Game Changers: Three Insurtechs Bringing Fresh Perspectives
All insurtechs have the potential to change the industry, but Insider Engage examines three to watch: Arbol, ICEYE and EigenRisk.
Arbol: Underwriting Climate Risk Without Underwriters
Sid Jha, founder and CEO of Arbol, a blockchain-based parametric insurance platform, worked with commodities on Wall Street and saw the growing impact of weather and climate change.
“Many industries are impacted by weather and climate risk, but our starting point was commodities, given my background,” Jha said.
Parametric is a great way to pay clients quickly, fairly and transparently, and not have them go bankrupt waiting for a claims check.
In 2018, when Arbol was launched, weather derivatives and parametric cover “were quite stunted,” Jha said. “We set out to build a platform that could enable people to have access, and have transparency and efficiency in being able to transfer climate risk, to have contracts based on everything from temperature of rainfall to wind speed – to really reduce their exposure to climate change.”
The company’s first product was launched in March 2020 — “a fascinating time to launch a product right in the middle of Covid,” Jha said. Covid highlighted the problems in the insurance industry and how claims are settled. Thousands of lawsuits about whether a pandemic is covered in the contracts made an already complex claims settlement process take even longer, Jha said.
“Parametric is a great way to pay clients quickly, fairly and transparently, and not have them go bankrupt waiting for a claims check,” he said.
Arbol initially focused on US farm space, but on risks that are not covered by the federal crop insurance program, such as agribusinesses.
Agribusinesses rely on crops, but don’t get the federal crop yield subsidiary, Jha said. The company provided products to protect against excess rainfall, drought, and crop yields falling short.
The company relies on smart contracts that reference different datasets, and then makes payouts based on the outcomes of those data sets. An AI engine does the pricing, and there’s no underwriting staff, Jha said.
“It’s about using a tremendous amount of information about the climate, both in the past and recently, to price these risks. It would be very difficult for a human being to accomplish,” he said. “If rainfall was high or low or windspeed was high or low, then we have payment rails that furnish the payment automatically to the consumer. There’s no claims form. It reduces the hassle.”
The company had $70 million in premium last year as a firm and have “far surpassed” that number in June of 2022, Jha said. Its combined ratio has been an impressive 65 or lower.
“It goes to the goal of making a sustainable business,” Jha said. “Sadly, there are too many examples of insurtechs who are growing by writing policies at a loss. This is something we absolutely will not entertain. We are very focused on being risk managers in addition to being a tech company.”
Arbol isn’t stealing business from existing insurers, it’s creating new markets.
Customers are across all industries, and from around the world, Jah said. “Some of our clients are wind farms, they are buying wind speed protection. Others are utilities buying temperature protection, yet others are farmers buying crop yield or rainfall protection. And we’re working on a deal to get shellfish growers protection from rising ocean water temperatures,” Jha said. “Every day, the fascinating things is we hear from a completely new part of the world, we get requests for the most interesting types of risks. It keeps us on our toes.”
Insights From the Final Frontier
Iceye is changing how insurers can monitor and analyze catastrophic events by offering a detailed view from space.
The company uses satellites and synthetic aperture radar to see through clouds, smoke and darkness coupled with auxiliary data, including elevation models, ground sensors and river gauges, to monitor changes anywhere on the Earth, said Paul Barron, global head of partnerships for Iceye.
The company, which was started to help ships avoid icebergs, expanded to work with insurers in 2021, Barron said.
We’re not looking to replicate something that’s already available to the insurance market. We’re looking to change the game.
With 21 satellites in orbit now, the company can monitor events from space with remarkable accuracy and speed.
“We can tell within approximately 24 hours of the peak of a major flood event anywhere in the world the extent of the flood and how deep the water was at the building level. If you overlay that information on a geospatial map linked to an insurance portfolio, you can tell almost immediately what the insured losses were and how much needs to be reserved for,” Barron said.
The radar is accurate up to millimeters, he said, and the satellites take 90 minutes to circle the earth, so information can be updated on a regular basis.
