Protection Made Easy: The Power of Parametric Insurance
Insights | Article | August 2024 | 5 min read
By Anupam Dey
Vacation. It brings to mind the excitement of relaxing on beaches or skiing on snow-capped mountains, as you plan your time away from home. However, sometimes things don't go as planned. Imagine: You are at the airport, eagerly anticipating the stunning views from your vacation location, suddenly you are informed of a flight delay. Initial excitement turns into frustration amidst the airport chaos. As you try to make sense of the situation, your phone chimes. Reluctantly, you check the notification. A smile appears on your face just as you read the message, your annoyance seems to wither away, almost like a scene from a movie. Next, you are greeted warmly as you enter a VIP airport lounge, allowing you to slowly settle back into a peaceful state with your noise-canceling headphones and a chilled glass of champagne.
That notification – it was sent by your friendly insurer, informing you of your entitlement to access one of the airport lounges while you wait for your delayed flight. No claims to be registered, no forms to be filled. Welcome to the world of parametric insurance. Parametric insurance is an evolving branch of insurance where an insurer accepts the claim on occurrence of an event, simplifying the claims process significantly and making claims payouts or benefits almost instantaneous. In the above example, which is a live proposition available through a Zurich Singapore partnership with Klook, flight tracking data is used to identify customers who are affected by changes in schedules. Taking a more proactive approach to insurance, the proposition is designed to instantaneously notify customers of the benefits available to them (such as lounge access, cash payout, etc.) and reduces the friction often associated with tedious and lengthy insurance claims processes.
This seamless, technology-driven approach gives ultimate convenience to our customers, allowing them to enjoy their travels as we provide them with peace of mind and turn inconvenient disruptions into more pleasant experiences.
Importantly, parametric products allow insurers to be present for their customers when they are needed the most. This innovative use of digital technology is allowing the development of newer insurance products that are unlocking a range of benefits, rapidly. In a world where consumers expect instant gratification for everything from food, entertainment, and rides, it is beholden on insurers to match these exacting standards. Good news – some insurers are catching up. The new tech-powered epoch of insurance is enabling this transition, from selling coverage, to empowering customers by providing services that help them manage their risks better. Some examples of how Zurich is developing innovative insurance products that successfully coalesce technology, service and customer experience including:
- Parametric flight and baggage delay insurance: Parametric flight or baggage delay is increasingly getting included as part of or as a standalone insurance product. Behind the scenes, insurers work with flight tracking data providers, building their own underwriting models and using cutting edge AI tools to offer a product that puts customers’ interests front and center. Be it flights, trains or even cabs, the parametric delay proposition has widespread use cases that not only help alleviate consumer concerns but also addresses them at the moment of truth.
- Parametric weather index-based insurance for events: An insurance product that tracks inclement weather and pays out a benefit for such unforeseen circumstances is surely a silver-lining in the dark clouds. Zurich has developed a weather index-based protection solution for farmers in Indonesia. Supporting an under-served and under-insured segment, the proposition covers coffee farmers against heavy or very low rainfall and pays out the benefits to them proactively without requiring them to go through onerous claims processes that take time and are expensive to validate.
- Parametric earthquake insurance: Some regions like Japan are susceptible to frequent earthquakes. A leading telco carrier in Japan has partnered with Zurich to offer parametric earthquake insurance that pays the claims to customers as soon as an earthquake above a certain threshold is detected at the customer’s location. Again, the product eliminates the need for customers to go through a traditional claims process; instead, hassle-free payouts are made almost immediately when specific triggers occur, providing a timely payout that allows customers to use funds.
These are just some successes of how parametric insurance can offer peace of mind to a customer. As Internet of Things (IoT) and connected devices continue to drive the adoption of technology across a much wider spectrum, we can expect the rollout of parametric insurance to accelerate in the coming years. In the meantime, don’t forget to consider including the parametric features in your travel insurance to stay zen. You are welcome!
