Storm Christoph, which brought heavy snow and flooding to many parts of the UK earlier this year, provided a test for London-based FloodFlash. The insurtech specialises in parametric insurance: a kind of rapid-response cover that pays in full when a pre-determined trigger, or set of triggers, are activated. The model, which sidesteps the traditional process of claim, investigation and loss adjustment, is attracting growing attention from both venture capital investors and traditional insurance names
“This could actually pretty much redesign insurance for these increasingly occurring peril events, which traditional insurance and underwriting just does not work for,” said Remus Brett, a partner at venture capital firm LocalGlobe, which has invested in FloodFlash. “We’ve been through a few storms and we’ve seen the model properly tested.”
Ian Smith FT 19th April 2021
The key need FloodFlash and other new entrants to the market offer is cash quickly. Catastrophic events need fast solutions. These new parametric products do not offer he breadth of cover traditional policies do but what's the good of comprehensive cover if it arrives too late to save the business?
Other insurtechs offering parametric cover include: -
- Arbol- agriculture e.g. farmers suffering too much or too little rain
- Parametrix- server downtime for cloud computing, web hosting and other service providers
- Parsyl- covering adverse temperature change for goods in transit e.g., shellfish, life-science products
As unpredictable events become ever more commonplace and destructive and past data less relevant the attraction for parametric insurance rises. Add to this a focus on cover for very specific time or events e.g. a car trip of just 5 miles or a single robot taxi trip and the attraction of such insurance grows.
Cars with Level 5 ADAS may have smart contracts embedded in the vehicles (where it is the vehicle insured rather than the driver e.g. USA) When driver behaviour metrics are added then privacy, regulation and compliance must be adhered to and when that is so are a powerful platform for parametric insurance.
More traditional carriers can combine the wide breadth of current products with the tight cover of parametric insurance in hybrid products.
Times are a changing as is insurance.
Nine hours and 44 minutes — for one North Yorkshire-based property business, that was all it took between water flooding its premises and an insurance payout hitting its bank account in January.