“The Data-Driven Revolution Is Arriving In The Insurance Industry” Dror Katzav, CEO of Atidot

We are truly overwhelmed with the great insights that we’re having in our new interview series “Scouting Insurtech Startups”. More about Insurtechs enriching the grounds of Insurance with new technologies like machine learning, AI, data analytics, chatbots and many more – customers service, and experience are not only developing but also companies who are willingly taking the leap of digital innovations for the industry. As said in this interview with Dror Katzav the CEO of Atidot, they’re “helping the life insurance industry to be “disrupted” without the disruption…”

How would you explain to a 10-year-old how you as an insurtech company supporting and enabling insurance businesses with your products and services?

Life insurance companies manage some of the biggest pools of money in the world. They are here to assist people in need by providing risk products and to help people save for retirement by offering investment products. Surprisingly, although the companies are so rich, they manage their business using very old technology. This is a problem since in the last few years it has become increasingly difficult to optimize your assets without a strong understanding of how people interact with insurance.

Most people do not actively go and change their policies, they either pay for it or they don’t. But their lives are in constant flux and their insurance needs are changing. Some have more kids, some have more debt, some buy a house that is more expensive than their neighbors, some do the opposite.

In today’s world, there is a lot of data out there (both at the insurer’s disposal and externally available) that can help them understand how these actions impact policies and risk profiles. Atidot is building a tool that is based on generating nano-segments of people with accurate risk profiles. So we can tell the company if you are over or under-insured if your policy is adequate or not at all right for your needs, and what is the likelihood you’ll be exposed to certain events. This helps the company better manage everyone’s money, generate better yields, improve customer service and provide personalized products.

In the last seven years, I personally got married, had a kid, bought a house and changed my job at least twice. Despite these major changes, not once in the last seven years has my life insurance company contacted me in order to adjust my coverage. 

A great way to see this is when a company receives a notice of address change. Typically, that information gets sent to the billing department to make sure the bills get sent to the right address. But there is more to it. Let’s say the move was from a small apartment in the city to a 4- bedroom house in a suburb with great schools, odds are the move has something to do with children being born. If those kids are not on the original policy taken out years ago, the policy is probably grossly out of date and needs to be fixed. Fixing it means that the policyholder is protected, but also that the insurance company can collect a higher premium, a win-win for everyone.  

When we started this company, we went to a lot of insurance carriers and asked them a simple question: if I had purchased a life insurance policy from you seven years ago, and I was a loyal customer, how much coverage should I have now?  The companies usually answer by saying they don’t know, so we wanted to find a way to take information that is already there to improve how companies operate. 

We also wanted to help life insurance companies more accurately calculate the reserves they need to have on hand. Incorrectly valued policies are going to wreak havoc on the calculations, and not knowing how many policies are going to lapse makes the calculation very difficult. If a company is keeping too much money in their reserves, they are missing out on resources that could be better used by the company.

How do you see your company in the next 5-10 years guided by your visions? What is your contribution(s) you’re predicting to provide in the insurance industry?

We see the data-driven revolution arriving in the insurance sector, as insurance companies know they can no longer sit on the fence. Being data-driven means leveraging your data to power AI-driven insights to create a better business. This will bring about better margins, less risk (or free up resources to enable taking on more risk), personalize products for customers and improve service. Becoming data-driven will enable the companies to achieve their full potential. 

We see midsize and large providers losing hundreds of millions just from not reaching out and upselling existing customers. Consider customers who purchase their original life insurance policies as part of their pension plans through a new job. Assuming this person is at the beginning of their career path, without a family of their own, they will be paying significantly less than they should be once they do decide to get married and have children. This person also may not understand that unlike their pension, which is based on the individual and therefore mostly static, life insurance requires more active upkeep. The responsibility to inform the customer should be on the companies themselves, but they cannot do so without the relevant data.

We are looking for data sources that provide a lot of information while remaining generalized and not personalized. For example, we can gather financial market indicators and a lot of data about certain demographics based on addresses.

We also work with actuaries to provide the insurance companies with additional tools and solutions that will enable them to incorporate more data into their workflow parameters, improving their finished products.

What are the successful use cases and developments that made you proud over the last 12 months?

I can share two examples at this time. One is for a South African life insurance company called Platinum Life. We analyzed about 1.5 million policies and we were able to predict how many policies were going to lapse about 50% more accurately than existing models. From this, we found that if insurance companies optimize the way they handle lapse prevention this could lead to a 30% – 35% increase in premium collection.

For the second example, the company wishes to remain unnamed but it’s one of the top ten insurance carriers in the U.S. We found which policy-owners were potentially under-insured and reached out to them through independent financial advisors who were part of their network. We discovered under-insured areas that were over $1 billion in missed opportunities. The conversion rates of financial advisors reaching out to those customers went up by over 150%.

What are your forecasts about insurers, reinsurers, and brokers versus AI, Iot and machine learnings causing digital disruptions not only in the insurance but also in the finance industry?

What the platform is doing is helping the life insurance industry to be “disrupted” without the disruption. It’s more like evolution.  Rather than relying on manual analysis, what we do is we take the data from all the different systems and very quickly use machine learning and big data technologies to understand as much as possible. Around 80% of the data in insurers’ legacy systems would not be accessible otherwise.  

Legacy insurers are not becoming irrelevant, but they need to evolve. Customers are looking for insurance providers which have survived the test of time, as they seek assurances that the company will still be in operation in the decades to come. Policyholders also need to receive the tailored products that smaller, less well-established providers are offering. That being said, insurance companies need to start harnessing their data to improve their capabilities and offerings, or they will surrender market share to a provider who does, be it a new startup competitor or another legacy provider that has adopted new solutions to meet the demand.

