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Bitesize Impact 25: Cape Analytics

Cape Analytics

Cape Analytics uses computer vision and machine learning to turn geospatial imagery into structured data on US domestic property. This data includes information such as building footprints, roof condition and nearby hazards. It does not provide the imagery itself.

Since we last covered the company in October, Cape Analytics has expanded its coverage from Florida to the whole of the US domestic property market and so provides insurers with information on over 70 million residential buildings. Insurers query its database via an API.

The company has three public customers – Nephila (the investment manager specialising in reinsurance risk), XL Catlin and Florida-based Security First Insurance.

Cape Analytics says most insurers are using the service to auto-fill underwriting criteria for new business. Some are also using it for renewal. One client has managed to reduce physical inspection costs by over 50%.

The company raised $17m in June this year, following a $14m raise in October 2016. The new financing, led by XL Innovate, part of the XL Group, included six new backers including The Hartford, Nephila, CSAA Insurance Group, The Cincinnati Insurance Company, and State Auto Labs Fund. These insurers join existing technology investors from current or prior rounds, including Formation 8, Data Collective, Khosla Ventures, Montage Ventures, Lux Capital, and Promus Ventures.

Besides new business development, the funding will be used to develop the system’s range of capabilities. Two areas of development priority are the ability to map hazards related to wildfires and to extend the service into the commercial lines property market.

Cape Analytics has undertaken some development work with existing customers on the claims side, but insists this is not a focus for growth at present. It now has 50 staff – mainly engineers, machine learning and data science specialists.

The company recently confirmed a partnership with insurance software provider Duck Creek, whereby its service will be offered as an add-on for Duck Creek insurance customers.

THE OXBOW PARTNERS VIEW

Cape Analytics illustrates two trends.

Get off pricing spreadsheets
First, insurers are increasingly using third party data in the underwriting process. This has three possible advantages: a) it reduces the burden on customers; b) it verifies information provided by those customers, c) it gives underwriters access to information they would not otherwise be able to get.

The Cape Analytics proposition is focused on roof construction; the obvious inference is that underwriters will need to ingest numerous data sources to get the best data for all aspects of a risk. That will only be practically possible if underwriters move off their pricing spreadsheets and onto a digital pricing platform.

Don’t go look yourself
Second, there are ever fewer situations in which insurers need to send real people to go and look at things. Cape Analytics illustrates this trend at the point of underwriting, but this is also true in claims.

For large-scale claims events (e.g. floods), satellite and drone companies provide almost immediate imagery, and analytics companies like Cape Analytics can turn this into insight.

For smaller-scale events (e.g. a flooded bathroom) insurers can tap into the “gig economy” to get a local person to go and inspect damage, under the direction of an insurer, via an app. It’s an idea we wrote about in Post Magazine in 2016, only to be dismissed by the adjusting industry. Impact 25 Member 360Globalnet facilitates remote imaging for claims so that insurers can see what’s going on in a property without having to leave the office.

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Chris Sandilands

Partner at Oxbow Partners
Chris Sandilands, ACII is a Partner at Oxbow Partners. Chris advises (re)insurers and brokers on a range of strategy topics and M&A. Chris started his career as a D&O underwriter at Munich Re, before joining Oliver Wyman, the consulting firm. You can reach him at csandilands@oxbowpartners.com.

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