Insurtech Spotlight: Q&A with Bob Frady, CEO and Co-Founder, HazardHub

Insurance Industry News & Views - June 16 2021

Bob Frady is CEO and Co-Founder of HazardHub, a leading supplier of geospatial risk data to speed the awareness and underwriting of hazard risks for personal and commercial property insurance. HazardHub translates huge amounts of geospatial digital data into easy-to-understand answers that are used by carriers, MGAs and partners to make real-world decisions. We caught up with Bob to ask a few questions about insurance innovation, the ‘API-fication’ of insurance, and how new sources of data are transforming the way commercial insurance companies assess risk and serve their customers.

Bob, prior to founding HazardHub, you had a successful career outside the insurance industry with leading brands like Live Nation, Expedia, and Zeeto Media. What led you to insurance?

I actually started in the insurance industry in the mid-90s. I worked for a company called National Decision Systems and they needed someone to try to sell to insurance companies in Boston. I’m from Boston, so I was nominated. Bingo! I’m in the insurance business. Liberty Mutual was my first customer. They were awesome and taught me a ton. Since that time, I’ve zoomed in and out of the insurance industry. Sometimes on the marketing side, sometimes on the underwriting side. I think the skills I’ve learned outside of the insurance industry have really beneficial to our work here at HazardHub.

Insurance can be a world unto itself. What can insurance companies learn from other industries when it comes to innovation, the customer experience, and doing things differently?

One thing that insurance companies can learn from non-insurance companies is that it’s okay to fail. One of the hardest things I had to learn is that insurance people are rewarded for not being wrong rather than being rewarded for being right. It makes for some very risk averse people and processes. Sometimes you just have to spin the wheel and see what comes up. Just because something is different, doesn't mean it’s bad. That’s not something that comes naturally to many people in the insurance industry.

Over the years, incumbent P&C insurance carriers have accrued a lot of legacy tech debt. Recently, we’ve seen the rise of APIs as an approach to building out a more modern, modular, and agile insurance tech stack. How do you see the “API-fication” of insurance transforming the industry?

On the good news side, we’re almost past the point where people ask, “What's an API?” Which is progress!

 As part of my work in the MarCom world, I saw how cloud technology and APIs fundamentally changed that industry. The advances were just stunning. The reason why HazardHub went with the API approach was because we believe that APIs offer enormous power and flexibility at any point in the value chain for insurance companies. Plus, it allows us to quickly and easily update our data. For crying out loud, people are still pulling shapefiles from suppliers. They’re still getting bulk data dumps. It’s just not necessary anymore. It’s far more efficient to let the API do the work.

We recently published our second annual crowdsourced eBook Underwriting Priorities 2021 & Beyond. How is underwriting evolving, and which technologies and digitization initiatives should carriers focus on to make their underwriting processes more efficient, profitable, and responsive to customers?

Underwriters have a real problem. The problem is actuarial models. Actuarial models require you to get a lot of data that isn’t really based on real-world availability. So, underwriters spend an enormous amount of time digging up data or – worse – asking an agent or the insured to give them the data. It’s tremendously inefficient and unnecessary. What we help underwriters do is to gather as much relevant data as they can in seconds to eliminate the silly questions like “where’s the fire station?” or “How close are you to a fire hydrant?” or “How many square feet is your building?” The most creative companies are minimizing the number of questions they need to ask in order to create a quote. Faster, more accurate quotes are the future of our business.

Insurance carriers and brokers collect mountains of data, but they still struggle to gain the insights needed to accurately assess and price complex risks. If you had to give the industry a report card, how well do insurers manage risk today?

Insurance companies have been around for dozens or sometimes hundreds of years without our fancy tools and analysis end machinery. So, they get a passing grade. Maybe a C plus. The law of large numbers covers up for a lot of ills. But progress is being made. We’re really only at the beginning of the game. I’m encouraged by the progress.

From wildfires to hurricanes and floods, the hazards to private and commercial property – and people – are becoming more frequent and numerous due to climate change. How are insurers adapting to the increasingly complex hazard risks of climate change?

To us the answer is simple – use better tools. We’re shocked when people say, “They have a wildfire model. You have a wildfire model. So, you must be about the same.” Most of the major wildfire models were written 15 to 20 years ago. Most of the major property fire models are based upon science developed over 40 years ago. Enormous strides have been made in identifying and harnessing data that can better answer these questions. So, while it sounds simple, it really is – the answer is to take a look at what you currently use. Do a champion/challenger analysis against some of the new tools out there. See what wins. File your rates. It's pretty simple – execute the basics.

What are the key attributes that insurance companies look for in a third-party data provider and partner? How important is insurance experience and subject matter expertise?

The key attribute that many insurance companies look for in a third-party data provider is safety. As in “how much risk am I putting myself in to use a new data supplier? How much of a change will this cause to my current process?” The way you get to safety is through proof. So, you have a bit of a chicken and egg problem – how do you get safe if no one is using you? The answer is to find the people who need your help and work with them – if there’s not a burning need, then move on. Next comes the quality of data and the ease of use of your product. Those are so tightly bundled that I can’t really separate them. Those two factors are enough to get you in with the innovators, but the laggards – and they are the biggest part of the market – will wait until you’re “safe.”

Insurance expertise is important only in the fact that you must learn to be patient. The sales cycle is enormously long. It could last for years. I once got a little short with an actuary, asking why his analysis was taking so long. He got very red-faced and yelled at me, “It takes five years to know whether I was right!” You just have to accept it. Insurance experience will tell you it’s a long process. But as long as you can understand what a loss ratio is, you should be good.

Insurtech startups tend to have very different cultures than established insurance companies. What advice would you give incumbents and startups on how to make insurtech partnerships work?

For Insurtechs my advice is simple – prepare yourself for an extremely long sales cycle. The industry has survived a long time without you.

For incumbents, my advice is to come to the table with data. Insurtechs live and breathe data. If you’re serious about innovation, bring relevant data to the table. It’s the single best thing you can do to speed up a process.

Take out your crystal ball: What do you think commercial property insurance will look like in 10 years?

My prognostication skills are cloudy, at best. What I would say is that for most commercial property insurance, pricing will be taken out of the hands of the salespeople and underwriters and put into the hands of AI. It’s not a bad thing – it makes everything more efficient. You want agents focusing on risk mitigation, not price mitigation. You want underwriters focusing on the most complex risks, not gathering data that’s better handled by machines. Overall, I think commercial property insurance will be a much smoother transaction than it is today, with pricing appearing almost instantaneously. Which sounds like fun!

Bob Headshot LargeBob Frady is CEO of HazardHub, the nation’s fastest-growing supplier of data to speed the awareness and underwriting of hazard risks for personal and commercial property insurance. HazardHub instantly presents over 1,000 data elements via their API, providing unmatched insight to the underwriting process. HazardHub provides carriers, MGAs and partners the freedom to smash their dependence on outdated, inferior hazard and risk products by combining high-quality data with cutting edge technology.

Bob has made a career of using data to develop smarter answers to difficult questions. Bob is HazardHub’s product architect and also oversees HazardHub’s flagship consumer site, Bob is a graduate of Cornell University.

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