Q&A with Paul Prendergast, CEO, Blink Parametric —
Do you see Parametric as an under-served area of insurance?
The vast amount of parametric insurance is written for large enterprises and governments. Our experience has been that there is latent demand for a platform that allows insurers to build and deliver simple, yet powerfully effective parametric solutions for SME and personal lines.
Our expertise in flight disruption over the last number of years has been very formative in establishing our reputation and indeed all of our learnings in that sector served the approach we adopted to build our new Business Interruption solution which took just 10-weeks in 2020 as part of the Lloyd’s Lab programme.
We very much view what we do as offering Parametric as a Service (PAAS).
The new business interruption product is based on hurricanes, can you see other potential in similar areas for Blink?
The scope is far-reaching for our parametric platform as it was designed for diverse application which is what makes it so exciting for us. Our first product was Blink’s flight disruption solution. Data is the key for that product and there is a wealth of flight data available that insurance companies use for other purposes and we knew that they trusted it. So, through Blink’s platform we track delayed or cancelled flights, notify the customer of schedule issues, sometimes even before the airline communicates the information, and then based on our Insurance Partners’ customised policy terms we offer the traveller alternatives with other airlines, book and pay for it or give them complimentary lounge access, or a cash pay-out option. What we offer isn’t only about getting customers cash quickly, its about resolving problems in real-time. That’s what parametric can do and that type of engagement with a policy-holder is transformative. We’re really proud that Blink is embedded in more that 1million travel policies and that have some excellent partners including Blue Cross and Manulife here in Canada. We were also delighted to welcome Allianz Partners on board last month (January 2021).
In general terms, parametric principles are equally relevant during periods of heightened security risk, geopolitical turmoil or everyday unforeseen circumstances, all of which can force changes into whatever contingency plans Insurers put in place and leave customers feeling exposed, worried and vulnerable. Flood is absolutely another peril that aligns well with parametric criteria as the risk can be predicted in many cases and data and tracking from weather monitoring and water defence systems can provide definitive real-time status updates.
Our new Business Interruption solution is a hurricane non-damage solution which we developed in 10-weeks with the support of our mentors within the Lloyd’s Lab innovation acceleration programme. Again, it is a solution that is data-led, using robust weather tracking systems, utilising open-banking integration to validate the impact of the hurricane on a business and supporting a series of immediate pay-outs to an amount and duration determined by the Insurer. It ultimately makes it possible for a business to recover and reopen and avoid a protracted claims assessment process.
An effective parametric platform allows a claim to process and for payment to happen. Then you resolve the problem. This is how the Blink model works!
Is parametric insurance moving into the mainstream?
I’d like to think that parametric is already hitting the mainstream and its appeal is steadily becoming normalised in the industry as underwriters continue to trust the data and validation process and open up to its use on Commercial lines. Of course, we don’t expect a policy holder to know that they are being served through a parametric platform so, we don’t expect it to become a household term as such, but if they get a seamless real-time claims validation and solution, whether that’s a service or pay-out, then we’ll be comfortable in the knowledge that our parametric platform is doing its job behind the scenes!
Climate change and natural catastrophes are of increasing concern and high visibility as we watch the media coverage of events around the world. There has long been a parametric component to cover for this type of risk and I would expect this to broaden and become more commonplace in time to include:
- Protection against natural disasters; earthquakes, cyclones, hurricanes supported by measured weather data across a specific period.
- Protection for farmers’ crops insured against damage and loss caused by air pollution, drought conditions or storm damage, again supported by measured weather data across a specific period.
- Protection against weather extremes. For example, an energy provider could give automatic support to vulnerable customers where they are insured against an extended spell of freezing temperatures across a specific period.
It’s also important to note that Insurers are actively looking for solutions that will add value to their policyholders, introduce a step-change to their services through insurtech innovation and build a stronger customer relationship with simple, effective, automated insurance product that delight. So, it’s not just us pushing parametric solutions, there is strong industry pull as well which is excellent to see.
This year alone with Covid-19 and all of its consequences has proven that we need smart, responsive, clear and simple insurance products that serve the policy-holder in real-time. There has been some spectacular innovation and parametric has risen to every challenge.
It’s actually possible for parametric to be mainstream whilst being a specialised segment of the industry. As long as Blink holds a world leading position within that segment, then I’m happy.
For countries that are not hurricane-prone, could there be other weather related products suited to…say Canada?
Yes – certainly. Hurricanes may not be prevalent in Canada but various storm categories, extreme temperatures certainly are all potential risk events.
Parametric does not need to be limited to the extreme events however. It can also support an individual or group heading to the slopes for some winter skiing who take out cover to compensate them if there’s no snow for the duration of their holiday period. Our parametric platform may not be able to make it snow but it can check the weather data for the specific location on the specific dates involved and issue a pay-out in real-time.
What are its limitations?
We simplify complex products, we make them accessible and affordable, providing real-time solutions with automated capacity to support volume.
Our view is parametric will never be the full answer for complex risks but will be able to improve the overall insurance value proposition by building hybrid insurance solutions.
