The deal, announced on Thursday, comes when the COVID-19 pandemic has forced the insurance sector to rely heavily on technology to reach customers, helping the "insurtech" sector that uses artificial intelligence and big data.
Founded in 2015, Palo Alto-based Hippo sells homeowners insurance online and the merger with special purpose acquisition company (SPAC) Reinvent Technology Partners Z will include a private investment of about $450 million and give it $1.2 billion in cash.
Global insurtech investments jumped in 2020, even as the larger insurance industry faced huge and varying claims from businesses and households hit by the pandemic.
Total annual insurtech funding reached an all-time high of $7.1 billion last year, with 377 deals inked -- the highest in any year to date, according to a report by broker Willis Towers Watson.
Hippo and its peers such as Unqork, Waterdrop, Oscar Health, Bind Benefits and Newfront Insurance received a total of $1.1 billion in funding in the final quarter of 2020.
Many insurtechs have gone public, with Oscar Health, backed by Google parent Alphabet Inc, raising $1.2 billion on Tuesday. Insurance startup Lemonade Inc also became a public firm last year.
Hippo's SPAC merger follows the recent deals by CCC Information and Metromile Inc. The deals also underscore expectations that total value of premiums generated by insurtech platforms will exceed $556 billion in 2025, from $250 billion in 2020, according to a study by Juniper Research.
SPACs are shell companies, which raise funds through an IPO to take a private company public.
(Reporting by Sohini Podder and Noor Zainab Hussain in Bengaluru; Editing by Bernard Orr and Sriraj Kalluvila)