Federato raises $15 million to help insurance customers manage risk.
: Ross and Steenbergen, both AI researchers at Stanford, began collaborating on wildfire modeling and hurricane modeling initiatives for the insurance industry. They were surprised to learn how big of a difference there was between what the data told insurers to do and what carriers were actually doing. After studying the problem, Steenbergen and Ross launched Federato to provide insurers a unified view of information to select and price risks.
Subsection 1.2: Federato is now raising new capital to grow the business. Emergence Capital led a $15 million Series A round in the company, which recently closed with participation from investors, including Caffeinated Capital and Pear. A portion of the cash will go toward expanding headcount, Ross told TechCrunch via email, from Federato’s current 23 employees to 50 by the end of the year.
The insurance industry faces three major challenges today.
Climate-related increases in natural disasters.
Climate change is causing an increase in the frequency and severity of natural disasters, which poses a challenge for the insurance industry. In the past, insurers have been able to rely on historical data to price policies and manage risk. However, with climate change, this data is becoming less reliable. As a result, insurers are struggling to accurately price policies and manage risk.
Loss uncertainty in insurance risks.
The insurance industry is also facing increased uncertainty when it comes to losses. This is due to factors such as state-sponsored cyberattacks and ransomware. In addition, there has been a recent trend of businesses being sued for large sums of money after accidents involving commercial trucks and asbestos. This has led to an environment where insurers are struggling to predict payouts and manage risk.
Payout inflation caused by verdicts against insurers.
Another challenge facing the insurance industry is payout inflation caused by verdicts against insurers. This is particularly true in the United States, where lawsuits are common and damages can be high. As a result, insurers are struggling to keep payouts under control while still providing adequate coverage to policyholders.
Federato's platform helps insurers manage risk and policy portfolios.
Using the platform, customers can visually monitor risk and manage their policy portfolios.
Federato's visual interface lets users see all of their policies in one place, track the performance of individual policyholders, and identify trends across their entire book of business. This gives them the ability to proactively manage risk and make informed decisions about where to allocate resources.
Federato uses machine learning to create a common framework for portfolio management.
Federato's machine learning algorithms analyze data from multiple sources to generate a comprehensive view of each customer's risk profile. This information is then used to create a customized portfolio management strategy for each insurer.
Ross positions Federato as an alternative to in-house services providers and legacy vendors.
Ross believes that Federato offers a more efficient and effective solution for managing risk than traditional in-house service providers or legacy software vendors. He cites the company's use of machine learning and its visual interface as key differentiators that give insurers a competitive edge.