scientists

The Big (Uninsured) Risk for Early Stage Life Science Companies

Early stage Life Science companies are invariably betting a great amount of capital on the human clinical trial testing of their first products. Immense work and expense go into lining up clinical trial sites, scaling up early manufacturing (or contract manufacturing) and building the team of Clinical, QA/QC, Medical, Legal, and related resources.  All of that overhead is devoted to just one thing— advancing the clinical material into clinical trials. However, something as simple as spoilage of a shipment can lead to an immense uninsured loss.

Time to market may be a huge factor of course, but risks associated with idle unproductive employees and the associated salaries, benefits, rent, and other overhead that often add to losses while the batch from the shipment is being recreated are usually uninsured with standard Ocean Cargo policies.

This proverbial tightening of the funnel should be a great target for important insurance coverage but has been left uninsurable by incumbent insurers in the market. Amy Sinclair, Life Sciences Practice Leader in the Boston office of Arthur J. Gallagher said, “A loss of clinical trial material in transit can lead to a Business Interruption and Extra Expense Insurance loss. We can cover that under a Property Insurance policy while the goods are in a fixed location like our client’s manufacturing building.  But until now, we have been unable to get insurance for our clients that responds to the risk exposure caused by a loss of goods while in transit or at warehouse or clinical trial locations.”

Corvus Insurance, with a deep understanding of Life Sciences logistics, has developed a proprietary Extra Expense form in an attempt to make whole those Life Science companies that suffer an insured loss (from spoilage or any other insured peril – theft, fire, windstorm, etc.).  

“This new coverage from Corvus fills a gap that responds to a critical, but previously ignored, risk exposure for Life Science companies,” said Steve Sawyer of Woodruff Sawyer in San Francisco. The policy form is available on request from Corvus.

Corvus Insurance Holdings underwrites Smart Cargo™ Insurance for the Life Sciences and Food industries on behalf of Argo Insurance Group (Best’s Rated, A, XIII).  Brokers on our platform are bringing needed, innovative and differentiated product into the market and great value to their clients.

 

Technology

InsurTech: Easier Than a Flu Shot

InsurTech is a new concept that is revitalizing an old industry. But what exactly is it, and how does it work? And how is Corvus shaking up something that’s already so cutting edge? InsurTech can be broken down into three primary aspects, each one important, all working together to run a system with maximum efficiency. Imagine visiting a doctor’s office— you check in at the front desk, you get your physical, and you get your bill. For most people, the bill is the greatest concern— and that’s why this third aspect is where Corvus is focusing its energy. What if you could prove to the doctor that you have been taking great care of your body all year? That you’ve been exercising, eating right, and cutting down on beers? And what if the doctor, having received this information, would, in turn, charge you less because of your healthy habits? That’s what Corvus is trying to do for commercial insurance buyers.

But we’re getting a little ahead of ourselves. So let’s begin at the “front desk” of insurance, the first aspect— that is, the contracts, the insurance platforms themselves, etc. This is the gateway to your policy, and there’s a lot of cool stuff happening in this arena. For instance, there is some great technology being applied to things like the mobile-enablement of auto claims, blockchain for reinsurance contract fulfillment, and online sales platforms for brokers and agents. This can cut the costs of managing an auto claim from 3% of premium to 2% which, given the size of the auto market, is an incredible achievement.

Next, we go to the actual doctor’s appointment— the second aspect, the product that you’re purchasing. Online channels, direct or broker-focused (Insureon or Wellthie are examples), as well as products that are sold for less than a year for the gig economy or on a P2P basis, fit into this category. Distribution costs can run from 3 to 30% or more, so reducing distribution costs is a big deal if they respond better to customer needs than conventional products and distribution methods.

The third aspect, where Corvus is most concerned, is that final doctor’s bill in the form of claims paid. This is where Corvus is particularly innovative— by using your data, we are able to help you reduce your risk in order to reduce your claims. Companies like Neos in the UK do this by giving out theft or water detection devices in order to prevent or respond more quickly to events that frequently lead to homeowners claims. Corvus accomplishes this not by creating new monitors of data, but by leveraging and licensing existing data sources to price, predict, and prevent commercial insurance claims. We use temperature sensors for cargo subject to spoilage in order to monitor and score risk with full customer (and broker) transparency. We are also perfecting the same for cyber (web-scanning technology). One big difference in this arena is the richness of the targets. In commercial insurance, between 60 and 80% of premiums go to pay claims. Reducing the cost of claims by 15% will make a bigger impact on overall economics than cutting distribution or back-end costs in half.

Corvus is excited to be breaking into InsurTech and excited for you to join us on this journey. From cargo to cars, we’ll reward you for your hard work, and you’ll reap the benefits of safer habits. By creating InsurTech for you, we are going to make the world a better place.

