Parametric insurance involves making insurance payouts when an event is triggered observed Bahaa Abdul Hussein. The concept of parametric insurance is based on the use of data. This is why data and analytics play a very important role in parametric insurance. We examine this aspect in details.
Data, analytics, and parametric insurance
Parametric insurance is different from traditional insurance in that it is triggered by pre-defined parameters. When an event occurs (eg: earthquake), it triggers the system. The occurrence of the event is verified and payout happens immediately. There is no need for assessment of loss as in the case of traditional insurance.
To underwrite a parametric insurance policy, it is important to understand about events and the probability of their occurrence. This calls for the availability of proper data. Also, when an event occurs it is important to collect data about the event to commence the claims process. The data obtained needs to be accurate and localized to estimate the loss at a particular location.
Here is an overview of the use of technology with data and analytics for parametric insurance:
- The use of remote sensing technology and data from satellites have made it easier to get information on trigger events. This is very important for knowing about weather-related events.
- IoT has proved to be a boon and helpful for parametric insurance. Sensors can be placed that can provide real-time information for insurers and verifiers. The data on seismic activity and weather can be very helpful in policy underwriting as well as claims processing.
- Data analytics is invaluable for parametric insurance. Data analytics tools can help in lowering costs by making accurate predictions.
- Machine learning can be very helpful in creating risk models for the underwriting process.
- Artificial intelligence can help predict the occurrence of events by studying data. Using AI make the process of risk enhancement effective. It helps to provide accurate assessment, which can then be used for effective policy pricing.
- Blockchain can be used to handle triggers. When an event is triggered, the system based on blockchain can process the transaction seamlessly and securely. It helps in reducing processing time as well as claims processing costs.
Technology has ensured that the right data is available for parametric insurance providers. The availability of this data along with analytics helps in ensuring efficient insurance processing. Newer technologies will help in enhancing the way parametric insurance process is done. Thank you for your interest in Bahaa Abdul Hussein blogs. For more information, please visit www.bahaaabdulhussein.com