Parametric insurance is a rising trend within the insurance industry, with GlobalData surveying showing that consumers are open to paying more for such policies. Meanwhile, Lockton has become the latest insurance player to embrace the concept, setting up a global parametric team with data scientists and analysts to help adopt it throughout the company.
Parametric insurance is where a pre-agreed measure is set; once it is reached, an automated payout is triggered. The most common example is water within houses or offices reaching a certain pre-determined level in a flood. This automated payment means policyholders receive the funds immediately, which can be essential in repairing and even reducing the damage.
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GlobalData’s 2024 Emerging Trends Insurance Consumer Survey found that 64.5% of global respondents would pay more for a parametric-type home insurance policy. However, the majority indicated they would only pay up to 5% more, which presents challenges for insurers seeking to offset the cost of implementing such technology. Meanwhile, just over a quarter of respondents stated they would not be willing to pay more.
Yet over a third of respondents indicated a willingness to pay over 5% more for a home insurance policy that pays out automatically. This is encouraging for insurers, as one of the issues with introducing technology into household insurance has been that the profit margins are not high enough for insurers to include it—even at a significant discount—and keep premiums competitive. As a top ten global insurance broker by premiums, Lockton’s decision to introduce parametric policies and establish a dedicated global team signals the industry’s growing commitment to this innovation. Our data shows customers are open to the concept, which offers convenience and peace of mind at a particularly desperate time. In addition, the ability of parametric technology to identify and sort problems quickly can benefit both insurers and policyholders.
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By GlobalData
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Lockton, Inc