“Parametric insurance makes for great flexibility”

What with heatwaves and droughts, torrential rain and flooding, thunderstorms and hurricanes, extreme weather phenomena are becoming more common across the globe – with all the risks that implies for people and property. In many cases, these risks are at best underinsured.

London-based FloodFlash helps close that gap by offering parametric insurance in the event of flooding. Consumers taking out insurance need only determine two parameters: the depth of water and the sum insured. In the event of flooding, pre-installed sensors measure the water level on site and payment of the sum insured is triggered the moment the water reaches the predetermined depth.

“Our flood insurance offers three main benefits,” says Ian Bartholomew who, together with business partner Adam Rimmer, co-founded FloodFlash in 2016: “It’s transparent, very easy to understand and available to the mass market, including all those who were previously unable to obtain flood insurance.” In the event of a claim, the partners say, the sum insured is transferred fast. In the quickest settlement to date, the money reached the insured’s account just ten hours after the flood hit.

The benefits of parametric insurance

Lukas Herrmann, a data scientist and underwriter with Hannover Re, is convinced of the potential of parametric insurers like FloodFlash. “They enable risks to be covered for which there was previously no insurance available,” he says.

According to Herrmann, the benefits for the consumer lie not least in the customisable nature of the insurance cover. Parameters such as the risk period, critical values and many others can be determined by the consumer to suit their needs. “Parametric insurance makes for great flexibility and leaves many options open,” says the data scientist.

As for the benefits for the insurer, along with the transparency and efficiency delivered by automated claim settlement, insurers benefit above all in terms of risk control: “With the sum insured fixed in advance and dependable satellite-based weather data for the past four decades or so, risk control is perfectly manageable,“ concludes Herrmann.