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With inflation driving up the cost of repairs, labor, and claims, insurance costs rise similarly across the board. Auto insurance premiums have risen 13.7% nationwide over the past year, according to research by Bankrate.com. Home insurance, meanwhile, climbed 12.1% year-over-year, Policygenius found.
But Jonathan Matus argues that it need not be so. He’s the founder of Fairmatic, a company that applies AI to – or so he says – reduce risk in the auto insurance industry.
Matus previously founded Zendrive, a platform that provides information to businesses for car insurance underwriting and claims as well as roadside assistance. While Zendrive focuses on insurance for individuals and families, Fairmatic has a more commercial bent – a customer base consisting primarily of businesses.
“Having spent about a decade of my career at Google and Facebook, I quickly noticed the negative externalities of technology which I actively helped to mainstream,” Matus told TechCrunch in an email interview. “The path to the creation of Fairmatic was created by the need to reduce the risks associated with one of the worst externalities of this powerful technology: the increase in distracted phone use while driving and the loss of life that result on the road.”
Matus may be speaking in grandiose terms, but Fairmatic’s business proposition is simple: analyze and price the risk profile of a fleet of vehicles. The company uses artificial intelligence models trained on driving data to attempt to mitigate risk and assist in various policy and claims management processes.
Customers have access to an app they can use to monitor “driving events” – for example erratic driving – and “identify actionable improvement opportunities”. The app also offers what Fairmatic calls a “fully digital mobile claims experience” that can automatically detect accidents (hopefully better than Apple) and analyze incident data.
Here’s Matus: “With Fairmatic, small, medium and large business fleets have actionable insights that improve safety and directly impact insurance savings.”
But there are reasons to be skeptical. Fairmatic isn’t the first to bring AI into car insurance decision-making — Jerry, Just, Root and Tractable offer similar technologies, albeit aimed at consumers — and AI has an uneven track record in the insurance sector.
Last year, the Casualty Actuarial Society (CAS), the professional society of actuaries specializing in P&C insurance, recognized the detrimental effects that AI could have when used by financial institutions to determine insurance and mortgage loans. In a series of articles, the CAS concluded that biased data — data on which insurers train their algorithms — could perpetuate the discrimination that already exists in the insurance industry. (See: Allstate’s pricing algorithm that disproportionately negatively impacted non-white customers.)
A later report from the California Department of Insurance denounced particularly problematic recent applications of AI by insurers, including the reporting of claims from downtown zip codes and the use of personal information unrelated to risk in marketing and underwriting insurance policies. “Conscious and unconscious bias or discrimination…can and often do result from the use of AI, as well as other forms of ‘big data’,” the report’s authors wrote.
Washington and Oregon have sought to ban the use of credit-based scoring algorithms to set auto insurance premiums. Separately, Colorado introduced legislation requiring insurers to test their algorithms and scoring models to uncover bias.
Matus is adamant that Fairmatic is careful to reduce the potential for bias in its AI. In fact, he argues, Fairmatic’s reliance on AI generally leads to better outcomes for clients, who have historically been stuck with insurers using outdated data and pricing models.
“Fairmatic’s AI predictive risk model was trained using over 200 billion miles of driving data,” he said. “It allows us to develop a deeper and more comprehensive understanding of the unique risk profile of each fleet and driver, and then turn that data into insights and coaching that improve driving behavior and reduce risk.”
But while it’s true that Fairmatic’s approach is better than most, the platform’s driver monitoring capabilities are concerning in and of themselves. They recall the algorithms that Amazon used to monitor the behavior of delivery drivers during the working day. According to Vice, the algorithms wrongly penalized drivers every time cars cut them off — data that Amazon used to assess driving performance and determine individual bonus payments.
In response to a question about surveillance and data privacy, Matus said that Fairmatic “only actively monitors data relevant to the insurance policy”, including information necessary for risk and claims management. “Fairmatic’s technology layer uses anonymous data and does not store driver information without permission from the fleet,” he added.
Either way, Fairmatic has had no trouble attracting investors – or customers, for that matter. The startup raised $46 million in a funding round led by Battery Ventures with participation from current investors and Bridge Bank that closed this week, bringing its total funding to $88 million at double its valuation. previous (Matus would not give a figure). On the customer side, Matus says he has onboarded “hundreds of thousands” of drivers.
It’s not very surprising. Commercial auto insurance is a huge market, with Allied Market Research estimating it will be worth $307.10 billion by 2030, up from $128.44 billion in 2020. Risk of bias aside, money speaks, even at a time when global VC insurtech funding continues to cool.
Fairmatic’s short-term plan is to hire 30 employees for its R&D center in Israel and more in Bangalore, India, Matus said. The company’s current workforce – spread across offices in the United States, Israel and India – stands at 85 people.
“Fairmatic has seen outsized traction since our Series A and this new capital will be used to accelerate our lead in bringing the full power of AI to commercial auto insurance. Fairmatic is making strategic recruitments around the world and we are accelerating the growth of our R&D centers in Israel and India,” Matus said.Our vision is to build a technology-enabled insurance platform that is not only fully digital, but also fully enhanced and powered by AI, for all products and business functions.