked with have their homes survive these events, then not only will our view of the underlying cost be different, but all of our partners view of that cost will be different. And then ultimately those costs will make their way in the form of lower premiums.
Cody Simms (37:15):
What all did you have to do from a regulatory perspective to get set up to be a lender of record for individual properties?
Dan Preston (37:26):
We are a broker effectively right now technically. So we [00:37:30] have a couple of folks internally who have their licenses. The company is licensed. We then work with an insurance company that has an AM best rating and they provide basically the insurance layer for it. And then we have reinsurance that kind of sits behind that.
Cody Simms (37:46):
You are essentially helping to source prospects for insurance, homeowners, you are qualifying them, you are kind of coming up with the package of the plan, and then ultimately you have to have someone say, yes, this individual property [00:38:00] looks like one that fits exactly what you described your customer base to be.
Dan Preston (38:06):
Exactly. We provide the product offering the pricing. We do effectively the underwriting of the home, the interventional work that allows us to reduce the risk of a potential loss. And then that portfolio sits with our insurance partner that provides the balance sheet, and then we work with our reinsurance partners that support that.
Cody Simms (38:27):
One other wonky insurance question for you is, I hear [00:38:30] the word perils thrown around and there's different levels of perils. What does that actually mean?
Dan Preston (38:35):
A peril is typically a particular type of risk, so that's like a wildfire exposure. It's the chance that your home could be burned on by a wildfire or it could be just your normal fire and it gets deeper and deeper. There's a earthquake and there's fire following earthquake. Each one of these ensures look at as a particular risk. And so then they'll model that with a bunch of historical data or prospective views, et cetera. And there's [00:39:00] basically an understanding of what that risk actually is as a way of standardizing across the industry to be able to price it in different ways.
Cody Simms (39:08):
As I sit and reflect on our conversation, it strikes me that your business is one that I wish didn't need to exist. I wish it didn't need to be successful, but here we are, and I shared the numbers from those New York Times and Wall Street Journal articles that are recent earlier on expected costs and also expected impact to home pricing because of all of these [00:39:30] perils. And we're now, I guess thinking about it as given these inevitable trends that are in front of us, gosh, I sure hope you are successful because otherwise we're banking, I guess on the insurance industry becoming nimble enough to navigate these. And I guess the hope is you're out there front running that that's sort of the way to think about it
Dan Preston (39:51):
For sure. And I think the thing that really motivates our whole team is that there is trillions of dollars of [00:40:00] resiliency infrastructure that needs to be built across the world to help us adapt to climate change. If we effectively want to be able to live within a lot of these disasters that are happening and not lose our homes and not lose our businesses, we're going to need to invest in things like resilience and other changes that will actually help that not happen. It's hard to rely on whether it's the government or others to make those investments because a lot of times it's actually your own parcel land. And so our view is that insurance can actually be a [00:40:30] mechanism for driving that. It can be a form of an incentive to actually make a home more resilient or make a neighborhood more resilient because by doing so, you can reduce your insurance costs by 50%. And those are the kinds of things that ultimately we hope the product will drive towards the long run that I could be a catalyst for starting to invest in this type of resiliency infrastructure.
Cody Simms (40:50):
It strikes me thinking of the classic Jake from State Farm commercial, right, with Chris Paul and the basketball who falls on the car and smashes it, or you have a flood in the kitchen [00:41:00] and then you snap your fingers and like a good neighbor state farmer is there and Jake's there to fix it and deal with the aftermath. I'm hearing you guys the opposite end of it, which is like I'm sitting in my home and I'm worried and I'm biting my fingernails that something might happen and I snap my finger and Dan from stand shows up and helps me deal with all the stuff I need to do to make my home safe for the future. It's a different orientation and it's a mindset shift that I think is indicative of how new companies [00:41:30] in existing industries are likely to emerge in this changing world around us because of climate change.
Dan Preston (41:35):
Yeah, couldn't agree more.
Cody Simms (41:37):
You need to come up with a jingle.
Dan Preston (41:38):
Yeah, I think so. Maybe you can come help us figure that out.
Cody Simms (41:42):
Dan, anything else that we should have covered today that we didn't talk about?
Dan Preston (41:44):
No, I think this is great. Thank you. It was really wonderful.
Cody Simms (41:47):
Well, I appreciate you. Oh, I guess one last thing. When you announced the company, you also announced a pretty big fundraise. You want to share a little bit about the capitalization of the business?
Dan Preston (41:54):
So we raised about $30 million with two lead partners, inspired capital and lower carbon. [00:42:00] And basically this is to fund the product coming live, launching in California with our wildfire product. And then over time it'll allow us to expand well beyond that and start to support other types of risks that we see across the us.
Cody Simms (42:13):
And the other thing is you're building this with kind of a super team of very experienced founders, a few of whom are very close to our network here at MCJ. Maybe share a little bit about your co-founders.
Dan Preston (42:22):
All of which who have been good friends of mine for many years now. Jason Miller was the chief product officer at PolicyGenius, and he is leading product [00:42:30] at Stand. Bill Clerico, who I think has also been on the show. He runs Convective Capital and has really deep network all around wildfire, which has been a huge asset for the company. And then Sam Shank, who was the founder of Hotel Tonight, which sold to Airbnb a number of years ago, also been close friend of mine for a long time and brings a wealth of knowledge across a lot of different areas of the business, and it's an incredible team to work with. We've also, frankly, been able to hire a really incredible team overall. It's actually [00:43:00] very fun. We have this combination of very experienced insurance talent folks who have worked at some of those most storied insurers in the world with aerospace engineers who are doing fluid dynamics modeling like that. And the combination of the two is it's really fun to watch.
Cody Simms (43:13):
I love it. Well, Dan, thanks for joining us today and good luck and I sure hope that many people listening, check you guys out. If you're worried about what's going to happen with your homeowners insurance, particularly here in California right now, go check out Stand. What's the URL?
Dan Preston (43:28):
StandInsurance.com.
Cody Simms (43:29):
There we go, [00:43:30] Dan. Thanks.
Dan Preston (43:31):
Awesome. Thank you.
Cody Simms (43:32):
Inevitable is an MCJ podcast at MCJ. We back founders driving the transition of energy and industry and solving the inevitable impacts of climate change. If you'd like to learn more about mcj, visit us at mcj.vc and subscribe to our weekly newsletter at newsletter.mcj.vc. Thanks and see you next episode.
