Hartford Steam Boiler Inspection and Insurance Co. is working to create insurance products involving sensor technology – and has made some hefty bets recently aimed at making them a reality.
One investment came from the October acquisition of Meshify, a Texas-based startup with a cloud-based platform that sends electronic signals of potential risks. Last month, working with its Munich Re parent company and Silicon Valley venture capitalists Kleiner Perkins Caufield & Byers, Hartford Steam Boiler put together a $23 million financing package for relayr, another cloud-platform player working in the field known as the internet of things.
The internet of things umbrella refers to the physical puzzle pieces embedded in electronics, software, sensors and network connectivity that enables the objects to collect and exchange data, according to a description from the International Institute of Analytics. Giant companies have referred to it as the industrial internet.
Hartford Steam Boiler’s relationship with relayr, which has offices in Boston, Silicon Valley and Germany, began in the first quarter of this year when HSB Group became a customer of relayr, using its hardware, software and consulting services. As the two companies worked together, the potential of a new insurance market became clearer, HSB spokesman Denis O’Shea told Crain’s Connecticut.
So what looks like HSB reinventing itself as a tech company is really an insurance product expansion rooted in the Hartford-based company’s 150 years of helping clients protect industrial equipment, he said.
“It’s really an insurance play,” O’Shea said. “We’re looking to develop an insurance market.”
The products will be marketed to small- and medium-sized companies covered by insurance firms that HSB is allied with through reinsurance relationships, he said. Key to the strategy is the use of sensors that send building distress signals to cloud servers that then send warning emails and text messages to cellphones and computers.
Reinsurer HSB is far from a tech lab spectator, having introduced an internet of things early-warning detection service/risk management tool in October. In a pilot program with Wisconsin-based Church Mutual Insurance Co., the service saved customers more than $500,000 by helping churches avoid frozen pipe leaks. The service is being rolled out to thousands of additional houses of worship insured by Church Mutual, according to HSB.
Sensors provide non-stop, real-time information on temperature changes and the presence of water, which shape HSB’s underwriting decisions, O’Shea said. With the technology infrastructure being laid, President and CEO Greg Barats and his team are turning increased attention to fashioning customized insurance products. Barats has been considering these for quite some time, O’Shea said.
“Some people think five years ahead; he’s usually thinking 10 to 15 years ahead,” the spokesman said.
Barats has been mapping HSB’s latest tech thrust for at least two years. HSB established a tech shop in San Francisco early last year that O’Shea calls “a small office with a lot of brain power.” Germany-based parent Munich Re has shown “a lot of interest” in HSB’s tech moves, authorizing $50 million in investments over five years through their Munich Re/HSB Ventures arm that directed the relayr financing. That deal was the largest to date for Munich Re/HSB Ventures and included support from HSB Group Inc. in Hartford, O’Shea said.
HSB has been cleared for a full plunge into insurance offerings driven by sensors and internet of things technology by the Connecticut Department of Insurance, spokeswoman Donna Tommelleo said.
“The idea behind the products was approved years ago,” she said. “What’s new is how they interface with their customers. This is HSB and this is their niche.”
A regulatory environment that enables collaborations between insurers and tech companies will ultimately benefit consumers, said Eric George, president of the Hartford-based Insurance Association of Connecticut, of which HSB is a member.
“This is really advanced stuff,” he said. “It’s encouraging to see that an insurance company can develop products with a tech company like relayr while relayr is doing what it’s doing. When you have flexible rules then everybody wins.”
The partnership with give relayr’s customers “financial confidence” to make investments in internet of things technology, creating greater predictability in returns from those investments, HSB and relayr said in a Nov. 1 press release.
Increased output, reduced downtime, cutting maintenance costs and developing new revenue streams will be among the benefits, Barats said in the release.
The HSB collaboration with relayr will “transform the entire (internet of things) landscape,” relayr co-founder Josef Brunner said. The potential products will offer “first-of-a-kind” industrial insurance, the companies say. In conjunction with that, HSB is “mentoring” tech companies that come into its orbit, O’Shea said.
“People have long talked about the potential savings and increased efficiencies that are going to be possible with the internet of things,” Brunner said. “But now we are doing much more than talking about it. We are literally going to do it.”
Many companies have been slow to recognize and act on similar opportunities, according to an International Institute of Analytics paper titled, “The Internet of Things: Opportunities and Applications Across Industries.” The December 2015 paper featured an interview with Jason Mann, director of industry product management for internet of things at SAS Institute Inc., which has a branch office in Glastonbury.
The internet of things is viewed as a “disruptive force” by some business owners, HSB spokesman O’Shea said. The thought of billions of sensors dotting the business and industrial landscape within the next decade is disconcerting to some, he and others acknowledged, although they are the key to better informing customers to guard against accidents and losses.
“The choice is either you can let the bus pass by or you can get on the bus,” O’Shea said. “The choice Greg (Barats) has made is for us to get on the bus.”
The bus is likely to fill up, experts say.
“I think the situation is starting to turn, and we’re seeing a pickup in recognition of how big the (internet of things) opportunity can be,” Mann said in the report. “I’m excited by the new use cases that come up, and the many pilots that are exceeding the expected returns… The decisions that you make now are going to position you for that new reality.”