Insurtech emerged in around 2015 as new entrants looked to challenge traditional insurance by providing a better client experience, access to new capital and ways of insuring the uninsurable. The expectation was that this could be powered by massive amounts of new data, sophisticated analytics and powerful computing technology. Insurtech, as it was originally conceived, has not yet delivered any major changes to how conventional insurance is offered, but parametric insurance does have potential in all these areas. The lure of parametric insurance is the ability to increase the certainty between a loss occurring and a pay-out being made, quickly, accurately and cheaply.
Parametric insurance is not new, but it has seen the most success in providing alternatives to property catastrophe reinsurance, an important but somewhat niche product. A handful of micro-insurance offerings have used parametric triggers. Weather derivatives providing hedges against extremes of heat or rainfall have been around for a couple of decades but take up has been slow.
This is changing. Parametric covers are now being considered across the full spectrum of risk types and sizes. Technology exists to define and deliver insurance coverage based on real-time reporting of accurate data. Parametric insurance is starting to offer attractive solutions where conventional insurance has failed.
Get the full report here.