 

Technology

Data Dive: More Information Creates More Opportunity For Brokers

Anyone who has spent any time at an insurance company has heard the saying “there are no bad customers, just bad pricing.” Seemingly innocuous on the surface, it is symptomatic of the fact that the customer and the insurance company aren’t in a mutual partnership. Often, it’s true. Traditional insurance companies rarely think about individual customers and businesses, instead choosing to focus on collecting data that transforms the company into a statistic. Corvus turns this approach on its head. We use data that measure the underlying causes of losses, and we make our clients an active participant by mining and sharing this data to help take corrective action.

 

The traditional insurance pricing model focuses on aligning the cost of insurance with expected future losses, using data collected from a wide variety of sources to do so. In a market with many competitors, there is constant pressure for companies to charge more for risky customers, or else have their low risk customers leave for a lower priced insurer. In the extreme, aligning price with a customer’s risk breaks down the social goal of insurance in the first place: to pool society’s risk and help each other overcome fortuitous events. We see this in many cases through government backed insurance programs where private insurance companies are unwilling to participate for the riskiest customers.

 

The issue with this approach is that while insurers collect a lot of data from many sources, they’ve historically been limited in the depth of that data. As a result, most business insurers attempt to correlate abstract variables about a business with insurance claims. In the case of cargo insurance, they may use information about the age of the truck, the type and annual amount of goods being shipped, and even business credit score. While these components correlate with future expected claims, from the perspective of improving the client’s business and reducing risk, they are meaningless. Traditional insurance companies rarely share this data with customers in any meaningful way, and even if they did you’d be hard pressed to find a use. No company in their right mind is going to ship fewer goods to save money on their insurance.

 

Corvus is taking a new approach to insurance, capitalizing on the proliferation of data at more granular levels and without legacy systems and practices holding us back. We seek out insurance products that have a large amount of untapped data, but most importantly, untapped data which measures the underlying causes of the insurance risk— as opposed to generic information about the client’s business. With our Smart Cargo Insurance product, we use the temperature data from an individual’s shipments to identify when their cargo is most susceptible to spoilage. With our Smart Cyber Insurance, we can identify a customer’s IT security vulnerabilities that enable outside parties to breach their data. By moving our data closer to the true source of risk, we’ve created pricing and underwriting unique to each business’ risks, which makes for increased transparency and fairness for all customers.

 

Having all this data is great, but if we only use it to charge our customers different prices, we’d be no different than every other company. Instead, we take transparency a step further by sharing this novel data in our Dynamic Loss Prevention report, providing insight on the factors in a client’s control that are most likely to prevent claims. Where traditional insurance companies penalize risky companies by charging them more money, Corvus aims for a mutually beneficial approach that reduces losses, putting both parties in a better situation. We are living in a data-driven world, and it’s time for the insurance industry to step up to the bat and play. At Corvus, we are using this data to center clients’ needs and to mitigate their risk— and we’re doing it transparently, so customers can make the choices that are best for them.

Handshake

Venture Capitalists, InsurTech and Choosing Your Customer

As Corvus contemplates its next stage of fundraising, after respecting the August VC break, we are having some interesting conversations, not just about Corvus but about how VCs see the world.  Some thoughts about VCs, distribution channels, and number of products seemed worthy of sharing to other entrepreneurs in the space.

 

First, an attempt at categorization of InsurTech.  Everybody has one, here is mine. Many, perhaps most InsurTechs are focused on efficiency and reliability of back-room systems for insurer processes, examples range from blockchain for reinsurance transactions to new data that improves underwriting.  Customer – insurer.

 

A second category focuses on digital distribution of insurance.  From term life to renter’s insurance to SME business covers, these InsurTechs rely on SEM and awesome digital experience combined with behavioral economics and other tech insights in order to connect with online shoppers.  Customer – small premium consumer.

 

Still others are working alongside Corvus to build tech-enabled commercial insurance products sold through brokers.  Whether new data comes from social media, mobile phones, IoT sensors, and the like makes little difference to these InsurTechs.  They key is getting to commercial sized organizations that benefit from the new data. And the only road to the mid-sized commercial insurance market is through brokers.  See Zenefits and their $500MM of capital if you still think otherwise. Customer – insurance brokers.

 

A few InsurTechs are attempting to combine several of these tech advantages.  In the presence of these more ambitious challengers is where Corvus flies. We are trying to master more than one of these InsurTech capabilities.  In fact, we think that mastery of new data sources in order to create tech-enabled commercial insurance products requires a very thoughtful approach to building digital platforms.  Combining our tech-enabled products with a digital experience designed to make our brokers look like heroes and builds barriers to entry for our competitors that will invariably come into the market.  Platforms like our CrowBar will support multiple products, building a brand that can leverage sales, marketing, SEM, and a digital platform. Corvus knows it customers – Commercial Insurance brokers.