What kind of partners and customers are you most interested to work with?

We welcome any opportunity to work with life insurance providers, but our immediate focus is on the US and European markets. We can provide these companies with our analytic services that will not only help them provide better coverage policies to their customers but allow them to maximize revenue potential. They are losing out on millions of dollars of revenue a year that they could be earning if they were better able to manage underinsured policies.

Some of our out-of-the-box solutions can provide immediate benefit to companies and can be readily seen by its impact on the top or bottom line of the company.

We are also working with many other startups and insurance technology companies in the industry. The needs of providers are so wide and varied that by working with other solution providers, we can offer insurance companies tools to solve a wider range of problems.

How would you promote the connections from you as an insurtech to the insurance businesses and be more relevant to other industries like finance, manufacturing, construction, logistics, tech, and many others?

We believe the way for solutions to work is to be very focused on insurance, life in particular. From the ground up, we’ve built the company based on data science and actuarial studies. 

If you know that the data you relate to is for life insurance policies and annuities, you don’t need to train engineers and or the system, to know what a policy looks like.  The system is not going to throw errors up all over the place just because we saw a missing premium because it takes all available data into consideration. The system we have built could be potentially utilized similarly by other industries looking to gain greater insights about their customer base by evolving with the new tools that were not previously available.

Can you share some strategies about how we can put up the game with these tech giants entering the insurance industry like Amazon, Google, Apple, and others?

Insurance companies need to think about what happened to GAP and Target with the rise of Amazon. All of them have a supply chain, brand, warehouse, manufacturing, digital assets, and e-commerce but still, Amazon took them to their knees. Why is that? Because Amazon knows the customer, using AI and data science to feed the machine.

Insurance companies, for the time being, still have a defensive moat as customers keep their savings with the big brand insurers. The brands still have value, so unlike Toys R Us, they are not going to die so quickly. But to survive and thrive they need to compete with the rising “Amazons” of the insurance market. 

Currently, many established providers are trying to put a digital band-aid on their data operations. Digital underwriting, digital claim processing, digital investment robo-adviser, chatbot for the call center and the like. This is all very nice, but the real value will only come when it is combined into one AI-powered data-driven platform. An optimized platform such as this one would know the customer through and through, improving the decisions being made across the entire value chain. This is what we at Atidot are bringing to the world of life insurance.

Please share your 3 do’s and don’ts in creating a new company?

Dos:

1. Pick the right spouse: It starts with your partner. I’m on the road all the time. Between relocating to the States and still spending 2-4 months abroad each year, if my wife was not part of this game we could have never done this.
2. Pick the right co-founders: Same goes for your co-founders, who are literally your comrades in getting the product off the ground.  
3. Go after a big challenge: My army service taught me that the sky’s the limit. My unit was focused on challenges that are considered impossible and our motto was “Turn The Impossible Possible”. We picked something everybody thought was impossible- reinventing actuarial science and bringing AI to the heart of life insurance.

Don’ts:

1. Don’t over listen: When you are trying to disrupt an industry, everybody will tell you that what you do doesn’t make sense, it won’t work, or that you are thinking about it wrong. You must believe in yourself to a degree that it is almost stupid in order to have the guts to build something big.
2. Don’t wait too long before going to market: Test your thesis – talk to companies and talk to investors about your ideas, as it will help you shape them. People are already busy, they probably aren’t going to steal your idea, and if the idea can be stolen from a conversation over a cup of coffee, it probably wasn’t that good an idea anyway.
3. Don’t sit on the fence: If you are in it, go all in. Quit your job, take the low-cost flight to the conference, call your contacts and tell them you are in. Trust me.

A piece of advice you want to share with young people and startups who wants to enter the fast-spinning world of insurtech and fintech?

You may think you realize how slow the industry moves, but it is slower than you think and it’s a winner takes all industry. Start early.

Your top 3 books everyone should read and top 3 gadgets everyone should have?

Here are 3 books that I liked about management skills

1. The 7 Habits of Highly Effective People (available in Germany, in the US, in the UK, in Italy and in Spain)
2. The Goal (available in Germany, in the US, in the UK, in Italy and in Spain)
3. The Hard Things About Hard Things (available in Germany, in the US, in the UK, in Italy and in Spain)

But, 3 books that I just like reading:

1. The Neverending Story (available in Germany, in the US, in the UK, in Italy and in Spain)
2. The Hitchhiker’s Guide to the Galaxy (available in Germany, in the US, in the UK, in Italy and in Spain)
3. Ready Player One (available in Germany, in the US, in the UK, in Italy and in Spain)

The gadgets I’m using the most:

1. Alexa or Google Home (available in Germany, in the US, in the UK, in Italy and in Spain)
2. Good Earbuds for podcasts and E-books
3. Step counter or Fitbit (available in Germany, in the US, in the UK, in Italy and in Spain)

But since I’m also parenting a two and a half year old kid I’m very much into:

1. Lego 
2. Play-Doh 
3. Magna-Tiles 

I guess you can tell I’m a geek 🙂

Barak Bercovitz, the CTO and co-founder served over 10 years in the same unit as Dror creating data systems using the latest technologies, and  Assaf Mizan was the Chief Actuary of the Israeli Commission of Insurance.

So it would be fair to say that the Atidot team really is the best of both worlds.