Rich Data Spurs Intelligent Risk Transfer, Cuts Time To Recovery

In the past few days, promising insurtech ventures competed for top honors, based on impact to the insurance landscape. Innovators were awarded in categories of underwriting platforms, analytics usage among others.

The UW platform award went to a parametric risk transfer solution designed to protect SMEs during hurricanes. This category saw stiff competition, including another parametric product that insures agri-constituencies against commodity price volatility. The analytics category winner was an insurtech that drives efficiencies into claims by guiding treatment course utilizing evidence repositories.

Parametric risk transfers are a common trigger-linked feature of (re)insurance most often used by large corporates and sovereign sponsors as more responsive forms of risk transfer than traditional, indemnity-based solutions. Efficient proof of loss mechanisms obviate loss adjuster need with payouts tied to pre-determined parameters.

SME Hurricane Protection

Most parametric transactions in property insurance are relatively large and bespoke in nature. SMEs that are equally exposed to natural catastrophes, find it difficult to get coverage. Parametric solutions have existed in the market for a while but suffer from basis risk – the risk that payout does not accurately reflect the severity of the event.  A Cat-2 hurricane passing right over a location can produce higher wind speeds and damage than a Cat-5 passing 30 miles away.

An elegant solution to handle these shortcomings, Swiss Re Corporate Solutions’ Pop Storm is live in 8 US states since 2019. It is an online parametric hurricane coverage platform providing data-driven coverage to SMEs. Brokers provide clients speedy quotes for single location coverage. The platform is also equipped for larger, bespoke transactions.

Swiss Re Corporate Solutions won the Business Insurance 2020 US Insurance Initiative of the Year for its Pop Storm platform.

With Pop Storm, reported wind speed at a point within a km of the insured’s location is the trigger. It uses HWind data from catastrophe modeler Risk Management Solutions to verify wind speeds for claims, and payouts are typically settled within days. By using wind speed as a parameter, the basis risk is lower than traditional covers.

Price Volatility Protection

Price volatility is a major risk for producers, buyers and insurers of agricultural products. Prices can gyrate by 20-30% per year, hampering ability of farmers to manage businesses. Dairy farmers are a good example of a group impacted by price volatility with attrition being commonplace.

Currently, large farmers and traders minimize risk for common crops (corn, wheat, soy) with futures, which guarantee prices for a defined period. But less than 1% of the world’s farmers work on farms bigger than 250 acres. London based start-up Stable offers a parametric platform to fill this gap for buyers and sellers of top 200 crops produced, enabling protection from sudden price changes. It covers more than 3000 commodities in 40 countries.

Policies are underwritten against independent index prices (UK’s DEFRA/AHDB), which reflect the average goods sales price. Payouts are triggered automatically based on how commodity prices shift around a baseline index price. Policyholders recoup lost costs more quickly than  standard policies as claim evaluation is sidestepped.

Workers Comp Anomaly Detection

In the analytics category, winning TPA Gallagher Bassett Services uses a system to determine care strategies that produce best outcomes, from the manifold ways providers treat injured workers. Treatment Quality Index (TQI) data enables staff to quickly evaluate medical treatments and recommend appropriate procedures for specific injury types. By monitoring treatments, TQI flags anomalies so nurses can review if treatment is inappropriate and make recommendations to adjusters for the best course of care if it falls outside evidence data based guidelines.

With TQI, 90% of claimants get treated based on evidence linked guidelines 90% of the time. It has led to a 25% drop in indemnity claims requiring nurse intervention and double digit reduction in average claim cost.

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