 

Some VCs think that the key choice is around the product. They advise companies to stick with one product or one digital capability in order to try to master it before moving on years later.  That may be because one product companies have easier exit strategies – build to sell. Thankfully, some VCs are more ambitious and see that the choice of customer is a more critical defining factor for InsurTech success.  Having chosen a customer to serve, tech needs to be built for all aspects of the experience.

 

As a closing comment, those InsurTechs that aspire to build tech for brokers but also to work around brokers disrespect the channel at their peril.  We won’t forget – commercial insurance brokers. IMHO.  InsurTech. For You.

We Built the First Commercial Insurance Policy Powered by the Internet of Things (IoT)

…And why it’s not all about the IoT

Corvus Insurance, a tech-enabled MGA, was founded in early 2017 in order to leverage existing technologies and data that might be used to predict and prevent commercial insurance claims. Putting this data to work can greatly improve underwriting, loss control and claims outcomes while driving down the overall cost of risk to organizations. Corvus hopes it will make the world a safer place.

 

Corvus, comprised equally of veteran tech and insurance leaders read the same tea leaves that were available to everyone in the commercial insurance industry in the past few years. Data is everywhere and expanding exponentially. Experts and futurists all predicted that IoT data would empower new innovation in insurance. Incumbent insurers are as aware as any tech startup about this opportunity. A recent LexisNexis survey reports that 70% of top insurer executives think having an IoT strategy is important while 79% report that they don’t have an IoT strategy. Why did it take this long to happen and how did a little startup pull it off?

 

At first it is difficult to understand why no other insurer had demonstrated success in IoT. Data from sensors can be used to predict the likelihood of a claim if the data measure a precurser to a major type of claim (pressure from the weight of snow on the roof) or if they can measure and respond on the spot to slowly developing claims (think water leaks). Given that data, Corvus could select it s customers and price its commercial products better than competitors. And, Corvus could use the data to warn customers about impending or more likely claims, something we now call Dynamic Loss Prevention™ to bring added value to customers by helping them to act to prevent claims from happening. We could even use the data to provide benchmarking and other business intelligence as a differentiator. So, how did the journey take shape?

 

We started by looking at use cases (that’s the tech vocab) for causes of loss. We tried to answer the question: What causes of loss are monitored by sensors with data collected? That was easy, sensors are indeed everywhere – in vehicles, on machines, on HVAC systems, security systems, temperature sensors, light sensors, and water overflow sensors. That is part of the problem, sensors are in too many places to start to narrow the search.

 

So, we decided to start at the other end of the problem. We asked the question: what industries had a lot of claims that might be predicted by sensors? While we could find some use cases in liability insurance most were related to property insurance. Still, lots of industries share the same set of common losses – theft, fire, temperature, collapse. Our initial focus was on buildings since they sometimes had integrated systems for a combination of insurance perils like theft, water leakage, and fire.

 

We contacted numerous large sensor companies and some niche players, as well. They all seemed aware of the opportunity to use data to predict and prevent insurance claims. They were willing to work with a startup like Corvus, too (perhaps because we had funding from Bain Capital Ventures). We started to negotiate terms, it all seemed great. Except for one thing. They would not give us the names of their customers, and it seemed we could not guess at that since most of them had modest market shares. If we presented an IoT empowered insurance product to brokers and told them it was good for any building owner that had sensors from company A, the brokers would quickly retort: how will we know if my client’s building has sensors from company A, they only represent 10% of the market so I will be wrong 90% of the time. Worse, most of the use cases lacked even rudimentary data to predict which data scores are predictive of claims. Back to the drawing board.

 

That forced us to think narrowly. What industry bought a lot of insurance for a significant risk that could be predicted by data from sensors? We eventually found our way to the market leader for temperature sensors for food and pharmaceutical goods – the major cause of loss for goods in transit for these companies was spoilage. And they measured the temperature of the goods frequently, not for insurance purposes but for regulatory reasons. Finally, time to roll up the sleeves.

 

In April of this year, we launched Smart Cargo Insurance™ coverage to insurance agents and brokers and their clients in the Food and Pharmaceutical industries. We are quoting and binding business. While it is too early to declare victory, we achieved a small milestone for the insurance industry. The first commercial IoT-based Insurance policy.

 

Not only does the policy allow us to better price risk, it also allows us to identify accounts with the lowest risk factors. And we respond to that by offering broader coverage, particularly around the spoilage peril, to accounts with high scores. We don’t stop there, however, since we use ongoing data from the IoT sensors to inform us about trends for our insureds, providing them with Dynamic Loss Prevention™ reports that can help prevent a claim. And we use minute by minute shipment data to enhance our subrogation rights, allowing us to reduce cost for us and the policyholder.

 

But, what we learned along the way is that our model, our playbook if you will, is just as applicable to any new source of data. So, while building a IoT policy is a happy milestone for Corvus and the insurance industry, it has exposed us to thinking about other sources of data to inform underwriting, loss control and claims, all to benefit the policyholder and their broker.