Alphabet’s Verily enters the stop-loss health insurance market

Verily, the health unit of Google parent Alphabet, is creating a subsidiary to apply technology to a kind of employer-sponsored insurance known as “stop-loss.” 

The new Coefficient Insurance Co. will be backed by the insurance giant Swiss Re via a minority investment. The companies did not disclose the size of the financing, which is still subject to regulatory approvals.  

Stop-loss provides protection for employers against catastrophic and unexpected losses. Self-funded employers tend to purchase it from outside insurers to avoid liability and huge losses. The market is already valued at about $20 billion, according to the research firm S&P Global Intelligence.

The space is crowded, but Verily and Swiss Re said the new service will be differentiated because it uses tech-based underwriting to determine potential areas of cost volatility, and to cover those areas to reduce exposure.

Verily said it will specialize in bringing the hardware, software and data science to the initiative. Swiss Re already has distribution in the employer stop-loss market. Over time, Verily’s President of Health Platforms Vivian Lee said the company will integrate existing efforts, such as Onduo, its service that helps its employer customers better manage their population of workers with diabetes.

“We’re hoping to be more personalized in the way we offer health solutions,” Lee said. 

The effort could see interest during a global pandemic, which brings with it increased uncertainty. Employers, noted Swiss Re CEO for North America Ivan Gonzalez, could experience a big hit from Covid-19 but also from “related diseases” as people delay seeing doctors in person. “More elective procedures have been delayed and postponed,” he said. 

Verily has been looking at health insurance for years. It already has teams working on medical research, diabetes care, as well as a range of pandemic-specific initiatives. The overarching theme for its business is opportunities at the intersection of the health and technology sectors, and it frequently signs industry partnership deals.

Verily collaborates with but operates separately from Google Health, which is focused on structuring medical information in health records. It has taken outside investment from a number of investors, including Silver Lake and Temasek.