On September 10, 2018, Hurricane Michael has made landfall in Florida, leaving a path of destruction in its wake: more than 375'000 residents had to be evacuated from flooded neighborhoods, several hundred homes were destroyed and large areas of crops heavily damaged. Marco Dolores was one of the many affected loosing not only all his personal effects but also being forced into dire financial straits, knowing his whole family is dependent on the income coming from the destroyed headquarters of his family business.
Natural catastrophes happen frequently all over the world causing substantial economic and social losses to the affected communities. According to the Swiss Re Institute, in 2018 economic losses from natural catastrophes amounted to USD155 billion, triggering USD 76 billion in insurance pay-outs and contributing to the fourth highest ever. Parametric insurance covers can help communities get back on their feet much faster by providing automated emergency pay-outs in the immediate aftermath of a disaster. The mechanism allowing the fast pay-out speed is a pre-defined index level. Once reached by an event, the payout is triggered. This means policy holders get paid without having to go through a lengthy insurance claim and loss adjustment process.
In the case of hurricane Michael, parametric insurance products paid out in under a week, enabling affected people like Marco to start rebuilding destroyed property and infrastructure swiftly, helping society and the economy quickly bounce back.
To further improve the customer experience, boost wide-scale adoption and extend protection to more people, Swiss Re has now developed an end-to-end digital solution including risk modelling, policy administration, portfolio steering as well as claims and payment services. The Swiss Re platform enables insurers and governments to launch and administer parametric covers in the back end and pays out quickly and without questions asked.
As a digital platform, Swiss Re's parametric natcat solution not only fosters societal resilience through quick pay-outs but also through making insurance more accessible to consumers and businesses via new sales channels such as e-commerce platforms or apps. This helps insurers expand their product and service offerings, opening up new areas of growth that deliver high customer value at a low investment costs. For governments, it means a much more streamlined pre, during and post event management, enabling a much faster recovery and rebuild of critical infrastructure and services. Designed as a modular platform, insurers and governments can choose whether they want the full end-to-end turnkey solution or only particular services such as costing, claim payment and/or event tracking.
We are convinced that innovative parametric solutions like our digital and fully automated end-to-end platform are beneficial to all parties involved as they are not only an important puzzle piece to closing the protection gap but offer insurers the possibility to do so in an effective, scalable and cost-efficient way.
What parametric covers do you think are most needed and where? Please share your views as comments below.
Category: Climate/natural disasters: Disaster risk, Earthquakes, Floods/storms, Resilience