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How San Francisco-based Federato is using AI to deliver next level intelligence to underwriters and transforming insurance industry

In the AI Startup of the Week, the editorial staff of is featuring promising AI startups, their innovations, solutions and challenges. In this ninth episode, we are taking a look at California-based Federato, a startup providing an AI-powered underwriting platform for insurance companies.

We have seen artificial intelligence (AI) completely transform a number of industries like healthcare, supply chain, logistics, and human resources, among others. Federato, a startup based in San Francisco, California, wants to use AI to completely redefine the underwriting process used by insurance companies.

Co-founded by William Ross and William Steenbergen in 2020, Federato wants to ensure that insurers no longer under utilise the data at their disposal. It does this by bringing speed and precision to underwriting with a platform that promises better outcomes for organisations and communities.

Designed by underwriters for underwriters

In the field of insurance, underwriting is the process used by insurers to determine the risks of insuring any business. The process usually involves the insurance company determining whether there is an acceptable risk, and if it does, calculates a fair price for the coverage.

Federato believes this old school approach to underwriting has led to exponential growth in uninsured loss. Citing Swiss Re Institute, the startup shows how there is a large gap between insured loss and total loss on its website.

“Globally, there is a large gap between total losses and the amount that are insured, referred to as the insurance gap – e.g., more than 70 per cent of losses from natural disaster events are uninsured globally,” Federato says on its website.

In order to reduce this gap, the startup believes that there is a need for innovation in insurance and it wants to start by re-engineering underwriting with its platform. Federato says it has built its underwriting platform taking into account an “increasingly complex risk environment.”

The company acknowledges that businesses don’t have problems but people do and in order to rectify that problem, the startup has spent over 1,250 hours asking the underwriters what they need to do their job better. The platform built by Federato thus focuses on “amplifying existing data investments, empowering people to take action, and strengthening their relationships with customers.”

Federato also allows a collaborative, real-time approach to coordinate risk selection and allows insurers to safeguard their portfolio. This is possible with the help of an approach that Federato calls Risk Ops.

Risk Ops to drive next level intelligence

The core strength of Federato’s underwriting platform is an approach called Risk Ops. This surfaces portfolio-aware insights at key points of action in the pricing process. The model allows for proactive monitoring of risk accumulations, real-time organisational performance and goal tracking, account prioritisation by appetite and winnability, and system adherence to rules, guidelines, and authority.

Federato has also made the platform intelligent enough to dynamically optimise each underwriter’s queue. It also supports features like embedded notes, referrals, and collaboration. The central point being that underwriter’s don’t have real-time insights to deliver profitable growth and Federato wants to offer that insight.

As you would have understood by now, Risk Ops cannot deliver these real-time insights without AI. With Risk Ops, Federato is bringing AI to insurance and the idea to deliver it in a way that transcends basic automation. The core idea is built using the principles of machine learning (ML) to deliver “high-quality, dynamic risk information to the last mile in underwriting and core operations.”

AI is an opportunity for insurance

Will Ross, CEO and co-founder of Federato, says AI and the machine learning technologies powering it have “much more to offer insurance than the basic automation-driven cost cutting that has dominated adoption thus far.”

He adds that automation is essentially an exercise in human replacement where cost is taken out of the equation by using a machine to do the work of a human. However, he thinks there is a better way to use AI, which Federato says is a technology “tailor-made” for the insurance industry.

At Federato, Ross and his Dutch co-founder William Steenbergen are focussing on implementation of core AI technologies like deep learning and reinforcement learning. Ross says that the planning cycle uniting portfolio-level risk assessments and core underwriting operation is “ripe for a bigger thinking.”

He thinks the first step in this transformation would be insurance underwriters preparing for a shift from static systems of record to dynamic systems of action. “When insights and information are allowed to exist as data and functions contained in software rather than relegated to PDFs, they can be used proactively and in real-time,” Ross explains.

With Risk Ops, Federato is essentially building this dynamic system of action where the underwriter is empowered with real-time information and actionable insights at all times. It is taking into account constraints such as rate, retention, and accumulation goals, to help underwriters be better at their jobs. While the use of AI in the form of Risk Ops marks a giant step, it will need the collective effort of the insurance industry and leadership in the space to realise the full potential of AI.

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