InsurTech 2.0 Brings AI and Customization to Small Business Insurance, Foxquilt Says

In the connected economy, InsurTech sprouted as a relatively new category that removed some of the friction between consumers and various types of coverage, from health plans to life insurance.

Now, artificial intelligence (AI) is on the scene, and the stage could be set for InsurTech 2.0.

“The first generation of InsurTechs were made up of very smart people that had very big funding and very big exits in many cases,” Foxquilt CEO Mark Morissette told PYMNTS. “They didn’t have the opportunity to grow and optimize their product fully. Now it’s time to think more about the customer. You need to define that customer and then go and solve their problems. But at the same time, you need to generate a sustainable business model that generates underwriting profitability and build a smarter machine that facilitates solving customer problems.”

Morissette runs one of the companies creating the new intersection of AI and InsurTech. Foxquilt is based in Toronto and started in 2017, during the first phase of insurance innovation. It is focused on small businesses, micro-enterprises and sole proprietorships, developing, underwriting and distributing commercial insurance products in the United States and Canada.

The company uses a combination of data analytics and AI to recommend the best insurance coverage and price through brokers, agents and enterprise partners. It has built a machine-learning engine that enables larger insurance companies and other enterprise-level businesses to craft customized insurance plans for those segments. According to the IRS, there are 28.4 million sole proprietorships in the U.S.

Foxquilt distributes its product through a B2B2C model. Its technology platform, Foxden, is used by its B2B enterprise and broker customers. It allows small business owners to access policies and price quotes for liability, casualty or workmen’s compensation coverage, to name a few examples. It also has several large insurance carriers as partners, including Lloyd’s and Greenlight Re.

AI plays a dominant role in what that policy and price will look like, from the type of business to the size of the business to the goals of the business owner. That AI prowess is what has attracted some large enterprises to partner with Foxquilt. AI’s “magic,” as Morissette said, is in its ability to use its underwriting algorithm to compare the business’s profile with other small businesses and match the right coverage to the policyholder. Foxquilt has more than 800 products to serve all the verticals populated by small businesses and sole proprietors.

“Today’s business owner does a lot of different things,” he said. “And legacy insurance carriers don’t have the capability to rate them or underwrite them. They basically rate a small business on their highest exposure risk, and it tends to be one-size-fits-all. We don’t discriminate. You might be doing a little plumbing, a little handyman work, hey you might even be teaching yoga. But our machine sees all the data from these businesses, and we’re able to evolve our infrastructure accordingly.”

A good example of how Foxquilt works can be seen in the partnership it announced Jan. 16 with global specialty insurer Markel, which will use the Foxquilt machine-learning capabilities.

The partnership will “remove friction” from the insurance buying process, Markel InsurTech Underwriters Managing Director Scott Whitehead said in a statement.

Morissette said the partnership, in addition to others, comes from Foxquilt understanding the needs of its audience. AI has helped in that understanding, and now that the company has thousands of customers on its platform, it will learn more about them every day. Intellectual property is the key to the company’s success, Morissette added.

“Imagine if you could create algorithms and basic back-end data warehouses that could harvest data from different APIs and create a modular product around a unique class of business,” he said. “Then that algorithm can configure customized products across many verticals in that business. That’s what we’re doing. That’s how we’ve been able to scale and create viable economics for this company. We have very sound underwriting science.”

Foxquilt is a big believer in embedded payments, he said. The term means different things for different companies. But the utility of having purchasing power embedded into the Foxquilt solution goes a long way toward integrating the technology within its partners’ user experience. It will be an important strategy going forward as Foxquilt increases its efforts this year in the U.S.

“We have massive growth in front of us,” Morissette said. “Our technology increases the capacity of our partners and makes business insurance accessible for companies that don’t see much from legacy insurance carriers.”

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