Parametric policies
Parametric policies are a new insurance solution that shifts the focus from the concept of damage to the concept of the event.
In the Italian market, which is still completely unexplored, we can provide our customers with innovative solutions as a complement or alternative to traditional products, covering niches not yet controlled by the large insurance groups.
The main difference between parametric and traditional policies relates to the way in which claims are established, calculated and settled. The right to insurance reimbursement (predetermined ex ante in the contract) is in fact obtained when a specific event occurs, which is verified automatically and objectively by a third party, based on the recording of certain measurable phenomena that do not require an expert.
Just a few years ago, it would not have been possible to implement an insurance system like this: simple, clear, transparent and objective. Today, technology and access to the vast amount of available data are enabling us to offer new solutions that are unprecedented in Italy.
Our parametric policies are the missing element of the insurance offering for SMEs: whatever the sector, from agriculture to tourism, through transport and digital, we can protect these companies from the risks that present a danger to their future every day.
First player in the parametric solitions market
How it works
Often, the things that work best can be explained simply.
Advantages of a parametric policy
Shorter waiting times for settlement, because, since it is not necessary for an expert or a loss adjuster to be involved, the customer can be automatically compensated when the oracle reports that the trigger/parameter has been reached
Lower costs for the customer, since the policy price will be lower as it does not include the cost of the expert report and the administrative costs related to claim settlement
A simple, clear contract: the customer has a good understanding of what is covered and what is excluded.
Blockchain technology enables us to generate insurance policies through “smart contracts”: digital contracts that are legally valid and executed automatically when an event occurs.
An example may help to clarify:
REVO ParametricXProtezione Estate
Paolo owns a seaside resort, for which he purchased a parametric policy that protects him from losses caused by bad weather. He agreed with us to be reimbursed whenever more than 2mm of rain falls on his beach.
The oracle, which in this case is the nearest weather station to the resort, will notify OVERX whenever this situation occurs. Through the blockchain, OVERX will automatically send the agreed compensation within a few hours.
As Paolo does not have to report the damage to his insurer, he can focus on his business, is free to create projects and make investments for his business, and can enjoy the present and the future without the anxiety of weather forecasts.
Oracles
A key role in the development of parametric policies is played by oracles, which are independent third parties that certify the actual occurrence of an event (e.g. rain).
They are valuable for two reasons: on the one hand, they serve as a tool to support our actuaries in the pricing process through the analysis of historical data; on the other, they report in real time whether the trigger event that may activate the service in the contract has taken place.
There are four main categories of oracle:
third-party data providers used for settlement (eg. weather station aggregator)
use of mathematical models produced by scientific partners to prove the event-damage correlation
Use of IoT for more precise and customer-specific recordings
Use of third-party software enabling the detection of service interruptions
The power of data combined with experience
That’s why we wanted to create an internal business unit dedicated exclusively to parametric products, with an open-minded and innovative approach. We did this with the aim of developing all the key skills to manage this business within our Company, and are the first in Italy to achieve this.
Our parametric team has transverse skills in all areas necessary to structure innovative solutions. It can rely on very specific skills in data analysis (from the analysis of weather time series to predictive algorithms for catastrophe events) and on actuarial and product technical skills.
An ever-expanding omni-channel offering
A scalable system such as the one we have built enables us to provide solutions for new types of risk, so that we can respond promptly to the most diverse coverage needs expressed by the market.
We are already active in weather, agricultural and business interruption solutions, to which catastrophe, mobility and cyber cover will also be added in 2023. The native omni-channel nature of our parametric products and the flexibility of our system also allows us to work with all types of intermediaries.
Product development timeline
Some examples of the protection we can offer?
The future will always be an unknown, but with REVO you can now face it without fear. The key word is protection.