Startups claims commercial vehicle insurance does not work for policyholders or suppliers
Koffie Labs, a New York-based insurtech startup with a focus on commercial motor vehicle insurance, announced Tuesday morning that it raised $ 4.5 million in two rounds of initial financing led by Anthemis Group and Lerer Hippeau.
Ian White, executive director, and Mike Dorfman, chief operating officer, founded Koffie in 2017. Dorfman has deep roots in the truck industry, growing and working in his family’s fourth generation logistics and truck insurance provider. White is a businessman with previous experience in technology startups.
Koffie Labs was born out of a simple fact about commercial vehicle insurance: it gets more and more expensive for truck drivers, but it is still not profitable for insurers. One of the significant obstacles in road transport insurance is an outdated way of assessing and pricing risk, based only on the most general characteristics of a given fleet. Historically, risk has been assessed and insurance policies have been priced with little regard for aftermarket telematics installed on a truck or for driver assistance technology developed by the OEM.
By creating more detailed risk models based on approximately 100 characteristics of the physical trucks themselves, Koffie wants to give fleets credit for the insurance company’s installation of security and loss control technology. White said that capital will be spent on product development and procurement; Koffie currently has about 10 employees.
“Fundamentally, we bring a wealth of data to the occasion, including 3 million truck accidents and 100 million federal inspections,” said White in an interview with FreightWaves. “So far, the industry has worked on heuristics and has failed. Can we get more granularity? “
Most insurers cover prices based on the operations of a fleet of trucks together, but Koffie goes to the specific vehicle level. Why does it matter? Because the safest trucks on the road are approximately three and a half times less likely to suffer an accident that results in bodily injury than an average truck, White said.
While traditional insurers essentially consider a risk factor for the truck, one for the driver and one for operations, Koffie’s models take into account everything from axle, make and model configuration to accident prevention technology, training of drivers and market – and vehicles Operational data, White said, allows Koffie to divide the truck industry into 10 risk plots.
Developing unique risk profiles for each physical truck and then revealing patterns hidden in a vast lake of collision and inspection data is quite an undertaking, but White and Dorfman also want to build significant automation within the insurance operation itself.
Dorfman said that when he went to work at his family’s company, he was surprised to learn to use a fax and a typewriter. The budget generation process for a carrier was laborious, done with paper and pen, and could take up to 90 days, he said.
“I saw cases where we started a quote a quarter before a transportation company’s policy expired and we still couldn’t find a home for it,” said Dorfman. “It was extremely frustrating from my point of view and from the insurer’s point of view and eventually led insurers to withdraw from the market because they were unable to get enough fees to make the business profitable. It seemed that no one was happy. ”Koffie says he can deliver insurance quotes to truck drivers in one day, partially filling 80% of a given operator’s application using the data already collected.
But in many ways, Koffie’s innovation comes back to assess and price risk differently than the rest of the industry. White said that while the fleets are sold with new safety technologies, such as video telematics or driver assistance technology, the products often come with the promise that they will help reduce the carrier’s insurance charges. But when the fleet owner shows his new technology to an insurance company and asks for a discount, he finds that his rates have not changed.
“Fundamentally, for me, insurers were basically unable to differentiate a good from a bad transport risk,” explained Dorfman. “What I saw were often insurance companies that were not specialized and didn’t really know how to subscribe properly. There has been no innovation in decades in terms of underwriting factors and processes in this line. For us, the solution is to look at fleets at a granular level and look at security technology. We’ve seen this work in personal vehicles for a long time, but many of these rating factors are simply left out of the equation. [in trucking]. “
By tracking more individual attributes for each truck and measuring the performance and risk of these trucks over time, White and Dorfman believe that Koffie will have an advantage over other insurers as autonomous vehicle technology becomes more robust and widespread. Whereas traditional insurance providers will be tasked with creating an entirely new risk model that takes into account an emerging technology – a technology for which they have not collected their own data – Koffie sees AV technology as a set of hardware technologies and software that already evaluates and prices independently.
“If we saw a vehicle five years in the future, we could break it down into hardware, software, ask ourselves where we saw these things before and evaluate it with the historical data we already have,” explained Dorfman.
Koffie’s focus on commercial vehicle insurance is based on a deep family history and a passion for all things road transport that led co-founders to enroll in truck driving school.
“The better you understand this £ 80,000 piece of metal, the better you can understand the price risk,” said White.