Parametric for the people
Today, the majority of the world's risks are uninsured. However, population growth, wealth concentration in cities and economic development are driving higher exposures. Additionally, new technologies like autonomous vehicles, A.I. and quantum computing are creating new risks and changing existing risks.
Technology can help us to better understand, manage and mitigate risks. Digitalization in homes, farms, cars and health is a huge opportunity for the insurance industry. It can help us to reduce losses and make the world more resilient.
Traditional insurance typically involves a high touch sales process, complex policy wordings with exclusions, lengthy claims processes and expensive policy administration.
Digital platforms and devices are enabling cheaper, faster and more scalable solutions pushing the boundaries of insurability. Customers can access covers that would previously have been unaffordable or inaccessible. Companies can benefit from cheaper, bundled, off-the-shelf solutions.
Parametric insurance is not new. It is based on a pre-defined index that will trigger a payment in the case of an event. This can be the magnitude of an earthquake, a certain amount of rainfall or the delay of a flight. What is new is the possibility of a fully automatic insurance offering with embedded parametric product design in a lean, cloud-based and modular ecosystem. Swiss Re's suite of parametric solutions include features like real-time reporting, steering, dynamic pricing, automated claim payments and policy administration.
For insurers, it means gaining access to a broader customer base through innovative product design, expanding offerings with high consumer value at low investment cost or opening up new areas of growth across various distribution channels. One critical factor is designing the index right so that it pays out when it should.
For consumers, parametric insurance holds the key to bringing many more currently uninsured people under cover in a lean, unintrusive, fast way. This can complement existing covers or act as stand-alone emergency financial support for when disaster strikes, by issuing an immediate payout to policy holders.
Innovation is not easy, especially in a highly regulated environment. We are trying to ease the user experience via a lean consumer journey, improve trust in the industry via a transparent, inclusive and affordable product, and partner with the right distributors to ensure efficient, broad access. There are still some key obstacles to parametric solutions helping more people protect their lives. How can we overcome them?