Lloyd's seeks to develop parametric insurance and smart contracts

Parametric insurance and smart contracts technology could help insurers increase efficiency and improve customer experience, finds new reports by insurance and reinsurance marketplace Lloyd’s of London.

According to the report, parametric policies give insurers more scope to design products for risks that could otherwise be uninsurable or underinsured, as they are based on definitive information such as previous loss events and independently verified data. These policies trigger a pre-defined level of claims payment quickly after pre-agreed parameters have been exceeded.

The report describes four practical applications for smart contracts in the cargo, contingency/aviation, agriculture and property catastrophe classes, and shows how full claims and/or workflow automation could be applied to further classes in the Lloyd’s market.

Smart contracts are either totally or partially automated by computer code, reducing the time taken to get a policy to the customer and a claim paid. It also helps carry out various insurance processes such as risk placement, premium payment, warranty enforcement, and claims assessment and settlement.

Trevor Maynard, Lloyd’s head of innovation, said: “The Lloyd’s parametric products highlighted in the report demonstrate the value of combining the best underwriting and broking expertise in the Lloyd’s market with the latest technology to deliver outstanding products and services to our customers.

"While smart contracts are a nascent technology, they offer exciting potential to transform the customer experience and it’s something we are looking to develop at Lloyd’s. These reports offer in-depth analysis of how insurers can use new technology and products to benefit their customers, and ultimately generate new business.”

Caroline Dunn, Lloyd’s head of class of business, added: “Lloyd’s welcomes the underwriting of risks on a parametric basis for a diverse range of classes of business for a variety of customers, including re-insureds, as well as personal and commercial lines’ customers. We have worked to provide Lloyd’s market participants with a thorough insight into the parametric insurance market, including legal considerations, design features and the applicability of parametric products within Lloyd’s.”

Get all the latest re/insurance industry news with our daily newsletter -  sign up here.

More of today's news

Flooding hits Louisiana as downgraded Barry brings intense rainfall
Nearly a third of homes are inside a ‘Special Flood Hazard Area’ in Louisiana, where homeowners are required to purchase flood insurance.

Moody's withdraws financial strength rating of Genworth Australia
The agency believes it has insufficient information to support the maintenance of the rating.

UK insurers ‘hugely disappointed’ as Ogden review fails to meet expectations
Minus 0.25% ‘better than proposed minus 0.75%, but remains woefully inadequate’.

Risk trading insurtech AkinovA unveils Series B investment round to fuel expansion
The start-up aims to unlock growth in the re/insurance and ILS markets for cyber and property catastrophe risk trading. 

Mercer strikes five-year longevity risk partnership with Club Vita
The partnership aims to enhance longevity risk management in the US pension industry.

Save £600 with the Intelligent InsurTECH Europe Super Early-Bird rate:  Book now