Parametric Flood Insurance: What is it and can it help your business?
Flooding has always occurred in the UK, but the risk it poses to both homes and businesses is on the rise.
According to the State of the UK Climate report, the UK is getting wetter, with the years 2011-2020 being 9% wetter than in the period from 1961-1990. And with climate change continuing to gather pace, UK climate change projections estimate that the average daily rainfall during an English winter could rise by 41% by 2050.
This would have an undeniably adverse effect on communities, businesses and the infrastructure of the country. Indeed, data put together by the Irish location intelligence solution firm Gamma revealed that more than 3 million homes in the UK could be flooded by 2050.
With flood risks likely to intensify over the next few years, pressure will continue to mount on insurance companies to provide better solutions for businesses. But traditional Flood Insurance may not be able to meet this demand. As businesses make claims for flood damage, their premiums will increase to reflect the insurers’ risks – or find insurers leaving the market because the claims risk is too high.
It must also be highlighted that traditional insurance requires time to evaluate damage and the costs, causing delays that could harm a business further.
But a new type of insurance could offer a practical solution. It is known as Parametric Flood Insurance – or FloodFlash Insurance.
What is Parametric Flood Insurance?
Parametric Flood Insurance provides cover based on predefined values.
Unlike traditional insurance, which stipulates that the level of damage and its value must be assessed after a flood, Parametric Flood Insurance will pay out as soon as an event happens, even if no damage is caused.
To do this, the insurer and the client agree to certain ‘trigger’ levels. This could be the height of river water, the amount of rainfall, or some other measurable factor. They then agree a settlement sum that will be paid out if this threshold is reached. For instance, if river water reaches 1 metre above the ground level of a commercial building, the insurer will pay out a pre-agreed sum, which can be spent in any way the client wishes.
In order to do this, the insurer will attach fine-tuned sensors to the client’s property. When the sensors register a flood, the data is automatically sent to the insurer, who can then arrange payment
What are the benefits of Parametric Flood Insurance?
Opting for Parametric Flood Insurance can offer businesses and individuals the following benefits:
- The need for loss adjustment is removed as payments are automatically made if the policy is triggered.
- The process is much faster than traditional insurance settlements.
- The claim funds can be spent on whatever the business or individual wishes, whether that is replacing stock, paying for clean-up or implementing new flood protection measures.
- The insurance can adapt to emerging risks in real-time to give better protection.
- You are in control – you can set the type and level of triggers and the size of the pay-outs with the insurer.
Find out more about flooding protection
If your business is at risk of flooding, get in touch with us to discuss the options available – including Parametric Flood Insurance – today!
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