London headquartered insurance and reinsurance firm Beazley has updated the technology systems and user experience of its parametric weather insurance products, in order to provide what it calls the first fully personalised insurance policy and to enable automatic payouts to claimants.
One of the benefits of parametric triggers for weather insurance or reinsurance protection is that they can pay out rapidly and without any need for loss assessors on the ground.
Beazley is set to make that process even faster, since a partnership with tech firm Weather Decision Technologies (WDT) that means the payment of claims under its Beazley Weather Guard policy can now be made automatically.
Thanks to the new technology being used, a policyholder of a Beazley parametric weather insurance product no longer even needs to file a claim, as payouts can be automated based on the actual weather condition parameters that are recorded.
Beazley’s Weather Guard product is designed for event organisers, retailers and the like, but the re/insurer also sells parametric weather protection to other types of clients.
The policyholder needs to select Weather Decision Technologies (WDT) as the claims verification data provider it wants to use. WDT then sends it weather data to the client and Beazley, ensuring transparency and if the weather parameters recorded reach or exceed the trigger levels specified in the policy, Beazley will settle the claim automatically.
Clients select the trigger levels when receiving a quote and the automatic claims service is just one of the enhancements made, as Beazley has also made the weather covers more personal and simpler to understand, the firm says.
“Our clients need swift claims service and flexible insurance coverage to address the wide range of weather risks that could imperil their events,” explained Beazley contingency underwriter Christian Phillips. “But they also want simply worded policies – no-one likes insurance small print.
“We believe we’ve created the simplest insurance policy on the market – one that can be entirely personalized to reflect exactly the coverage the client has bought.”
Beazley has updated the language of its now digitally delivered weather policy, which can be accessed via mobile device, so that the wording more precisely and exclusively describes the actual coverage purchased.
Now, the first sentence of each policy explicitly spells out the trigger for coverage, as well as the sum insured in dollars (or other applicable currency) and any self-insured deductible.
“We wanted to give event organizers a simple but precise description of their coverage that they could access at a glance on a mobile phone,” Phillips said. “If you’ve bought a Beazley Weather Guard policy to protect your event against heavy snow, your digital policy will specify ‘snow’ and explain how many inches of snow will trigger coverage. If the covered peril is excessive heat or cold, your policy will explain how high or low the temperature needs to be to trigger coverage. It’s entirely personalized.”
“Insurers have generally struggled with plain English policy wordings,” William Pitt, Beazley’s chief marketing officer explained. “Traditional policies are one-size-fits-all documents that describe every possible form of coverage the policyholder might have bought. To remind yourself of what you actually have bought, you have to constantly flick back to the declarations page.
“We asked ourselves: What would happen if all the information on the declarations page was instead integrated into the policy wording itself? When we did this, we found that it made the policy much easier to understand. Instead of ‘named insured,’ we could insert the actual name of the policyholder. Instead of ‘sum insured,’ we could insert a dollar amount. It all became much less abstract.”
Parametric triggers work well for weather covers of this type, but even a parametric policy can be wordy and difficult to understand, so by simplifying this Beazley will make this type of weather insurance more accessible for potential clients.
By enhancing the speed of the payout as well, the benefits of parametric weather covers can be more easily demonstrated to protection buyers, helping to broaden their appeal and uptake.
Parametric triggers can be sped up even more if real-time data on weather conditions can be used, enabling payouts to be almost instantaneous, once the weather data is delivered to an app or other technology platform.
For simple weather-linked insurance or reinsurance contracts this has to be the future, enabling hedging and protection to be delivered with simplicity and accuracy, while payouts are made just as soon as disaster strikes.
The application of this into the ILS market and as hedging tools for insurers or reinsurers is an ongoing process, with most parametric contracts still requiring relatively lengthy processes to define if payouts are due.
But with technology advancing and real-time data inputs now available, as supplied by the likes of New Paradigm Underwriters, it can only be a matter of time until we see simple, automatically paying hedging products for perils such as hurricanes and earthquakes.