Company’s management has first-hand knowledge of insurance business
Paul Daoust, chief executive officer of GRX Technologies in Providence, realizes his company is in the business of selling innovative software products to players in an "arcane industry:" insurance.
Daoust and the rest of the GRX management team should know. They come from some of the largest insurance and consulting groups in the world, including Zurich, AIG and Chubb. And they’ve seen firsthand the inefficiencies at every stop along the insurance supply chain, which includes brokers, insurers, reinsurers and corporate risk managers.
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The company’s mission: To get all those links in the chain on the same page at the same time.
"We’re able to sit out there and be a solution for buyers, brokers and underwriters, so they can all collaborate intelligently on the same platform," Daoust said. "That enables each of them to do what they do better, cheaper and faster."
Founded in 1999, GRX develops and markets Web-based software applications that streamline the management of risk-related data. Its software works seamlessly with existing software programs so clients don’t have to plow IT expenditures into new enterprise systems.
GRX Risk Exchange is a Web-hosted service available on a subscription basis that allows risk managers, brokers and underwriters to exchange data and ideas digitally, in real time. The company’s other product, GRX Risk Platform, offers similar functions but can be customized to meet the needs of larger insurance-industry players.
Pricing varies widely, starting at $10,000 for an individual user to subscribe to GRX Risk Exchange to several million dollars for a large users who needs a customized platform to manage expansive systems.
GRX targets the energy market, selling its software applications to more than 100 gas, oil and chemical companies. It also sells to insurance carriers, brokers and reinsurers that have energy-industry clients.
It’s a logical market, given the sprawling nature of many energy firms – companies that have dozens of corporate divisions that may use hundreds of insurance underwriters and brokers.
For brokers who work with energy clients, for example, it’s often a "wrestling match trying to get the risk information from energy clients," said Matt Flanagan, executive vice president and chief marketing officer, and also a GRX co-founder.
Brokers receive disparate information on risk and claims data from a multitude of separate corporate divisions. Once brokers clean up the data, aggregate it and put it in a format that makes sense, they are sent to the insurer, which then tweaks the data into its own format.
"There’s this intense back and forth between carrier and broker, broker and client," Flanagan said. "Our technology can be inserted anywhere in that supply chain to provide a seamless environment for partners to analyze data and negotiate together."
The most important component in that chain just might be at the source of that information stream: corporate risk managers.
"At the very beginning of the insurance supply chain, at the risk-management end, there’s trouble," Flanagan explained. "They’re not pumping their risk information into the system in any standardized way."
The result, GRX says, is inflated administration costs within the industry. Andrew Berry, GRX president and chief operating officer, said that 37 cents of every premium dollar is wasted on administration costs – largely a result of an inefficient, paper-centric environment.
According to A.T. Kearney, an independent consulting firm, risk managers can save up to 21 percent on operating costs using GRX software, while brokers can save up to 30 percent and insurers and reinsurers save 10 to 15 percent.
The construction and pharmaceutical industries could be next on the radar for GRX. Both sectors have high premiums and complex risk structures that are "messy and ripe for improvement," Flanagan said.
GRX now employs 35 people, occupying spacious offices on the fourth and fifth floors of the Simmons Building at 10 Davol Square in the Jewelry District. About half of its staff is focused on product development and support, while the other half includes sales-and-marketing and administrative personnel.
The company used seed funding to build a prototype of its technology, and in 2000, while trolling for venture financing, GRX won financial backing from two large mutual insurers that agreed to take a minority stake in the firm.
Of course, GRX hasn’t been immune to the doldrums that have plagued the rest of the software sector over the past two years: lethargic corporate spending on software and services. And many large insurance carriers and reinsurers were hit with huge losses stemming from Sept. 11, which had a ripple effect on the entire insurance market.
"Even if you’ve got a low-cost product with a high (return on investment) it’s just harder to sell software today," Flanagan said. "Insurance companies will say ‘you need to prove to me what the ROI will be."
