Parametric insurance and smart contracts to improve customer experience
Parametric insurance and smart contracts could help insurers offer customers better products and services, according to two new reports published by Lloyd’s today.
The smart contracts report, Triggering Innovation – How smart contracts bring insurance to life, has found they could be used to increase efficiency and add value for customers.
Smart contracts are contracts that are either totally or partially automated by computer code, reducing the time taken to get a policy to the customer and a claim paid. carry out various insurance processes such as risk placement, premium payment, warranty enforcement, and claims assessment and settlement. 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.
The parametric report, Triggering Innovation – Parametric insurance (only available to Lloyd’s market participants) identifies similar benefits. Parametric policies trigger a pre-defined level of claims payment quickly after pre-agreed parameters have been exceeded, such as an earthquake over a certain size. As policies are based on definitive information such as previous loss events and independently verified data, insurers have more scope to design products for risks that could otherwise be uninsurable or underinsured. The report also contains three case studies (available to everyone) that demonstrate how Lloyd’s parametric policies are helping agricultural producers in Europe, the UK and the US manage the risks to their businesses.
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.Trevor Maynard, Lloyd’s Head of Innovation
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.Caroline Dunn, Lloyd’s Head of Class of Business
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About the reports
Triggering Innovation: How smart contracts bring policies to life
Working with experts at the Centre for Commercial Law Studies at Queen Mary University, the report looks at how smart contracts can power efficiency and enhance the customer experience. The report showcases how smart contract solutions could be implemented across a range of products and explores the technology, design choices and legal and regulatory considerations insurers need to think about to start using smart contracts.
Triggering Innovation: Parametric insurance
The Lloyd’s Class of Business team has also produced an accompanying market insight report accessible exclusively to Lloyd’s managing agents and syndicates. Produced in collaboration with the School of Risk Management of St. John’s University, it provides a comprehensive insight into parametric insurance, including legal considerations, design features and product development in the Lloyd’s market.
Lloyd's is the world's only specialist insurance and reinsurance market, offering a unique concentration of expertise and talent, backed by strong financial ratings and international licences. It is often the first to insure new, unusual or complex risks, providing innovative insurance solutions for local, cross border and global risks. Its strength lies in the diversity and expertise of the brokers and managing agents working at Lloyd’s, supported by capital from across the world. In 2018, more than 90 syndicates are underwriting insurance and reinsurance at Lloyd's, covering all lines of business from more than 200 countries and territories worldwide. Lloyd's is regulated by the Prudential Regulatory Authority and Financial Conduct Authority.