For example our Business Interruption solution leverages data to provide a validated pay-out in real-time for SMEs , providing well needed liquidity but then the traditional claims process will kick in for larger more complex claims.
I would expect that we will see an increasing element of preventive alerts to policy-holders to take steps to reduce exposure to an imminent peril which is certainly an element that parametric technology can support but I am confident that Insurers will continue to evolve and respond to emerging risks to serve the market.
Why do you feel your business interruption solution is particularly suited to the SME sector, is it affordable and how will the product be promoted?
Our research shows that there’s a gap in cover to support the SME sector in the US. FEMA also report that following a disaster, 90% of smaller companies fail within a year unless they can resume operations within 5 days. We know that the majority of business interruption claims can take between 6 – 24 months to settle so, our solution can cut the average claim process time by up to 95% and offer real-time claim activation and pay-out solutions in the immediate aftermath, making it possible for businesses to recover and reopen. Its appeal is in its simplicity. Critically, it allows our insurance partners to offer cover through a streamlined claims validation platform that immediately begins measuring the impact of a disaster on a business, automates pay-outs and demonstrates to customers that insurers are there for them, when they need it most.
SMEs are the lifeblood of all economies so, the potential to save them from permanent closure is a compelling one.
Blink doesn’t sell insurance. We leave that to the experts. We are a B2B2C business. We sell the solution to Insurers and customise the offering to their specific needs and they promote and offer it across their broker network and utilise our platform to carry it right into the hands of the policy-holder. It is affordable precisely because of the automation we provide on monitoring and the critically important validation process. The steps are simple but there’s a lot happening under the hood:
- Blink continually monitors national weather systems, tracks hurricane formation and projected landfall path.
- Blink proactively confirms insured party was in hurricane path.
- Blink measures the financial impact, verifies the business impact and confirms the policy cover levels. Blink issues payment to the policy holder.
- Blink validates business impact by tracking business activity via open banking and accounting software integrations.
- Validation process is repeated daily and ongoing business impact confirmed.
- Claim pay-outs commence after 1 week, to an amount and duration that is completely configurable subject to partner requirements.
None of the above data or validation steps require 3rd party administration or human intervention which makes it cost effective and efficient and ultimately reduces the claim total. The activity is fully trackable with a dashboard reporting and audit facility to fulfil the underwriters requirements and confirm that pay-outs are given to only those that have been impacted.
Do you think it will largely be sold direct?
It will be 100% sold through Insurance partners.
Do you think commercial insurance, have enough knowledge of parametric solutions?
I think we have a way to go in educating the sector about the true capability of parametric insurance. I still learn new things in this business so, we have taken on some responsibility to be more active in setting out case studies and real-life examples of what is now a proven and well established platform that delivers.
I totally understand the fear from an underwriter’s point of view, that they wake up and a huge pay-out has happened, but nobody checked it first. For me, the big thing is reducing the risk for the underwriter, which we can do with a robust validation process. If there was a Covid-19 lockdown in London and every company got a pay-out because it was parametric, that’s too blunt a tool for that kind of pay-out. A percentage of businesses have been impacted badly, but a large percentage have just got on with it. We only want to give pay-outs to the people who’ve been impacted. That’s what open banking and real-time financial analysis can do. As more data confirmatory points in the validation side of things emerge, as opposed to just the ‘event’ occurring, it will make parametric or automated indemnity much more palatable for underwriters.
It’s important also to say that I don’t want to replace traditional insurance, but to ensure that parametric is understood for the value it adds either as a standalone or a hybrid solution.
What’s next for Blink?
Blink Interruption rollout in the USA is top priority. As an outcome of our experience with the Lloyd’s Lab, we are also thrilled to be working with Beazley on our Blink platform and building the next generation of products so there is a lot of optimism and positivity around the coming year so we are not going to waste a minute of it.
About the Author
Paul Prendergast is CEO of Blink Parametric. A serial entrepreneur and winner of the Deloitte Fast 50 for the fastest growing technology company in Ireland, he co-founded Blink in 2016 and delivered the first real-time resolution flight cancellation insurance product which went ‘live’ in April 2017. Blink was the only Insurtech as part of the first cohort of the FCA’s sandbox ‘safeplace to innovate’ programme and was acquired by CPP Group (AIM CPP) in March 2017. Since then, Paul has led Blink to providing Parametric as a Service (PAAS), making TheINSURTECH100 for 2019 & 2020, an annual list of the worlds’ most innovative InsurTech companies and to selection for the fifth cohort of the prestigious Lloyd’s Lab innovation accelerator programme in 2020 developing a market-ready Business Interruption offering as part of a 10-week programme.
Blink has steadily expanded its services platform to become a world leader in parametric insurance product innovation. It transforms its clients’ complex offerings into superior service experiences with simple, intuitive, parametric products. Its proven platform serves as the execution conduit for increasingly Covid-19 prone, high frequency, low severity claims across Commercial and Travel as well as Climate, Energy and IoT sectors. It successfully partners globally with insurance and financial services companies in Asia, Australia, Europe, North America and Central and Latin America.
SOURCE: Blink Innovation