Bessemer leads Shift Technology's $60 million Series C

Innovation in AI and machine learning is helping the insurance industry tackle fraud, a $100 billion problem.

The recent tidal wave of venture-backed “InsurTech” start-ups over the past five to 10 years has also brought upon a required, even if unwelcomed, digital transformation for the industry’s incumbents. It’s no surprise that in a world where consumers expect flawless digital experiences, insurance providers are trying to keep up and evolve their offerings into more user and mobile friendly experiences.

This new industry standard not only impacts how enduring insurance companies plan to catch up to digital and mobile-first solutions, but also how they’ll inevitably compete with these newcomers that can onboard customers seamlessly and pay out claims faster than traditional carriers.

Digital and mobile-first insurance agents, MGAs, and carriers of this generation are built upon modern cloud infrastructure and deliver better and more transparent customer experiences. That doesn’t mean enduring large and small insurance carriers all over the world are going away; most incumbents have dedicated digital transformation groups and many initiatives in progress that focus on launching new solutions that compete with startup offerings.

For context, the global insurance market consists of approximately $5 trillion in premiums annually and analysts estimate that insurance fraud likely costs the industry around $80 to 100 billion each year. Carriers are continually searching for ways to mitigate this problem. Up until now, claims adjusters and fraud investigators have leaned on basic databases and manually searching for inconsistencies, which inform the actions they take. However, with recent advancements in artificial intelligence and machine learning, we believe the opportunity is ripe for SaaS companies to deliver much more effective fraud detection solutions, tackle this enormous problem for insurance companies, and facilitate the ongoing transformation of the industry.

The aggregation of not-so-marginal gains

Throughout our research for Bessemer’s insurance technology roadmap, we have identified two primary innovation strategies in the industry. One is the approach that Lemonade, Root, Bessemer portfolio companies Fabric and Spruce, and many others have taken where a business builds a new type of insurance company from the ground up. Differentiated customer experiences, data-driven underwriting, and product-driven marketing often define these types of strategies.

The other strategy isn’t about building something from scratch, but rather using modern SaaS and advanced AI, data science, and machine learning principles to improve the industry from within. Many of the digital transformation teams at established insurance companies are innovating via the aggregation of marginal gains with the help of these new solutions. When it comes to the area of insurance claim fraud detection, “marginal gains” don’t feel all that marginal given the magnitude of the problem.

That’s why we’re investing in Shift Technology, the SaaS platform designed specifically for insurance companies that use artificial intelligence and both structured and unstructured datasets to detect patterns and flag potentially fraudulent insurance claims. Shift Technology is the clear emerging leader in this space having set out from day one to help the industry tackle this $100 billion problem.

Bessemer’s Series C investment in Shift Technology

Back in 2013, David Durrleman, Eric Sibony, and Jeremy Jawish, a talented co-founding team of mathematicians at Shift Technology, developed their first fraud detection solution after having first-hand experience with these challenges when they worked with other multi-national carriers.

Since then, Shift Technology, with a world-class team of data scientists, has emerged as an effective cloud-based provider of AI fraud detection solutions across many different insurance product lines. The team has reached an exciting inflection point helping more than 70 customers and counting around the globe when navigating the prospect of full claim automation, one of the many promises Shift Technology is striving to fulfill.

To understand what we mean by full claim automation, here’s an example: Let’s say you are a policyholder and you broke the windshield of your car. Your auto insurer allowed you to submit your claim from a mobile device. Because of software advancements, an insurer is now confident enough in their anti-fraud and claim processing solution to pay out a policyholder’s claim automatically without any human interaction or wait. This not-so-marginal gain to the claims management process makes customer experience for insurance companies radically better and nearly frictionless.

At Bessemer, along with the company’s existing investors, we are thrilled to lead Shift Technology’s $60 million Series C financing. The team’s ambition to fix a pervasive issue for insurance companies and their position and expertise in developing an AI-based fraud detection solution makes us confident in their ability to help current and future customers grow during the industry’s digital transformation.