by Paul Prendergast – CEO of Blink Parametric, a CPP Group company

Parametric Insurance is one of the major global trends in insurance innovation. The movement towards utilising big data and mobile technology to provide new, innovative solutions is revolutionising the once traditional insurance sector. Customers are demanding speed, convenience and a more personalised service from their insurance products. In this article we focus on Parametric Insurance to understand how it differs from traditional insurance, how it works and why it’s pivotal for the future of insurance.

What is Parametric Insurance?

Taking the traditional travel insurance model as an example; something bad happens on a trip, the Insured has to sort out the issue and then provide proof to the Insurer that the claim is valid. This can take weeks and then the insured gets a cheque in the post possibly six weeks later. Not a great experience for the traveller.

A parametric example would be around flight delay or cancellation. The flight is tracked proactively and before the Insured knows something has gone wrong the claim is paid and they are informed. This immediate pay out then allows Insurers to sort out the problem in real-time e.g. flight rebooking, cash pay outs or lounge access.

Parametric Insurance provides cover for areas that aren’t covered or are often excluded by indemnity style policies. Compensation is provided when an event occurs rather than on the loss experience. The specifics of the parameters and reimbursement values will be determined before the cover starts. The insured doesn’t have to provide proof or observe a lengthy claims process and the insurer doesn’t need to spend resource and money on assessing claims – the data does all the hard work for everyone.

Examples of parametric insurance types include:

  • Protection against natural disasters; earthquakes, cyclones, hurricanes supported by measured weather data across a specific period such as Blink Interruption.
  • Protection for farmers’ crops. For example, if air pollution, drought conditions or particular wind speeds result in damage to crops again supported by measured weather data across a specific period.
  • Protection against extremely cold weather. For example, an energy provider could give automatic support to vulnerable customers where they have secured cover on the occurrence of an extended spell of freezing temperatures across a specific period.
  • Flight disruption cover for when a flight is delayed or cancelled, such as the Blink Travel disruption solution.

Why is this type of insurance becoming so popular and why now?

Parametric Insurance isn’t an entirely new concept but with data becoming ‘big’, more accurate and trusted by consumers and businesses, Parametric Insurance solutions to a number of scenarios that would have previously been inaccessible can now be realised. It’s also becoming more commonplace to provide customers with non-cash benefits such as airport lounge access, ride-hailing credits, cinema tickets etc which are easier to provide than establishing the value of compensation in cash.

With customers now coming to expect more from their products and services, insurance providers need to keep up with the demand for fast and intuitive solutions to customer problems. The combination of data, mobile tech and AI means that insurers are able to provide innovative and progressive customer experiences. Not only does this benefit the customer but also provides Insurers with integrated digital platforms that enable faster, cheaper and more scalable solutions and communication methods.

What are the benefits?

It’s essential to consider that for the customer, it’s possible to deliver an enhanced customer experience by:

  • providing immediate solutions
  • removing the regular time-lag in the claims process
  • reducing hassle and frustrations
  • saving people precious time and energy
  • The automated timeframe for resolution is trackable and rapid.

For Insurers:

  • No claims forms are required
  • No receipts are required to be retained or sent to an insurer
  • No ‘people’ interaction is required, saving significant overhead and operational costs
  • Additional financial and time/implementation savings can be realised, saving in-house development time and financial investment.
  • Solutions can be made market-ready, delivering efficiencies and enhancing customer satisfaction ratings in three months for standard implementations.

How soon will it become commonplace?

Parametric insurance is already here – flight disruption services from Blink are already supporting hundreds of thousands of customers worldwide. It is becoming increasingly popular and other insurance categories are quickly taking note and following suit. The potential for applying Parametric Insurance solutions to more cases are limitless. IoT devices that create connected homes with the use of smart devices, smart meters and digital assistants provide huge amounts of data that can inform a multitude of solution-based parametric insurance services. For example, an insured IOT-supported domestic appliance becomes faulty, automatic fault code alerts can be issued to the Insurer triggering corrective action options such as service calls or immediate cash pay out to the owner’s bank account.

Furthermore, the change in customer attitudes towards insurance is changing at an increasingly rapid rate which is driving change to insurance products. Insurers are grappling with challenges that range from striving to lead transformative change in the sector to merely keeping up with its pace and the growing market expectation. Some Insurers have taken the strategic decision to invest in-house to varying degrees of success and some notable failures. More Insurers are realising that they are unable to create solutions themselves and are turning to proven, agile, expert Insurtech specialists for their parametric insurance products to give them a leading edge.

We are starting to progress our understanding of the opportunities mobile tech and the IoT create (and have been for several years) and how insurance can make the most of big data that is readily available from them. While Parametric Insurance is becoming a sure way to utilise data to innovate the insurance industry, parametric solutions are not designed to replace traditional insurance policies. Used effectively, Parametric Insurance solutions can complement indemnity style policies and fill in the gaps that traditional policies have.

The Blink Parametric platform can enhance an existing insurance product with the capabilities it provides. With the Blink travel solution existing partners can add real value to their core travel insurance product and deliver an innovative customer experience that provides a tangible fix to flight disruption in real time. The technology sits in the background while Insurers retain control and access to customer data. Blink Interruption continually monitors national weather systems and provides liquidity to small and medium-sized businesses in the immediate aftermath of an insured event such as a hurricane.

We believe that the future of insurance will be one where parametric insurance will become an indispensable component of any product.

About Blink

Blink designs data-driven travel disruption insurance solutions and parametric insurance product innovation, transforming clients’ complex offerings into superior service experiences with simple, intuitive, online products in sectors such as Travel, Climate, Energy and IoT.

Blink uses cloud based, microservices and globally scalable technical architecture driven by an innovative API systems platform allowing for complex architecture to be filtered into simple processes, that are agile, adaptable and fully customised.

Based in Cork, Ireland, Blink was acquired by CPP Group Plc in 2017. It made TheINSURTECH100 in 2019 and 2020, an annual list of the worlds’ most innovative InsurTech companies and has experienced significant growth since it’s inception, with insurance partners throughout Europe, Asia and North America. For further information visit