Virginia-based machine learning company Soteris unveils its AI profit optimization tool that empowers property and casualty (P&C) insurance carriers and managing general agents to maximize profits, allowing them to invest back in operations and improve customer experience.
Every insurer knows that they will lose money on some of the policies they write, and some of those losses are due to analyses made at the segment level, rather than at the policy level.
Designed to directly target an insurer’s bottom line alongside results from its work with existing customers, the Soteris AI profit optimization tool uncovers the blind spots in their books where extra profits have been bleeding away.
For Dr. Sunit Shah, founder and CEO of the YC-backed Soteris, the benefits of this in-house tool means that “for the first time, an insurer can look at a single policy and know exactly what it’s worth, in time to act on that information.”
“The primary effect of our newest product is that it will help insurers make sure each individual policy will be profitable for them on an expected value basis, whereas before they were only able to do that on a segment basis”
Dr. Sunit Shah, Founder and CEO at Soteris
While the Soteris tool is geared towards insurers, Dr. Shah says customers may also benefit from the knock-on effects, as insurers can “invest those gains back into their own operations to both reduce prices and improve the overall experience for their customers.”
“Insurers’ main goal is to grow their policy count, so the secondary effect is that this enables them to lower prices to grab more market share,” he said, adding, “so for most people, we’d expect their rates to be lower than they would be if the insurer were not using our product.”
As customer concerns grow over how AI is used in the insurance industry, Dr. Shah believes that adhering to regulations is a major strength of his product.
“Because our product is all proprietary AI we build in-house, as opposed to a function of calls made to external LLMs, we can explain our product’s decisions in a way many others can’t, such as tracing exactly how much each factor in any given calculation contributed to the end result,” he said.
“We believe that level of explainability sets us apart from a lot of other AI out there and part of what makes us attractive to insurers given how critical getting the regulatory aspect right is to being successful in the insurance industry.”
“One fundamental change we’re bringing to the industry is that we don’t think of policies in ‘segments’ or ‘types.’ Take a familiar example like auto insurance. A typical insurer might think of ‘married couples’ or ‘single-driver policies’ as segments and think of all the policies within those groups in the same way. We help insurers see them as unique individuals and unique policies”
Dr. Sunit Shah, Founder and CEO at Soteris
And Soteris proprietary AI tool didn’t just arrive overnight; it went through several years of fine-tuning to deliver best results, allowing insurers to more than double their bottom lines.
To date, Soteris has scored over 100 million submissions, amounting to over $180 billion in insurance premiums.
Additionally, the company has run several proofs of concept that has seen book Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) increases of anywhere between 70 and 125 percent.
As Dr. Shah recently told the “Insurance Nerds” podcast:
“It’s natural for most insurance analyses to end up at the segment level, rather than the policy level […] What we do at Soteris is we bring that segment-level analysis down to the policy level. Essentially, we are predicting that thing that used to be thought of as random — that used to be thought-of as unpredictable.”
Essentially, Soteris surfaces the negative-profit policies hiding in a healthy book, so insurers can act on them and pull real EBITDA to the bottom line, without touching their rates or product.
It identifies negative-profit policies directly and frames the outcome in terms insurance executives already track: EBITDA and profit.
After five years in the making, the Soteris tool has now come out of stealth, after having previously receiving $8 million in seed funding, led by Spider Capital, with participation from Intact Private Capital, Amplify Partners, DCVC, the Webb Investment Network, and Overlook Ventures.
Some of insurance policies quietly bleed profit every time they are written or renewed.
The Soteris AI tool can predict how much each policy will make before any type of commitment is made.
Disclosure: This article mentions a client of an Espacio portfolio company.
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