Can you share the story behind EHAB's inception and what motivated your focus on weather risk management for the construction industry?
My CoFounder Filipe Moura and I had previously been looking at how we could leverage smart contract technology within the built environment. This was and still is a technology searching for real world use cases that can tap into its benefits. We attended lots of events talking with stakeholders across the built world, including in construction.
One particular session was a hackathon style event that had industry experts and technologists in the same room discussing the ways smart contracts could be utilised in construction. The idea of weather risk and the automation of some aspects of the contract surrounding this risk were discussed. The data from this session was further anaylsed by a group of experts within the Digital Catapult and eventually the weather automation proposal was suggested as the most compelling from an opportunity and feasibility standpoint.
Some of the contractors interested in this proposal were BAM Nuttall and Ferrovial construction, so a consortium was put together to deliver an Innovate UK project, as part of the Transforming Construction pot of money. EHAB led this project and ended up developing a first of its kind solution. However, this solution was incredibly difficult to implement without a modelling engine for weather risks in construction that closely mirrored reality. This was the impetus for building the solution we have today.
We had always seen the weather problem as something huge, given how climate change has already affected weather patterns. Our motivation has always been to build something that helps lots of people solve a big problem, and weather risk certainly is that.
What specific challenges in the construction industry does EHAB's solution target, and how pervasive are these issues globally?
One of the two major problems we are tackling is the problem of forecasting how weather will impact your project multiple months or years into the future, thereby allowing you to price your contract and optimise your work schedule to appropriately manage this risk. This is incredibly difficult as traditional weather forecasting is only accurate up to 2 weeks in advance.
The other problem is to protect projects against new unpredictable weather that creates big spikes in costs that can impact the profitability and even viability of a business. Traditional insurance has long covered these types of extreme events, but it does not completely cover the risk and the mechanisms for claims are slow and cumbersome.
Could you elaborate on how EHAB's software-as-a-service (SaaS) and embedded parametric insurance work together to mitigate weather-related risks?
Our platform allows a customer to upload a plan or schedule and assign risk types to different activities. These risk types contain thresholds of impact for various weather types. We Then gather decades of historical weather data from satellites and ground stations, run a climate analysis on this data and combine all these things into a big simulation. The simulation gives you a distribution of impact for different activities over the year and, combined with all the dependencies of the plan/schedule, of the end date of the project. This is valuable information that can help optimise a project and is used in various use cases within construction and beyond. Users subscribe to this service on a quarterly or annual basis.
This same data allows us to structure the price and probability of payout for parametric insurance, which is a form of insurance that triggers based on an external factor and pays out a fixed rate based on the severity of that event. Seeing as the customer has already used the data to inform how their plan may avoid these risks, we then enable them to purchase an add-on to their traditional policy which can cover them automatically for risks that fall outside their contract or their traditional policies.
Your startup aims to significantly reduce weather delay costs for construction firms. Can you provide data or examples, illustrating the environmental benefits of your solution?
Climate risk is the increasing exposure of people and businesses to the effects of climate change. This is happening now and so we must have solutions in place to help mitigate these risks. Our main focus is to help adapt to this new normal because even if we solved climate change today and stopped emitting, we would still be locked into significant warming and therefore changes to weather patterns. We believe not enough is being done to tackle these effects which is why we have seen such big increases in insurance premiums as the cost of change catches up.
That being said, our solution can help companies to reduce waste by avoiding pouring concrete on days when it might result in a re-pour. We can help companies identify risks to materials that might render them useless. We can also help to reduce the overall timeline of a construction project. All of these things have carbon reduction benefits. This is not however our main focus. Our main aim is to provide a way for companies to model long term weather impacts from our changing climate so they might make better decisions to limit cost & health and safety impact.
Who are the primary stakeholders benefiting from EHAB's services, and what advantages do they gain over traditional weather risk management approaches?
Construction contractors and their clients are the main benefactors of the solution, which has knock-on benefits to the government and taxpayer on large infrastructure projects. Traditional approaches are very basic and leave lots of uncertainty both from the perspective of project planning and project insurance. For example the EHAB model is 94% accurate at predicting weather downtime even years in advance and on average sees a 17 day improvement in end date prediction on traditional methods. Based on our portfolio of projects this results in almost half a million in savings per project. This number may become significantly higher as the tool is leveraged even more, as these numbers reflect an initial analysis of each plan.
We also can offer benefits like improved safety warnings to prevent falls at height due to wind gusts and the faster and fairer completions of compensation events due to improved data being provided to the contracting parties. These have benefits such as reducing the number of injuries and deaths on construction projects as well as reduced dispute times and costs associated with claims, which is an entirely non-productive cost.
There are numerous use cases which we are still discovering in construction and we have started to identify and solve some of these problems in energy, ports and logistics too.
How does your approach differ from traditional weather data providers, and what makes it uniquely effective?
Predicting the weather is hard. Really hard. We knew we could not solve that problem. So we looked at the outcomes businesses needed and we realised they just needed greater confidence than they currently have in order to get better margins and reduced risk in the long term. Our model does not model the weather per-se. Instead we model the impact from the weather. We model the thresholds that businesses care about and whether or not those thresholds are broken. This allows us to achieve much higher accuracy when modelling.
We are also unique because we are plugging insurance into this modelling which benefits insurers and their insureds. In particular if we can prove that our modelling software helps reduce risk then insureds should see a reduction in their insurance rates, as well as insurers seeing an improvement in their loss ratios.
Can you share a case study or an example where EHAB's solution has been successfully implemented?
BAM Nutall are our longest running customer, having worked with us right from the first day or our business's existence. We have now helped them on 40+ projects, representing over a billion in total project value. This has helped them on numerous occasions to justify their risk pot, improve their schedule and make better decisions. We also work with 15 other customers who are at varying stages of their weather risk management journey. Some simply use our weather calendar feature to plug into other risk solutions like Acumen Risk and improve their risk outputs, whilst others like BAM are seeking a more holistic risk solution.
What major obstacles have you encountered in developing and scaling your solution, and how have you overcome them?
The construction industry is incredibly complex and almost every planner, even within the same company, has a different approach to risk, planning and decision making. This makes building a simple SaaS tool more challenging. It has to have a lot more features out the box than many other solutions perhaps would. The process of building has taken 2-3 years before finally getting the product to a place where the tool is useful to most contractors. There are still of course challenges given that the industry is itself evolving in its maturity of tech adoption and the fact that attitudes towards different tools are always shifting as well.
The only way to overcome these challenges has been to constantly engage with our customers and the industry and to continue to iterate on the platform that is used by many today.
Looking ahead, how does EHAB plan to expand its services or enter new markets to further its mission?
The EHAB solution is currently being expanded into a few other industry verticals who have very similar problems to construction, such as port operations and energy. We intend to make our tool useful for these similar built environment verticals because they already share many of the same contacts and customers that we have within the construction industry.
Our main focus today is to get our parametric service launched which will give many industries a much more accessible and easy to acquire parametric insurance policy.
