Ondo InsurTech: Revolutionizing Water Damage Prevention in Home Insurance

• Ondo InsurTech provides a proprietary water damage prevention system called LeakBot, which detects small leaks in home plumbing systems before they cause significant damage.
• The technology uses a patented temperature differential monitoring system that clips to pipes and can detect leaks as small as 5ml per minute without requiring professional installation.
• Ondo partners with insurance companies who pay a monthly fee ($5/month in the US) for the technology, which delivers ROI by preventing water damage claims that average $14,000 each.
• The company has deployed devices in 151,000 homes, works with 24 insurance companies globally, and is experiencing rapid growth (60% year-on-year overall, 400% in the US).
• Ondo expects to reach EBITDA-positive trading by the end of the current fiscal year and doesn't anticipate needing additional funding before reaching cash flow breakeven.

Ondo InsurTech PLC is positioning itself as a leader in 'claim prevention' technology for the home insurance industry with a focus on water damage, one of the most costly perils for insurers. In a revealing interview, CEO Craig Foster outlined how the company's proprietary LeakBot technology is changing the traditional insurance model from simply pricing and paying for risk to proactively preventing claims before they happen. Water damage represents a $17 billion annual claims burden in the US alone, with an average claim of approximately $14,000. Ondo has secured partnerships with 24 insurance companies globally, including major US carriers, and is deployed in over 151,000 homes. The company's growth trajectory, especially in the US market, positions it as a potentially disruptive player in the insurtech sector.

The Problem Ondo Solves

Water damage represents one of the home insurance industry's most significant challenges. This hidden nature means leaks often go undetected for weeks or months, causing extensive damage before homeowners notice.

The scale of this problem is substantial. Foster notes, 

"In the United States, there's $17 billion of claims every year... they tend to be relatively small leaks to start with that have caused damage for a period without anyone noticing, and then the average claim in the United States is about $14,000 when they happen."

Traditional detection systems have significant limitations - either requiring expensive professional installation with cutting into pipes (costing $400-500) or offering limited accuracy. This gap in the market has created the opportunity that Ondo is addressing with its proprietary technology.

The LeakBot Technology

At the core of Ondo's offering is LeakBot, a proprietary and patented sensing technology. The device is a small sensor that homeowners can easily install themselves by clipping it to the main water pipe where the stop tap is located. No professional installation or pipe cutting is required, making deployment simple and cost-effective.

The technology works on a deceptively simple but ingenious principle. Foster explains: 

"The simple scientific idea here is that every time you use water, the water's coming from underground through the pipe and it's usually colder than where the device is located." 

The device measures the temperature of the incoming water pipe and compares it to the ambient temperature. When water isn't being used, these temperatures should equalize. If there's a continuous temperature differential, it indicates water is constantly flowing somewhere in the property - signaling a leak.

The technology can detect extremely small leaks, "down to about 5 milliliters per minute," according to Foster, making it highly sensitive while remaining affordable and user-friendly. The company holds 29 patents around the world on this core technology.

Business Model and Revenue Stream

Ondo's business model centers on partnerships with insurance companies, who pay a recurring fee for the service. In the US, this amounts to approximately $5 per month per customer, or $60 annually. This fee covers all costs, including the hardware, software, and any plumber visits required to find and fix detected leaks.

The value proposition for insurers is clear. As Foster states, 

"The frequency of a claim is about 1.6%. The average claim is about $14,000... So the underwriting cost per policy, for every home insurance policy written, there's about $220 of risk associated with water damage claims." 

With Ondo's solution costing insurers just $60 per year, the return on investment is compelling.

The company's revenue model includes prepayments from insurance partners: 

"When they sign an order, it commits them to a certain volume of devices... they pay us the first year fees in advance on 30-day terms once they sign the order." 

This approach helps fund working capital needs as the company grows without requiring continual equity fundraising.

Interview with Ondo UnsurTech CEO, Craig Foster

Market Penetration and Growth Strategy

Ondo has achieved significant traction, with their solution deployed in approximately 151,000 homes and partnerships with 24 insurance companies globally. The company reported revenue of nearly £4 million for the fiscal year ending March, with annualized contracted recurring revenue approaching £6 million.

The growth rate is accelerating, with Foster noting, 

"That number's grown 60% year-on-year at the moment, and we expect that growth rate to accelerate as we make more traction in the United States. In the US, I think we're growing about 400% per year at the moment."

The company's distribution strategy has evolved from simple opt-in email campaigns to more innovative approaches. Foster highlights their partnership with Nationwide, the eighth-largest home insurer in the US: 

"They ran a pilot in a single state of Ohio and then said they wanted to expand into their customer base. We thought they were going to go into four or five states. They wanted to go into 16 states. They're now in 17."

