Alphabet's Verily breaks into stop-loss health insurance market backed by Swiss Re

Verily Life Sciences is expanding into the health insurance market with a focus on employer stop-loss insurance.

The Alphabet company will leverage its expertise in hardware, software and data science to offer a new data-driven solution for employers, the company said Tuesday.

The Verily subsidiary, called Coefficient Insurance Company, will be backed by Swiss Re Corporate Solutions, the commercial insurance unit of the Swiss Re Group, through a minority investment.

The companies did not disclose the size of the financing as it is subject to the satisfaction of certain closing conditions including regulatory approvals.

Employer stop-loss is a segment of commercial insurance that protects self-funded employers from unexpected and large employee health benefit claims by reimbursing employers for claims above a defined amount.

The stop-loss market is valued at approximately $20 billion, according to S&P Global Intelligence.

RELATED: Verily, John Hancock collaborating on life insurance solution that offers virtual diabetes management

Coefficient will combine innovative health technology solutions with novel insurance and payment models, the companies said.

The company will focus on what Verily calls "precision risk" to provide self-funded employers with more predictable benefit plan protection and help control cost volatility.

The partnership will use advanced technology and data analytics to innovate risk management in the employer stop-loss space, according to Andreas Berger, CEO at Swiss Re Corporate Solutions.

“Employers have been facing rising and increasingly unpredictable healthcare costs for years,” said Verily CEO Andy Conrad in a statement. “Coefficient is aimed at reducing blind spots and providing greater cost control mechanisms for self-funded employers, and we expect that partnering with Swiss Re Corporate Solutions will help us to better develop and distribute our precision risk solution to the employer stop-loss market."

Over time, Coefficient will integrate Verily’s employer health solutions, including mobile health devices and innovative care management programs such as its Onduo virtual diabetes clinic, in order to align payment models with better health outcomes, Conrad said.

Looking ahead, self-funded employers could face unpredictable health costs due to the impact of the pandemic as employees deferred care and if employees have long-term health effects from COVID-19 infections.

RELATED: Alphabet's Verily opens own lab to speed up COVID-19 testing

Coefficient uses an analytics-based underwriting engine to identify unexpected areas of cost volatility, and cover those exposures with more dynamic and precise insurance policy provisions. Over time, Coefficient plans to integrate Verily’s suite of health devices and tech-driven interventions for workers and dependents into its precision risk solution to improve health outcomes and control cost, the companies said.

Along with leveraging Verily's technology capabilities, Coefficient also will benefit from Swiss Re Corporate Solutions’ risk knowledge, distribution capabilities and reputation in the employer stop-loss market.

Verily dipped its toe into the insurance market last year through a collaboration with John Hancock. The two companies teamed up to offer a life insurance solution and digital wellness program to help people with diabetes manage and improve their condition.

Verily, originally Google Life Sciences, once part of Google X, spun out in 2015 to lead Alphabet’s healthcare and life sciences research. The company has been quietly expanding its footprint in the world of healthcare and medical research.

The technology company has collaborated with health systems and other providers on initiatives to tackle major health challenges. Verily is working with Atrius Health and the Palo Alto Veterans Affairs healthcare system to improve patient outcomes through population health initiatives.

And the company has rolled out a number of pandemic-related initiatives such as developing a lab for coronavirus testing, offering a COVID-19 screening tool for health systems and hospitals, and launching a return-to-work solution for employers called Healthy at Work.