Parametric insurance has traditionally been used for protection against natural catastrophes. New sources of data are now enabling more types of parametric coverage, including in the travel industry. Could we see the emergence of automatic payments for commuters’ Monday morning train delays?
Flight bookings have been the initial focus of parametric travel offerings, but in June 2021 Wakam announced a ferry delay coverage product. This product is part of a trend of parametric insurance solutions being applied more widely to travel.
We spoke to Eric Allombert, Wakam’s Chief Marketing and Communication Officer, to find out more.
Travel insurance has already been revolutionised by embedded insurance (see InsTech London’s recent report, Insurance: to Embed, or not to Embed). Travel insurance providers can attract customers by partnering with travel companies and selling insurance to their customers at the point of sale.
Parametric insurance is different from traditional insurance in that it pays out a pre-defined amount based on a trigger event, instead of using claims payments based on the cost of a loss. Changes to or cancellations of travel arrangements can be used as trigger events for parametric travel insurance.
Embedded parametric policies for travel arrangements offer transparency and quick pay-outs for customers and new distribution channels for insurers.
Wakam’s expanding product offering
Wakam is a digital insurer working with technology companies to design and launch innovative insurance products. It now has 300 partnerships across Europe.
Wakam partnered with Koala in 2019 to provide flight delay and cancellation insurance. The product is embedded through APIs within airlines’ booking websites. Customers can choose to add insurance at the point of purchase, with their chosen level of compensation for delays.
Koala is connected to live flight information, which it uses as a parametric trigger. When a customer’s flight is delayed or cancelled, they are contacted and compensated automatically.
In June 2021, Wakam announced a partnership with Setoo to launch a similar product covering ferry delay and cancellation in Greece. Setoo, which recently announced a merger with Pattern Insurance, is an insurance-as-a-service platform which develops and sells insurance to other companies’ customers. The ferry delay product is embedded with LIKNOSS, a technology company managing online bookings and ferry reservation systems which is widely used in the ferry reservation industry.
When the ferry delay product was announced, it was described as the first use case for Wakam and Setoo together but not the last. We asked Eric why Wakam chose to partner with Setoo, and he described the companies as “a good technological match”. We will be watching for future collaborations between them.
More parametric solutions
Other companies are also offering parametric travel insurance solutions. Blink Parametric embeds parametric flight disruption coverage for insurers. Arbol recently announced a weather protection program for vacation rentals. If it rains for more than half of the holiday, the renter is refunded their selected coverage amount. Among Setoo’s other products is a policy that reimburses skiers for poor snow conditions on their vacation.
Wakam is also working with its partners to simplify and automate the claims process for other types of insurance. With Wetterheld, it has launched a parametric weather insurance product for farmers and restaurant owners in Germany.
Wakam has also developed a theft insurance solution for engagement rings with technology company GoodsID and jewellery brand Courbet. GoodsID provides blockchain-based traceability and certification for the ring. If a client logs a theft within two years and the report is validated, Courbet automatically starts to make an identical replacement for the customer.
After the widespread disruption to the travel industry caused by the COVID-19 pandemic, travellers will be concerned about the potential for travel arrangements to be delayed or cancelled. Embedding parametric products in the purchase process could aid consumer confidence as the industry recovers.
The success of parametric products for transport bookings depends upon real-time data sources which can be used as triggers. Such data sources are well established for flights. Wakam’s ferry delay coverage is enabled by the data provided by Setoo’s partner LIKNOSS.
Eric told us that Wakam is always looking out for more parametric triggers. With more reliable live data becoming available and digitised booking systems in use, we expect to see Wakam and other insurers launching parametric coverage for more forms of transport, such as coaches or trains.
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To find out more about Wakam, visit wakam.com.