Some insurance partners are now offering premium discounts to customers who install the device, driving adoption further. Foster predicts these types of solutions may eventually become mandatory for home insurance policies.

Addressable Market and Expansion Potential

The addressable market for Ondo's technology is substantial. Foster indicates that their existing insurance partners represent approximately 13-14 million potential customer homes. Even within their current US geographic footprint, the company has access to about 6 million homes.

As Foster emphasizes, 

"The 100% priority for the team right now... is just continuing to execute well and driving penetration into that existing customer base, especially in the US, because this can already be a very big business even if we didn't sign another partner."

The company appears well-positioned for continued growth without needing to continuously expand its partner base, though they continue to pursue new insurance company relationships alongside deepening existing ones.

Financial Outlook and Path to Profitability

Ondo's financial trajectory shows a clear path to profitability. While the company currently operates at a small cash flow deficit, Foster states they are "not far off" breakeven and expects to "hit EBITDA positive trading at the end of this new fiscal year that's just started."

The company's business model is designed to improve margins over time. Foster explains, 

"We're kind of single digit P&L margin in the first year. But then we have a much healthier margin from year two onwards. Typically 70-80% once the customer gets into year two." 

This is because the hardware costs are front-loaded, while recurring revenue continues in subsequent years with lower associated costs. The prepayment model helps manage working capital requirements, with Foster noting, 

"We don't see any need to raise any more money before we hit cash flow breakeven which is a good place to be in."

Customer Satisfaction and Retention

A notable strength of Ondo's offering is the high level of customer satisfaction it generates. When the company's plumbers visit homes to address detected leaks, they often identify and fix multiple issues homeowners weren't aware of. This creates a compelling customer experience, with Foster reporting, 

"We've got over an 80 net promoter score in every single market that we operate in, close to a five out of five customer satisfaction score."

This customer satisfaction translates to benefits for the insurance partners as well: 

"Customers with a LeakBot are much more likely to renew their home insurance policy after they've experienced it." 

The company has maintained a 100% retention rate among its insurance partners since inception, indicating strong satisfaction with the ROI their solution delivers.

The Investment Thesis for Ondo InsurTech

• Proprietary technology with strong IP protection: LeakBot's technology is protected by 29 patents globally, creating a significant barrier to entry for competitors.
• Clear and compelling ROI for insurance partners: With water damage claims costing US insurers $220 per policy annually on average and Ondo's solution priced at $60 per year, the value proposition is straightforward and compelling.
• High customer retention and satisfaction: 100% retention rate among insurance partners and 80+ Net Promoter Score among end users demonstrates product-market fit and customer satisfaction.
• Scalable business model with improving economics: Single-digit margins in year one improve to 70-80% margins in subsequent years, creating an attractive long-term economic profile.
• Capital-efficient growth strategy: Prepayment model from insurance partners funds working capital needs, reducing the need for additional equity fundraising.
• Large addressable market with existing partners: Current insurance partners represent access to 13-14 million potential homes, with significant growth potential within existing relationships.
• Accelerating US market penetration: 400% year-on-year growth in the US market, where water damage claims are highest and the ROI is most compelling.
• Clear path to profitability: Expected to achieve EBITDA-positive trading by the end of the current fiscal year without requiring additional funding.
• Well-positioned for industry trend toward preventative technologies: As insurance shifts from simply paying claims to preventing them, Ondo's established position in this category creates opportunity for continued growth.

Macro Thematic Analysis

The insurance industry is undergoing a fundamental shift from a reactive model of pricing risk and paying claims to a proactive approach focused on risk prevention. This transition mirrors developments in other insurance segments, such as telematics in auto insurance and wearable technology in life insurance.

Water damage, representing $17 billion in annual claims in the US alone, offers a prime opportunity for technology-driven prevention. The traditional insurance model, as Foster describes it, is "to basically just price risk and then wait for it to happen and then pay out the claims as that risk manifests." However, technological advances are enabling a new paradigm where insurers can "proactively manage that risk and reduce the risk profile."

This shift benefits all stakeholders: insurers reduce claims costs and improve retention, homeowners avoid the disruption of water damage, and preventative technology providers like Ondo InsurTech capture value from this efficiency gain. The trend toward mandatory adoption of such technologies, already emerging among some carriers, suggests this market will continue to expand rapidly.

As Foster summarizes the opportunity: 

"We're entering a new world where technology is enabling insurance companies to actually try and proactively manage risk and reduce the risk profile. So, it's another way for insurance companies to gain a competitive edge."