It offers financial protection against losses that are often hard, or even impossible, to get insurance for, except for in a nontraditional insurance structure. Traditional indemnity insurance, the kind we are all familiar with, pays out based on the cost of the loss incurred.
I think Parametric Insurance will become more popular in 2024, especially since there are increasingly more and more unpredictable weather and natural disaster events happening. Parametric Insurance will be common due to its ability to provide quick payouts based on predefined, measurable events rather than traditional loss assessment.
Why Insurance Agents Need to be Aware of Parametric Insurance:
Innovation and Market Demand:
Parametric insurance represents an innovative solution in the insurance industry. Being aware of emerging trends and meeting customer demands for novel, efficient products is crucial for insurance agents to stay competitive.
Quick Payouts:
Parametric insurance often provides faster claim payouts compared to traditional insurance. Agents need to understand and communicate this benefit to clients who value quick financial assistance in the event of a covered incident.
Predictable Triggers:
Predefined, objective parameters (such as weather data, seismic activity trigger or other measurable events), cause Parametric policies to be triggered. Insurance agents must understand these triggers to explain them clearly to clients and manage expectations.
Diverse Applications:
Parametric insurance can be applied to various industries, including agriculture, travel, and natural disaster protection. Agents need to be familiar with the diverse applications of parametric insurance to effectively target and serve specific client needs.
Risk Mitigation:
Specific risks are more precisely mitigated when Parametric insurance coverage is in place. Agents need to be knowledgeable about the types of risks that can be covered and how parametric policies align with clients’ risk management strategies.
How Insurance Agents Can Sell Parametric Insurance:
Education:
Agents should educate themselves thoroughly about parametric insurance, including its benefits, limitations, and potential use cases. This knowledge will enable them to communicate effectively with clients and address any concerns.
Identifying Client Needs:
Understand clients’ risk profiles and needs. Identify situations where parametric insurance might be a suitable solution. For example, businesses exposed to weather-related risks or supply chain disruptions may find parametric coverage appealing.
Customized Solutions:
Tailor parametric insurance solutions to fit clients’ specific requirements. Work closely with underwriters to design policies that align with clients’ risk tolerance and business objectives.
Communication Skills:
Clearly explain the concept of parametric insurance, its advantages, and how it differs from traditional coverage. Agents should be able to articulate the value proposition to clients in a straightforward manner.
Collaboration with Insurers:
Build strong relationships with insurers offering parametric products. Stay informed about new developments and product offerings. Collaborate with insurers to provide the best solutions for clients.
Integration with Technology:
Embrace technology to streamline the sales process. Utilize data analytics and digital tools to assess risks and provide clients with accurate and timely information about parametric coverage.
Regulatory Compliance:
Stay informed about regulatory changes related to parametric insurance. Ensure that sales practices align with legal requirements and industry standards.
Insurance agents need to be aware of parametric insurance due to its innovative nature and growing popularity. To sell parametric insurance effectively, agents should educate themselves, understand client needs, customize solutions, communicate clearly, and embrace technology.
With high deductibles and even higher hurricane deductibles, Parametric coverage may be your financial protector.
Author: Dick Wagner, Tactical Specialist
