July 23, 2018

Hartford Steam Boiler's tech focus aims to transform specialty insurer into problem-solving innovator

HBJ Photo | Steve Laschever
HBJ Photo | Steve Laschever
Hartford Steam Boiler President and CEO Greg Barats in the specialty insurer's new innovation lab — called The Mashup@HSB — which serves as the latest example of the company's efforts to become a technology innovator.
HBJ Photo | Steve Laschever
HBJ Photos | Sean Teehan
Photos inside HSB’s innovation lab including: flat-screen monitors displaying real-time data; a sensor-laden flavored water dispenser; and a 3D printer.

Hartford Steam Boiler

• Hartford Steam Boiler was founded in 1866 and was acquired by German reinsurance company Munich Re in 2009 for $742 million. It was formerly owned by insurance giant AIG.

• HSB owns one of the world's largest technical databases on equipment failures and causes.

• Over 50 percent of HSB's staff is made up of engineers, inspectors and other personnel with extensive technical knowledge.

• HSB conducts more than 1.5 million on-site inspections of equipment and property-casualty risks worldwide each year.

• HSB distributes equipment breakdown insurance and other specialty coverages through property-casualty insurers, insurance agents, brokers and managing general agents.

• HSB recorded $1.3 billion in revenue in 2017.

The elevator between Hartford Steam Boiler's 12th and 13th floors is a time machine.

President and CEO Greg Barats' 12th-floor corner office at One State Street in downtown Hartford is adorned with all the trappings of a century-and-a-half-old Connecticut insurance company: large wood desks; antique fixtures; and a painting commemorating the Sultana steamboat disaster of 1865.

The short ride to the 13th floor brings you to an open, mostly co-working space with flat screens displaying data charts, sleek high-tech devices — including 3D printers — and denim-sporting 20-somethings milling around desks and glass-encased tech labs.

"We come from a … very traditional legacy company that operates and approaches the market in a very systematic way," Barats said while giving a tour of the 13th floor known as The Mashup@HSB. "But for us to be in the new world, technology is really becoming a huge change-maker in the marketplace."

Hartford Steam Boiler's 13th floor opened in May, about 2½ years after the specialty insurance company started working on it, Barats said. It now serves as a future-facing innovation lab, and a physical manifestation of Barats' intention to steer HSB increasingly into the direction of problem-solving innovator.

HSB, which Barats describes as "an engineering company that got into insurance," has dived deeply into the tech space at its Hartford headquarters, mirroring an industry-wide trend in which insurance companies are working with, or buying, startups and housing their own in-house innovation shops to improve upon everything from customer relations to reducing a policyholder's risk of filing a claim.

Since its founding, HSB has operated as a specialty insurer and provider of engineering risk management and technology services. It insures things like equipment breakdown, cyber risk and identity theft.

With its investment and focus on technology, HSB aims to build a new internet-of-things (IoT) services business to help small to midsized companies prevent or reduce physical damage to their operations. So far, that's largely been done by developing or investing in sensor technology that helps businesses monitor equipment and infrastructure to prevent or reduce insured losses.

HSB, which recorded $1.3 billion in revenue last year, rolled out a $50 million venture fund in 2014 and has acquired multiple startups.

In 2016 it also acquired Houston tech company Meshify, which provides companies with industrial equipment sensor technology that can, as an example, monitor pressure and temperature to warn of problems that could lead to burst or frozen pipes. Meshify's technology also helps link devices through a cloud-based IoT platform.

Over a 40-day period last winter, HSB's monitoring technology prevented frozen pipes and water exposure at one business, which Barats declined to name, that could have caused millions of dollars in property damage, he said.

"We basically can turn off equipment remotely from 1,000 miles away," Barats said. "I can tell you if it's working, not working, if it's too hot, it's vibrating too much, how much flow is going."

Germany's Munich RE Group, which owns HSB, has taken notice of the Hartford company's innovation and venture work, Barats said. As a result, HSB is likely increasing the fund and expanding innovation efforts.

Barats is also leading Munich RE's IoT business strategy. Right now, a Munich RE team he oversees is working with German industrial robots manufacturer KUKA Robotics and carmaker Porsche on a "SmartFactory" concept.

The idea is to build micro-manufacturing facilities that companies can rent, in an effort to transform manufacturing into a service, Barats said.

"We're not just a user of technology," Barats said. "We're going to become a buyer of technology, where technology actually becomes a part of our offering."

Insurtech in Hartford

HSB's focus on technology isn't new, and neither is the idea of mixing insurance and innovation.

In 2016, about 28 percent of insurers were looking at partnerships with tech startups, according to a recent PwC/Startupbootcamp report on the insurtech market. Last year, 45 percent of insurers were engaging in such partnerships.

The trend of insurance companies working with startups and housing in-house innovation shops is prevalent in Hartford, said Dawn LeBlanc, managing director of the Hartford InsurTech Hub, which launched last year and is run by InsurTech London, a division of Startupbootcamp.

"We really see that the trajectory of insurtech is really going to accelerate," LeBlanc said.

LeBlanc oversees the InsurTech Accelerator — whose investors and/or partners include Cigna, The Hartford, Travelers Cos. and the state quasi-public agency CTNext — which works to annually bring 10 to 12 insurtech startups to Hartford, and provide support through access to mentors and investors.

The InsurTech hub is currently seeking applications for its next crop of startups, which will participate in a three-month accelerator program starting in February. Applications are due Sept. 30.

HSB is not directly participating in the accelerator, but is monitoring the program's success and will look for opportunities to engage with it, the company said.

Entrepreneurial bent

Barats took the helm at HSB in 2011. A longtime company employee, he began his career as a tech entrepreneur, founding two startups in the 1990s. Barats, who is being recognized in September by the University of Hartford's School of Business for his leadership in integrating technology and insurance, still carries the sense of urgency of working at a startup.

HSB's One State Street building, which Munich RE bought in 2014, is itself an example of modern-day and futuristic technology.

It's filled with sensors collecting data on things like what people are ordering at the restaurants inside the building to what types of drinks employees are dispensing out of a souped-up flavored water and coffee machine in the Mashup floor's lunch area.

The setup enables HSB to test its sensor technology before deploying it to customers.

Workers on the Mashup floor, where Barats also has a desk, toil on projects approved by the company's "growth board."

The board is made up of senior executives who decide to invest resources into projects that match up with the company's growth strategy.

A recently approved project includes a team developing new online distribution channel strategies for HSB's cyber risk insurance.

Teams are usually allowed a specific amount of time, anywhere from 30 days to a year, to complete their projects, Barats said.

"You hear the term all the time, 'fail fast,' and that's what we want to do here," Barats said. "If it's not a good idea, let's get it, let's get to it, let's kill it quickly, and move on and get the next idea."

Workers from any part of the company may submit proposals and — if approved — work on the Mashup floor, Barats said.

It's hard to say how much of HSB's resources are going toward technology, Barats said, but about 20 percent of the firm's business is services unrelated to insurance — like engineering and consulting.

As HSB leans further into the innovation sphere, Barats recognizes that other insurers in town are making similar investments. But, he said, that's of little concern.

"We're not really holding ourselves to (competing with) the insurance industry, we're looking more toward the technology world," Barats said. "We're trying to hold ourselves to a different, I'd say, competitor."

Correction: A previous version of this story incorrectly stated that Hartford Steam Boiler acquired At-Bay. HSB partners with At-Bay, but did not acquire the company.

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