Insurance Innovation of the Month – American Family’s Opterrix risk decisioning platform

Ninety’s “Insurance Innovations of the Month” feature contains regular snapshots of real and recent insurance innovations, based on conversations with the innovators behind them. They are drawn from anywhere in the world, and from all categories of insurance. If you’ve got an innovation you’d like to highlight, drop us a line at ninetymarketing@ninety.com.

Insurer(s): American Family Ventures

Market(s): USA

Insurance type(s): Multiple

Problem

American Family’s Chief Risk Officer wanted to enhance their toolset for managing the book of risk across the whole enterprise, at portfolio level. Particularly in terms of understanding risk aggregations and spotting localized concentrations of exposure. As a business with an acquisitive track record, American Family had pulled in a set of additional books of business, and the CRO challenged the innovation teams to help find a way to build greater visibility and confidence around visualizing and quantifying the entire portfolio.

Solution

American Family’s venture build unit ran a 3-month, $250k experiment, using cloud computing, proprietary GIS tools and the infinite computing power of the world to solve the problem. They gained access to all of the enterprise’s policy data, loaded it up in their prototype systems, and were able to visualize and quantify where risk was concentrated. Using GIS, they could grid the whole world into 5km squares, and map all insured property into that grid. Straightaway, they identified some key geographies of high property accumulations in tornado-prone areas. The tool, now named Opterrix, acted as a decision hub that allowed various scenarios to be played through, and helped the business make decisions about spreading that risk and buying facultative reinsurance.

As the Opterrix platform developed, the next step was to use the tool to look at where growth could be targeted. Where the population was growing; which neighborhoods should be targeted for automated sales and marketing initiatives. These innovative capabilities have already returned over $17M in new business production to the company.

They then looked at claims, piping new and real-time weather data in to the Opterrix platform. Seconds after a storm hits, American Family can leverage interactive mapping of the storm coming in, and highlight which policyholders were likely impacted, accurately predict claims volume, location, and severity, as well as anticipate and identify likely fraudulent claimants. This capability has been extended to wildfire, piping in wildfire and satellite data, using spectral imagery for early-stage fires. A smart combination of claims + sales insights is the ability of the tool to automatically issue moratoriums in very surgical ways. Previously, if there was a fire in e.g. California, the business would decline any new business across large portions of the state. Now, Opterrix can lock in on very specific areas and automatically issue moratoriums in a much more detailed way, protecting the enterprise from avoidable losses.

Historically, insurers like American Family have shipped this type of analysis work off to a large broker, who’d analyze it as a one-off event, highlight risk aggregations, and then issue a reinsurance policy to transfer excess risk. Then everyone would wait for a year to see if the analysis was right. Opterrix changes that for American Family: this is a real-time, proactive portfolio management tool. In line with American Family’s venture building tradition, Opterrix is available to other carriers, too.

Outcomes

In one year, at American Family, Opterrix delivered $25m of savings to the bottom line, and allowed the business to write $17m of premiums that they wouldn’t otherwise have done. Over a mid- to longer-term forecast, American Family predicts c. $250m of value to the organization from the tool. Some of the use cases inherent in that forecast are already in play; others are being built-out. Find out more at opterrix.com.

Social Impact:

As a social, for-purpose business, Ninety is always looking for the social, human or environmental impact of new ideas in insurance. Here, the impact is clear: as a mutual, American Family has a responsibility to its members to carefully manage its reserves. Opterrix helps it to do so. The tool also protects those members from fraudulent claims, and helps provide insurance in a much more precise way to people living close to areas affected by weather or wildfires, and who might otherwise struggle to get cover.

Tips to other innovators:

• Have a sufficiently senior sponsor, and make sure they have a significant enough problem to solve.
• Take a very lean MVP to challenges like this: aim to build something in 3-6 months for c. $250k. This has become American Family’s modus operandi for venture builds.

Categorization for insurance innovation portfolio planning:

Ninety Ten Big Ideas: this is an example of Ninety’s “Intelligent Risks” and “Smarter Back-Office” Big Ideas.

Ninety Ten Types of Insurance Innovation: this innovation combines the following Ten Types categories – 1) Profit & Capital Models, 2) Risk Selection & Pricing, and 3) Channel & Distribution.