“We call it persistent asset monitoring, which detects change. The frequency, clarity and accuracy of the images we produce have never been available before,” Barron said. “It can help to monitor multiple developments, including climate change, deforestation and illegal logging in rainforests, or potential volcanic eruptions.”
By monitoring changes in volcanoes, you can predict when an event will occur and after, you can see what happens with the lava flow, he said.
“You can see where the lava is going. Overlay that with other data sources, you can see which populated areas will be destroyed, where people need to be evacuated, and where insurers really need to manage their exposure,” Barron said. “These are really powerful insights that just weren’t available before.”
The technology can also be used to monitor dams and even mines — because the radar can see into the ground.
“You can monitor any asset,” Barron said. “If you are insuring that asset, you can better mange the associated risk. You can take preventative actions. You can evacuate people. You can send a repair crew in. If it’s a dam with issues, you can release some water. Give this information to insurers and they can make business decisions based on it to manage their portfolios.”
The company is working with a broad range of insurers and brokers, including Aon, Axa, Descartes, Swiss Re and Tokio Marine.
Iceye is looking to expanding into other perils, Barron said.
“We’re looking at wildfire, looking at scar damage and plotting where the fire is, where it is moving to,” he said. “We’re looking at hail, and anywhere we could apply our insights to give the industry additional data that they don’t have today. We’re also looking at detecting property damage caused by wind. We’re not looking to replicate something that’s already available to the insurance market. We’re looking to change the game.”
A Platform Harnessing Other Insurtechs to Improve Nat Cat Analytics
After earning a PhD in earthquake engineering, Deepak Badoni, co-founder and president of EigenRisk, ended up working for Aon Impact Forecasting before joining RMS.
“I just fell in love with this whole idea of solving a really practical problem of trying to quantify the cost of natural catastrophes in the insurance context — and didn’t even realize that all these million-dollar decisions were getting based on models,” Badoni said.
He realized that “everybody runs models in the industry, but very few people actually understand the results of these very complex models.”
“In a lot of cases, there’s a lot of garbage in, garbage out modelling that goes on. So people are making decisions [based on the models] but very few understand the basis for that.”
Badoni saw the potential to launch a platform that bring together data from multiple sources.
It’s really important to understand what your exposures are. What is your data? If you have the wrong values, if you have the wrong locations, a cat model isn’t going to help you.
“It’s a very fragmented industry. There’s a lot of small players out there, like us, and we can join forces,” he said.
EigenRisk, a natural catastrophe modeling platform, was launched eight years ago.
“The vision is to be the one-stop shop for all analytics related to natural catastrophes,” Badoni said.
The company’s cloud-based platform provides one-stop access to data management, geo-visualization, analytics, reporting, modeling and alerts. These capabilities are integrated with hazard data, event projections and simulations curated from more than 30 leading public and private sources to provide a more dynamic and complete perspective of risk.
Recent data sources added to EigenRisk’s platform include ICEYE’s unique flood insights for large-scale flood events; Canopy Weather’s U.S. severe convective storm response capabilities; and Global Earthquake Model (GEM) Foundation — an international public-private partnership committed to the development of open-source hazard and risk assessment software, tools and data — is sharing its earthquake exposure modeling resources.
“It’s really important to understand what your exposures are. What is your data? If you have the wrong values, if you have the wrong locations, a cat model isn’t going to help you,” Badoni said. “For instance, if you try to run a traditional cat model on a single tornado, it’s not going to give you an accurate answer because they’re designed to work in the aggregate, on very large catastrophes.”
EigenRisk has built a platform around the completeness of the data before cat modeling is involved and includes climate change risks such as heat stress.
“Heat stress is the idea that if temperatures are going up for increasingly long stretches of time, it’s going to have an impact on crops or if your business needs water. Heat stress on its own could cause economic losses for people, insurers are starting to look at that,” Badoni said.
The platform can be used for more than insurance, he said, noting risk managers are interested in better understanding their risk.
“I’d say we can answer 80% of the questions you might have right before, during or after a large catastrophe event,” he said.
The company is broadening its scope beyond natural catastrophes to include manmade ones, such as explosions.
“We think the gap is really about how can you visualize and even simplify things down to the essence and communicate it to non-technical people,” he said.