Parametric insurance is a fast-growing industry noted Bahaa Abdul Hussein. Technology has played a major role in the growth of this industry. Many technology breakthroughs have played a key role in the growth and these technologies will spur the growth in the future too. We look at some of these key technologies.
Technologies shaping parametric insurance
1) Internet of Things
Parametric insurance works on event triggers. The trigger comes from real-time data and IoT can help provide the data. Sensors can provide data related to events like earthquakes and other weather related issues. These sensors can send real-time data that can be used for the trigger.
2) Artificial Intelligence
AI is helpful in analyzing the vast data available to aid in risk assessment. AI tools help in analyzing risks and play an important role in underwriting. Once AI does an accurate risk estimation, it can be used to ensure the right price for customers. Another key benefit of AI is its role in fraud prevention. AI can examine data and spot frauds helping insurers to save money. AI also helps in speeding up insurance processes like underwriting, claims processing, and other back end operations. AI is an enabler that ensures customers have a great experience.
3) Machine Learning
ML in algorithms allows the system to learn from data. This makes the risk models efficient and more accurate. ML also is used with data analytics during the underwriting process. The ultimate aim is to ensure best protection while offering best price for customers.
4) Blockchain
Since parametric insurance works on the concept of event triggers, blockchain is ideal. Blockchain works on the concept of triggers and is the perfect solution for parametric insurance. Further, blockchain ensures secure transactions that are transparent. Using blockchain ensures the best security for transactions. Smart contracts are a unique feature in blockchain that execute the trigger.
5) Big Data
Predictive analytics is an important technology that works on Big Data. It helps insurers analyze data in a highly efficient way and predict what could happen. This kind of a system is very helpful in trying to understand events that could occur. As a result, the risk assessment process becomes more efficient.
6) Satellite technology
The use of satellite imagery is helpful in getting data to help identify event triggers. The cost of satellite data is cheap and in fact insurers can launch their own satellites thanks to advances in satellite technology.
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