October 4, 2022 | 11:47 AM An-Li Herring/WESA Courtesy of Koop The founders of automation insurance startup Koop include (from left) head of operations Jim Duan, chief commercial officer Kamron Khodjaev, chief technology officer Zak Gazizov, and CEO Sergey Litvinenko. Founded in 2020, the North Side-based company raised $2.5 million in seed funding last year. As self-driving car companies continue to develop the fledgling technology, a local startup is already selling insurance to the industry. North Side-based Koop says it’s cracked the code for how to underwrite the autonomous vehicle sector, despite its short track record.
Driverless tech still must undergo years of research and development before reaching consumers. Locally-based Argo AI began to test robotaxis in Miami in December and launched a second pilot in Austin last week. Aurora Innovation, also headquartered in Pittsburgh, runs self-driving trucks in Texas.
Koop uses data from such test fleets to set prices for coverage. It’s preparing for a future where increased automation could shift crash liability from human motorists to manufacturers.
Koop co-founder and head of operations Jim Duan said the startup is helping to fill a critical gap.
“At the moment, what a lot of commercial operators usually do is go to traditional carriers to get a quote. But the process is actually pretty gruesome,” he said. “Besides filling out very lengthy applications, you actually have to wait quite a bit before the underwriters … get you a quote. And more likely than not, the quote you get is probably not the best in terms of the monetary value.”
Koop, by contrast, readily covers a range of liabilities, including technical mistakes, product defects, and cyber hacks. Koop’s policies extend beyond autonomous vehicles, too, to robotics used in manufacturing, defense, health care, and other industries.
Three of the company’s four founders graduated from the University of Pittsburgh. They established Koop in 2020, and closed on a $2.5 million seed funding round about a year ago. Duan said the company continues to grow at a steady clip. He did not say whether it has generated a profit, noting it remains focused on research and development.
“We have definitely seen a huge increase of interest [and] not just in the United States,” he said. “In the past week, we have gotten emails from Europe and also from Asia inquiring about the possibilities of providing coverage for their operations as well.”
Unlike Koop, conventional automobile insurance emphasizes human-caused risks, Duan said.
For example, he said, “nowadays when we purchase [auto] insurance for ourselves, we only have to input our demographic information into [an insurance company’s] app, and the vehicle information as well.”
Using decades of data, underwriters assign risk scores based on such characteristics, allowing insurers to generate quotes instantly. The National Highway Safety Traffic Administration blamed drivers for 94% of auto accidents in a 2015 study. But by relying less on humans, self-driving cars are expected to reduce the risk of accidents.
Koop says its software accounts for this differential by using data from the vehicles themselves. Therefore, the company says it offers more competitive rates than other insurance providers. Duan said it has received very few claims to date.
Companies that are testing fully autonomous vehicles reported 130 crashes to federal officials over an 11-month period that ended in May, according to the National Highway Safety Traffic Administration. Only one resulted in serious injury, and air bags inflated in just two of them. All of the collisions occurred at low speeds.
Even the automated safety features that exist in many cars today are bound to reduce the cost of premiums charged by traditional insurers, according to consulting firm McKinsey and Co. It predicted in a report last month that the trend could shrink the premium pool for the U.S. personal auto insurance market by up to 10% by 2030.
Duan said that as a startup, Koop has been able to move more quickly than legacy companies to develop a model for underwriting fully autonomous systems. He hopes that by having its insurance platform in place, Koop will help consumers to have more peace of mind about the new technology.
“When it comes to the commercialization of the whole [driverless vehicle] industry,” he said, “insurance is definitely going to be a huge enabler.”