Indemnity

Henry Gale, research analyst at InsTech, looks at the benefits of parametrics and how it can complement indemnity insurance - and how a new hybrid policy.

In theory, when integrated correctly, a combined insurance product can offer the best of both to the policyholder – who has comprehensive coverage whilst enjoying faster pay-outs – and the best of both to the insurer, which sells more indemnity and parametric insurance. Parametric products need to be simple and credible, whether standalone or bundled with indemnity insurance. Although more brokers and risk managers are becoming familiar with parametric for some perils, it remains important for parametric policies to be as easy to understand as possible. Skyline Partners’ parametric heat stress product for the dairy industry was launched in France in 2021 as an embedded insurance product with the purchase of agricultural services from agritech company ITK. Our recent interview with Dario is available to read on the [InsTech London website](https://www.instech.london/insight/member-spotlight-s%C3%BAper-dario-luna). It is possible, but not yet proven, that extending the principle of combined parametric and indemnity policies could help solve this problem. Since extreme temperature rarely causes physical damage, the parametric trigger in Vave’s policy relates to a peril which would not be covered by a standard indemnity policy (an ‘add-on’ as discussed above). Parametric insurance is more easily scaled when included within comprehensive policies, rather than being sold as a separate policy, according to Vave’s Managing Director Marek Shafer. Vave, which already sells homeowners’ property insurance, plans to launch its commercial property insurance product in early 2022. Descartes is a managing general agent, an organisation that underwrites insurance policies without holding capital ( [fully defined here](https://www.instech.london/insight/mgas-fast-track-insurance-innovation)), with Generali as its lead insurance capacity provider. [Mastercard](https://www.instech.london/members/mastercard), told us, “Small and medium sized businesses often fail after catastrophes because they depend upon regular income to survive. Traditional insurance policies have gaps in coverage from limits, deductibles and exclusions.