Federato: Bringing the Insurance Underwriting Function Into The Future

When we make an investment, we always ask ourselves: how important is this product for the company's customers? And how much direct influence does it have on customers’ top and bottom line? 

The more critical the solution, the more likely it is to command high annual contract value and have strong retention, two metrics we know are great indications of future success.

In the case of the insurance industry, the function that sits “at the core” is underwriting. It’s underwriters that determine how much risk the insurance company is willing to accept, and at what price, and that’s what drives both their revenue and profit.

However, underwriting is getting more complicated than ever. The amount of data that’s available to inform an underwriting decision has skyrocketed. Pricing risk accurately has become increasingly challenging as new factors are introduced, including climate change, geopolitical risk and cyber risk, that can’t rely on decades of loss data to predict future risk. 

It is essential then for insurance companies to ensure that the data they use to make their underwriting decisions is as complete, up-to-date, and usable as possible. Up until now, the process that most underwriters used to gather this data was manual, clunky, prone to errors and, above all, often leveraged information that was stale.

Enter Federato. The product allows underwriters to seamlessly gather and visualize the complex data they need, while allowing underwriting managers to very precisely select and price risks that are aligned with their broader corporate goals. They call this the insurance RiskOps platform. The result is that Federato allows insurance companies to “jump two decades of technology in two months” (an actual quote from their largest customer). 

The co-founders Will Ross and William Steenbergen met as machine learning researchers at Stanford where they were working on climate and atmospheric modeling and reinforcement learning respectively.  Previously, Will spent five years working in AI at IBM Watson and William earned his M.S. in computational and mathematical engineering. 

While still in school, the duo began studying the insurance space in depth through more than 1,200 hours of user research with insurance professionals. They realized that the underwriting function, albeit so core for all insurance companies, leveraged incredibly old technology and processes. They re-imagined the function from scratch, and designed a solution that brought delight to its users. By the time Will and William graduated they had a fully functioning product and several very happy customers. We spoke to all of these customers and quickly realized the company was onto something very special.

Today, we’re excited to announce that Emergence led Federato’s $15M Series A, with the participation of our friends at Caffeinated Capital and Pear VC. It’s rare for us to find a company that touches three of our theses: Deep Collaboration, Coaching Networks, and Industry Cloud. 

With their platform, Federato is marrying collaborative workflows (Deep Collab) with a recommendation engine (Coaching Network) for the insurance industry (Industry Cloud). 

We are very impressed by what Will and William have accomplished in a very short period of time, and are confident that Federato platform will revolutionize underwriting for the multi-billion dollar P&C insurance industry. Welcome to the Emergence family!