Investment Analysis (7): Cape Analytics — use computer vision to automate the insurance inspection process
Company
Cape Analytics leverages geospatial imagery, computer vision, and machine learning to provide geospatial structured data and aerial imagery for insurance and property underwriting.
Year founded: 2014, HQ: Palo Alto, CA, https://capeanalytics.com/
Funding: Series A, $14M, 2016.10, Investors: Formation 8 (lead), Data Collective, Lux Capital, Khosla Ventures
Partners: Nearmap (data partner), TigerRisk Partners (reinsurance and capital advisory), Nephila Advisors
Market Opportunity
In 2015, the US home insurance industry delivered $86B in revenue, expecting ~3.4% growth/year. The US P&C insurance industry earned $608Bn premium in 2016, but loss ratio rose to 60.57% from 56.02% in 2013.
Inefficacies in assessing properties: Traditionally, this involved prospects filling out long forms and insurers quoting based on incomplete or outdated information from public records or after conducting expensive on-site property inspections. As a result, there are often discrepancies between the quotes and the charged.
Lack of data-driven dynamic pricing: the residential homeowners underwriters either don’t inspect renewal business at all or on a 3-to-5-year cycle. When situation changes, insurers take long time to react.
Failure in modeling catastrophic events: Recent reinsurance demand growth in the US has been focused in casualty lines. Catastrophic events accounts for huge losses, but insurance models have “short memories”.
Product and Strategy
“We’re absolutely not trying to bill ourselves as a replacement to property inspections. I think our offering is a lot broader that that simple economic measure.” — Ryan Kottenstette, CEO of Cape Analytics
Business model: pull down geo-imagery from partners (outdoor, satellite photos), brings the imagery onto its internal platform (like Google Earth), instantaneously and at scale, for entire property portfolios, and produces structured property for insurance carriers
Products: MS Isolation Platform, Web Isolation Service, Doc Isolation Service, Email Isolation Service
· Cloud-based platform; data integrates into an insurance carrier’s quote engine via API
· Provide near inspection-quality data of high-value property features
· Property data include: roof condition and characteristics, square footage measurements, parcel features such as solar panels and pool enclosures.
Features and Benefits
· Shorten insurers’ application processes, increase price policies accuracy, and reduce post-binding adjustments/cancellations by allowing insurers to instantly pre-fill property information at time of quote
· Reduce the risk (namely, increase potential revenue) for renewal business by reminding insurers to inspect properties that have an extension or a guest house or pool is newly built
· Increase transparency of exposure risk at a portfolio level and provide insights into data quality for specific cedents with new cedent portfolio product offering. The solution drops directly into current reinsurer workflows, offering them instant, accurate, and objective data at scale about each individual risk in their cedent portfolios and across the entire portfolio
· Easy to implement: the data solution format plugs into leading CAT risk models from AIR and RMS without any change to reinsurer workflows
· Improve risk assessment: Reinsurers can submit their portfolio to Cape Analytics, which will send back an augmented data set with delta analysis in under 24 hours, allowing reinsurers to identify exposure changes of up to 15% on a portfolio basis, dramatically improving risk assessment.
· Improve catastrophic event management: In an event like hurricanes, the product can help identify the properties in the insurers’ portfolios most impacted, identify reported and unreported losses, prioritize the efforts and deliver better service.
Customers: Security First Insurance, Cabrillo Coastal, etc
Management team
· Ryan Kottenstette, co-founder, CEO, Principle @ Khosla Ventures, BD director @Amprius, Inc
· Suat Gedikli, co-founder, CTO, Senior scientist @Open Perception, Inc., PhD in image processing
· Olivier Collignon, VP of Data Analytics, VP Business Analytics @LoopNet, Risk Applications director @RMS
Pros
· Promising market: The P&C insurance industry represents a billion-dollar market for data companies.
· Strong value proposition which is well-aware and widely-accepted by the market: increase costs-effectiveness in operation (risk assessment process), open-up potential revenue source in renewal business, and reduce potential lost of capital and customer in catastrophic events
· Experienced founding team with good market-fit: the team is specialized in cloud security/virtualization. Success in co-founding and exit a startup.
· Data partnership with Nearmap, whose imagery provides detailed 2.8” GSD resolution that is updated on a frequent basis, contributes to the competitive advantages
· Highlights of technology
o Clientless: No endpoint software needed, no impact on customers’ native experience
o Compatibility: Ideal compatibility and Integrates with existing infrastructures
o Supporting various vectors including Web content, documents, phishing and endpoints
Cons
· Technology: Its stealth IP is in collaboration from Juniper, Check Point, UC Berkeley, maybe similar to others with similar technology. Adding a layer of abstraction may lower speed.
· Attraction for decision makers: Focus more UX than available policies
