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India InsurTech Thought Leadership

Parametric Insurance and how it is transforming the global travel insurance industry


Parametric Insurance is one of the major global trends in insurance innovation. The movement towards utilising big data, automated business logic and mobile technology to provide new, innovative solutions is revolutionising the once traditional insurance sector. Customers are demanding speed, convenience, simplicity and a more personalised service from their insurance products. 

What is parametric insurance? 

Taking the traditional travel insurance model as an example; something bad happens during a journey, the Insured often has to pay-out and manage the consequences themselves and then provide proof to the Insurer after the event that the claim is valid. The insurer in turn has to review the claim and documentation provided by the claimant and if the claim is successful then the insured gets a payment or cheque in the post, possibly weeks or months later. 

In contrast, a parametric insurance experience does away with the need for phone calls, forms or receipts and in real-time delivers rapid options and a digital claims resolution to the insured’s mobile phone - providing assistance right at their time of need. The specifics of the parameters and reimbursement values will be determined before the cover starts. The insured doesn’t have to provide proof or observe a lengthy claims process and the insurer doesn’t need to spend resource and money on assessing claims – the data and technology does all the hard work for everyone. Typical examples relate to flight disruption and luggage delay or loss. 

Flight Disruption

The insured registers their flight schedule pre-travel. Then, behind the scenes, each flight is tracked proactively by the technology and when a disruption occurs within the cover parameters, the traveller is automatically alerted, offered a choice of options which can include cash pay outs or lounge access. This provides assistance in real-time. The solution can also be extended to provide automated assistance in the event of an extended delay or a flight cancellation, as the technology can provide options and coverage for local airport hotel accommodation or even flight rebooking.

Lost Luggage

This solution offers real-time support to airline passengers whose checked luggage cannot be located following an airport arrival. The insured needs to register their flight in advance and in the event of their luggage not arriving they simply enter their lost luggage PIR reference number. Near instant payouts are delivered direct to a bank account if luggage is delayed by 30 minutes at destination and a further payout can be made if luggage is still missing after 48 hours. Customers can immediately buy essentials and get on with their travels without bearing the full financial burden of the disruption.

Why is this type of insurance becoming so popular and why now? 

With consumers expecting more from their products and services, insurance providers need to keep up with the demand for fast and intuitive solutions to consumer problems. Global travel continues to experience periods of disruption during peak seasonal travel periods and as a consequence of severe weather events, so demand for effective assistance solutions is driving significant investment in parametric insurance so as to deliver benefits to both the traveller and the travel insurer.

Looking at India in terms of its travel market, the scale of the opportunity for parametric insurance solutions to deliver benefits to all parties is significant. According to the annual report of the Ministry of Civil Aviation 2022-2023, during the year 2022 (January-December), 43.4 million passengers travelled on international routes which was 152.7% up on 2021 activity. In the same period, 943,000 flights on scheduled domestic airlines carried a total of 123.2 million passengers – an increase of 48.9% percent in passenger numbers on 2021. The total cancellation rate across Indian domestic airlines in the month of September 2022 was 0.67%, according to Statista. On average 0.68% of flights were cancelled every month in 2022 as reported by Moneycontrol. This however represents a notable improvement compared to 1.13% of flights cancelled every month in 2019.

In terms of delayed/lost luggage, the SITA IT Baggage Insights Report 2022 recorded Global Mishandling rates for Domestic and International flights on international routes at 8.7 per thousand passengers, while only 1.85 for domestic routes. At a global level the likelihood of mishandling a bag is about 4.7 times higher on international routes compared to domestic routes. 

For each individual traveller inconvenienced by either flight disruption or delayed/lost luggage, the insurance sector has an opportunity to turn their disappointment into a positive customer experience. Blink Parametric can deliver on behalf of any insurance partner or brand, a white-labelled solution that is personalised and delivers a real-time suite of options to assist travellers in their time of need. The impact is transformative, both for the insured and for the travel insurer.

What are the operational efficiencies for Insurers? 

The Blink Parametric platform is designed so that:

  • No claims forms, receipts or phone calls are required. The process is paperless in real-time

  • Instant consumer resolution is provided at their time of need

  • It delivers a 99% reduction in the flight and luggage delay claims handling process compared to the traditional travel insurance process

  • It is significantly cheaper than a manual claims process delivering up to 90% cost savings

  • No ‘people’ interaction is required, saving significant overhead and operational costs

  • Implementation savings can be realised by reducing in-house investment

  • The solution is surge proof as it can rapidly scale in terms of capacity in the event of a mass event such as a winter storm without there being a corresponding need to recruit or reassign staff.

  • As a branded solution, it can be market-ready, delivering efficiencies, enhancing customer satisfaction ratings in three months for standard implementations.

  • There is no ability for fraud, as the solution is driven by external airline and airport data.

What other sectors can benefit from parametric insurance?

There are extensive and diverse applications for parametric insurance solutions. Cover for impact of natural disasters; earthquakes, wildfires, floods, cyclones, hurricanes supported by measured weather data across a specific period is becoming increasingly popular across the sector as is cover for farmers’ crop damage - for example, if air pollution, drought conditions or particular wind speeds result in damage to crops. 

A keen advocate for all innovation that can expand parametric insurance usage across the sector, the Blink Parametric team has developed its platform to deliver Insurance solutions across the travel, internet of things and business interruption sectors. The combination of data, mobile tech and AI means that insurers can provide efficient and progressive customer experiences. Not only does this benefit the customer but also provides Insurers with integrated digital platforms that enable faster, cheaper and more scalable solutions and communication methods.

Examples of how Blink Parametric insurance solutions could be used include:

  • If a Smart Connected Oven appliance develops a fault, then the service could help schedule a repairman and in the interim, offer a takeaway food delivery option.

  • If a satellite TV receiver malfunctions, the service could provide cinema tickets and arrange a replacement device to be delivered.

  • During extremely cold weather an energy provider could give automatic pre-set financial support to vulnerable customers where they have secured cover on the occurrence of an extended spell of freezing temperatures across a specific period.

  • Business Interruption - providing interim cash flow to small and medium-sized businesses in the immediate aftermath of an insured event (eg a hurricane or flood).

The Future

Blink Parametric is a multi-award winning InsurTech currently expanding its services across India and the APAC region. It uses cloud-based, microservices and globally scalable technical architecture driven by an innovative API system platform allowing for complex architecture to be filtered into simple processes, that are agile, adaptable, and fully customised.

Author: Shrey Raizada, Global Marketing Lead, Blink Parametric

Disclaimer: The opinions expressed within this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of IIA and IIA does not assume any responsibility or liability for the same.

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