NEW YORK--(BUSINESS WIRE)--Analytics start-up WePredict aims to free up potentially billions in auto industry warranty reserves through a unique analytics solution providing manufacturers and suppliers the opportunity to stabilize and mitigate risks they have in their warranty reserves today. The company recently completed a new funding round led by Munich Re / HSB Ventures. Existing investors Breed Reply and the Development Bank of Wales provided additional funding.
According to WePredict, most US auto manufacturing companies will accrue between 1-3% of revenue to cover warranty costs. Industry analysis has shown that companies are more likely to over accrue to avoid nasty shocks in the future. Using traditional methods, it can take years to effectively determine reserve adequacy, resulting in inefficient use of funds and missed business opportunities. This is particularly problematic in a time when the auto industry is looking for ways to fund autonomous and other future mobility innovations.
Due to its work with automotive, agriculture and construction equipment, and their respective supply chains, WePredict has developed an accurate, consistent way to use initial repair and telematics data to determine long-term product reliability, and as a result, warranty claims. This will allow companies to better understand and estimate their warranty reserves.
Munich Re will now develop an insurance solution that will back WePredict’s calculation. The insurance solution will provide an appropriate level of certainty to adjustments in warranty reserves, and this joint value proposition will bring greater balance sheet efficiency to clients by allowing for the reallocation of funds to working capital.
James Davies, Founder and CEO of WePredict said, “Every company has a scary story from the last 10 years where they under accrued, hence they are likely to be more conservative in reserve setting than they might need to be. This is a perfect place for insurance to help reduce risk, reduce accruals and free up capital for the business.”
The initial WePredict product launch targets the automotive industry, however the methodology applies to other industries as well. Renee Stephens, VP North America at WePredict, previously at JD Power and GM, believes there is an enormous opportunity. “These are unprecedented circumstances. Manufacturers are looking for innovative solutions to what are many times long-running business problems as they work to rapidly fund changing technology. Companies are looking to unlock the value they have, but in a responsible way.”
Jeffrey Sirr, Head of Munich Re’s Corporate Insurance Partner North America division, said, “We are forming strategic relationships with promising new start-ups like WePredict in conjunction with our insurance activities. This allows us to build out our own capabilities for innovative products and services, and to provide new insights and offerings to our clients that enable their business models and enhance their business opportunities.”
The opportunities to expand more broadly across the manufacturing spectrum appear equally promising. Davies said, “We are constantly looking for new ways to enable our customers to benefit from the accuracy of our product failure predictions. We see vast possibilities to expand these applications. With the help of Munich Re we are taking this a step further and allowing automotive original equipment manufacturers (OEMs) to free up a portion of their balance sheet to use more productively in their business.”
WePredict believes that people determine the success of predictive analytics, not systems. Formed in 2009, WePredict has grown rapidly by helping global blue chip customers and their supply chains in the automotive, agriculture and construction industries develop and implement predictive analytic solutions. The company is based in the UK and draws upon a global talent pool to assist any customer or partner worldwide to address critical business challenges.