Published on Sunday, January 30, 2022 in The Gazette, Pulitzer Prize Winner: written by Wayne Heilman, business writer
FOR THE HAIL OF IT
A Colorado Springs-based startup is looking for the skies to open and the hail to fall.
Hailios will be testing its hail monitoring device in up to 20 neighborhoods in Colorado Springs, Denver and Dallas with a major insurer that will use it to offer a new type of hail insurance. The startup developed the sensor to measure the size of hail and duration of a storm for a new type of insurance, called "parametric" coverage, that bases claims payouts on the size of hail and duration of the storm.
Hailios founder and CEO Lucas Schiff declined to name the insurer, but said the test is designed to be a "proof of concept" for parametric coverage to show its feasibility in helping combat skyrocketing hail coverage premiums.
The test will largely be conducted at auto dealerships and other commercial buildings that typically suffer major losses in large hailstorms, including the Motor City area southwest of downtown Colorado Springs and the Powers Autopark near Woodmen Road and Powers Boulevard, Schiff said. More frequent and severe hailstorms have prompted some local dealerships as well as auto rental companies at the Colorado Springs Airport to build parking garages or carports to protect vehicles from hail.
"Insurance premiums for both homeowners and commercial policyholders have skyrocketed because of the lack of data on hailstorms," Schiff said. "Insurance companies are paying out claims (with little verification) for fear of losing customers, which has dramatically increased losses and eventually rates. That has led to this new type of coverage called parametric insurance that pays if hail reaches a certain size."
Schiff said he is positioning Hailios as an "unbiased third-party provider of data" on hail that can be trusted by both insurers and policyholders. The 16-pound, solar-powered device is light enough and small enough that it can be attached to the shingles on a roof or mounted on a pole to measure hail in a farm field. The sensor, available on an annual subscription for about $1,500, measures hail size by recording vibrations of hail hitting its glass surface and calculating the kinetic energy the impact produces. It sends data via a wireless connection directly to insurers.
Hailios, which has 11 employees, is preparing for the growth that may come if the test is successful. The company raised $2.7 million last year from wealthy investors called "angels," who are often the first outside funders for startups at the earliest stages. Hailios is currently running an equity crowdfunding campaign on a platform called StartEngine that takes investments for as small as $250.
"What this could mean is that this device could pave the way for Colorado Springs to be one of the first cities in nation to have this low-cost solution for homeowners policies," Schiff said. "If this test goes well, we will need to figure out how to do this on a much larger scale and roll this out with a majority of the major insurers. In three to five years, my goal is for Hailios to be the dominant provider worldwide of hail data."
Schiff believes the market for the company's hail-measurement device, called Eyewitness, is huge — hail causes $36 billion a year in damage worldwide to agricultural crops, vehicles, homes and commercial buildings. The three largest insurance loss catastrophes in Colorado are all hailstorms, ahead of the East Troublesome, Waldo Canyon and Black Forest fires, according to the Parker-based Rocky Mountain Insurance Information Association.
Hailios already works with 18 major insurers, including SwissRe, Hailsure, Berkshire Hathaway Specialty Insurance, AXA Climate, AON, Generali and Descartes in the U.S., Canada and Europe. Besides the upcoming test in Colorado Springs and Denver, the Eyewitness device also is being tested in Australia and New Zealand to measure hail for parametric coverage in kiwi, mango and macadamia nut farms. About 200 Eyewitness devices are in use worldwide.
Richard Duer, CEO of South Carolina-based Hailsure, said the company has been using the devices for about 2½ years, mostly with car dealers, apartment complexes and golf courses for parametric hail insurance policies it administers for major insurance carriers. Duer, who lives in Colorado Springs, had been searching for a hail-measuring device and was happy to find Hailios in the same city.
"We have found this product invaluable. It is important to know what kind of weather happened at a specific location and hail is very localized — the damage can be very different in properties across the street from one another," Duer said. "This is the only product in the world that is accurate enough for this type of coverage — it is accepted by the five largest insurance companies in the world."
Schiff is a serial entrepreneur — he started four other companies before Hailios. Three of the companies still exist — a commercial lighting control company has expanded into measuring indoor air quality and other environmental sensing technology, a solar lighting company was sold and Schiff still operates a company that helps entrepreneurs turn ideas into marketable products. Another lighting control company shut down when it could not secure financing.
Schiff started Hailios nearly five years ago while he was CEO and founder of Nimbus 9, the lighting control company. He launched Hailios with Carsten Neufing, who Schiff befriended while working for Neufing's Fast Video Security startup nearly 20 years ago.
"Carsten reached out to me six years ago about a friend in the roofing business who was frustrated there was no data on how hail impacted buildings," Schiff said. "I had some information from Nimbus but realized this idea needed to be on its own platform (a separate company), so I transitioned out of Nimbus and adopted this idea full time." That was in partnership with Neufing, who is chief technology officer of Hailios.
The technology for the Eyewitness device was developed by researchers at Saarland University in Germany and adapted by Hailios to make the device smaller, lighter and more accurate in detecting hail. Schiff looked to the insurance industry as the target customer — one that needed an unbiased source of data on hailstorms. The device is now in its fifth generation and is a fraction of the weight and size of the original version.
Hailos first tested its device in 2018, chasing severe thunderstorms across Nebraska and Colorado before hitting the mother lode with a monster storm that hit Fountain. The storm pelted the city with tennis ball-sized hail that resulted in 84,500 auto and homeowners claims totaling more than $350 million, then the sixth-most damaging storm in Colorado history, according to the Rocky Mountain Insurance Information Association.
"We were in our new car and had to set up the station with a GoPro camera so that we could validate the sensor technology during an actual hailstorm," Schiff said. "Fortunately, we were able to get it set up and move to a safe location before the storm arrived. The results of that test gave birth to the current design of our sensor, which can also measure wind speed, temperature, precipitation, lightning and flooding."
The company is developing artificial intelligence that would allow it to use sensors to measure hail in a larger area such as an entire neighborhood, rather than just a single home. Schiff said that technology could be key to how the company could expand the use of the sensor on a much larger scale.
Lucas Schiff drops a large piece of ice unto a 5th generation hail monitoring device. Lucas Schiff is the co-founder and CEO of Hailios, a Colorado Springs-based company that has developed a lightweight, portable sensor to measure the size and duration of hailstorms. Photo by Jerilee Bennett, The Gazette
A lightweight, portable sensor to monitor hailstorms has been developed at Hailios, a Colorado Springs-based company. CEO Lucas Schiff and marketing director Nicole Anthony stand between boxes of sensors in their warehouse. Photo by Jerilee Bennett, The Gazette