Data Enablers: Valen Makes Insurance Human Again

Small businesses can benefit big if they’re insured by a company that partners with Valen. Why should every client pay the same premium when they all have different risks and needs? With a winning hybrid of human and artificial intelligence, Valen uses predictive analytics to help property and casualty insurance carriers give small businesses the coverage they deserve at a price that makes sense.

Valen merges carriers’ data with its own data consortium, which contains 27 million anonymized policy records. From that data, it builds predictive AI models whose insights guide carriers to make faster, more educated risk selection and pricing decisions.

Like FinTech, InsurTech debuts in an industry that has historically been very slow to adopt new technologies. Clients, however, would say that Valen is changing the insurance industry for the better, even if the transformation is slow. CEO Dax Craig said his proudest moment since founding Valen has been hearing from clients after his company was acquired by the insurance technology firm, Insurity.

“As I called all our clients to share the news, I was blown away by the outpouring of support for Valen, and for me personally,” said Craig. “It was incredibly gratifying to hear what Valen has meant to our customers, and how many C-level executives remarked on the impact Valen has had on the insurance industry overall.”

If you ask Craig, that support is built on a platform of trust. Despite its use of AI, Valen is a very human company that names having a “positive effect on the good of man” among its priorities. PYMNTS caught up with Craig to find out what inspired him and how Valen will be changing the world next.

PYMNTS: How does your business overlap with the payment processing or eMerchant world?

DC: There is significant crossover between FinTech and InsurTech. Both are in heavily regulated industries that have historically been very slow to adopt new technologies.

Capital One took the financial world by storm by focusing their efforts on identifying underserved customer segments and accurately understanding the risks associated with those customers. From there, they went into the mainstream consumer market with a more sophisticated customer segmentation they called “information-based strategies” to become a top-five consumer credit lender. We’re allowing insurers to take the same approach.

PYMNTS: Can you give the history on the founding and launch of the company?

DC: We set out to create a culture that stood behind its promises and put the customer first. We started Valen on … two key tenets: our products must provide demonstrable return on investment for our customers and shareholders and have a positive effect on the good of man.

Insurance serves an important common good, by allowing all of us to share risk for a small fee (premium) so that an accident or a storm does not ruin us financially. The problem that insurance carriers face is that the people sharing the risk are not equal — some policyholders are higher risk and some policyholders are lower risk.

As a result of policyholders paying the same rate, low-risk policyholders subsidize higher risk policyholders. It is difficult for carriers to determine the high risk and the low risk due to an asymmetry of information between the carrier and the insured.

PYMNTS: Why was the company founded? What was the grand idea that sparked it?

DC: Right out of college and with an idealistic view of how companies should treat their customers, I was on a cross-country road trip when one of my brand new tires went flat. I went to the big box retailer’s location near where the flat occurred to get it fixed under the warranty. Imagine my surprise when the manager told me, “It’s not our problem, and I don’t want to fix this because it hurts my store’s profitability.”

Flabbergasted by the response, I asked him, “What would your founder and CEO (who was well known for his commitment to customer service) say if I called and told him what you just said?” The manager pondered my question and finally reversed his approach, but not before he had sullied the reputation the founder had worked so hard to build.

Fast-forward to 2004 and, with a successful entrepreneurial career underway, I partnered with Richard Vlasimsky, an experienced consultant with a strong background in statistics, to start Valen.

PYMNTS: Can you show me some data or proof points on how the company has helped clients?

DC: We recently published a study that looked at five years’ worth of performance data. Our clients improved their loss ratios by 1.9 times over the rest of the industry, while growing at nearly three times the industry rate.

PYMNTS: What has been the biggest hurdle? How did the company overcome?

DC: One of the biggest challenges came from the executives who implemented our solution, as we watched them struggle to get their teams to adopt our technology. There are a lot of stories being written about how machines are taking people’s jobs, and our approach has often been lumped in with this, as some underwriters feel threatened that predictive analytics are meant to be their replacement.

We’ve been able to overcome this in a couple ways.

The first is by highlighting how our solution works best when people use analytics as a tool. In benchmarking, we create three groups: underwriters making decisions solely on their own judgement, having the analytic model make all the decisions without human input and a combination of the two. The latter consistently outperforms the former groups.

Another way we’ve overcome the challenge is by getting underwriters involved early in the process. We spend a good amount of time with underwriters, explaining why certain predictive scores come out a certain way, and making sure that they are involved in every step of the technology roll-out.

PYMNTS: Can you give me some personnel growth numbers?

DC: Our platform is so well-scaled that our team remains small and mighty at 30 people. We have experienced a 50 percent year-over-year growth in sales for the last few years.

PYMNTS: What’s the company culture like?

DC: The constants for Valen are our entrepreneurial spirit and our unending commitment to the customers we serve and the promises we make. It inspired us to create the first data consortium for underwriting analytics that enables carriers to more effectively compete with data-driven decisions.

PYMNTS: What is next? What does the future look like?

DC: Valen continues to build out analytic solutions for carriers focused on underwriting business (or commercial) insurance coverages, as well as claims. Our big-picture vision centers around data and our deployment platform. We see an opportunity to be the number one database focused on the financial and risk profile of small businesses in the U.S.

And, we know that our deployment platform solves a key pain point for companies that build their own analytics. Currently, many companies struggle to get their models into production and into the hands of end users that need these insights in real-time to make better decisions.

PYMNTS: To what do you attribute your success over the years?

DC: Trust. Our customers have a great deal of faith in the Valen team and the solutions we provide. Our focus on providing customers with a premium experience is a key tenant and the reason we’ll continue to be successful.