One to watch: FloodFlash
“The claims process can be one of the most frustrating parts of insurance, often involving delays, suspicion and finally irritation when the ultimate payment turns out to be less than you want or expect. Parametric insurance could change all that, writes the FT’s insurance correspondent Oliver Ralph. Behind the nasty jargon is a straightforward concept — this is insurance that pays out as soon as an event happens, rather than after the scale of the loss has been calculated. It’s often used for the sort of large scale insurance bought by governments. When there are strong storms in the Caribbean, for example, island governments receive their money immediately.
UK-based FloodFlash is one of the first companies to apply the principle to commercial insurance, selling flood coverage to small businesses. The company installs sensors on the outside walls of its customers’ premises. If the sensor registers a flood, then a pre-agreed amount is paid immediately. No need to guess how much damage the water has actually caused, or to spend money on claims adjusters. Just the presence of the flood triggers the payment.
“Working out the likelihood of 50cm of water is one thing,” said co-founder Adam Rimmer. “Working out how 50cm of water turns into damage is a totally different problem and that’s what creates uncertainty.” Some insurers don’t like the concept — they say that insurance payments should be based on actual losses. But Mr Rimmer sees scope to expand the concept to other countries. He says floods globally cause $50bn of damage a year, and only $9.5bn of that is covered by insurance. FloodFlash soft launched its product in the UK earlier this year, and is targeting businesses in flood prone areas. “We’re trying to protect people by rivers and coasts,” said Mr Rimmer. “If you are in a high risk area you could struggle to find [traditional] cover.”