Parametrics offer potential solution to BI pandemic cover

Parametric solutions may offer a better mass market business interruption pandemic solution to UK SMEs than traditional policies, although there are still challenges to overcome.

Yasha Kuruvilla, insurance analyst at GlobalData, said: “Given that only a minority of companies have cover against pandemics, the cost to insurers if the majority of businesses were covered would be exorbitant. This limits the efficacy of the traditional insurance model when dealing with pandemics.

“Parametric insurance could be a good starting point in navigating some of the insurance issues that have become apparent. Since payouts are based on a clear, measurable statistic that is agreed upon by both parties, there is no grey area regarding whether a claim should be paid or not.”

Some providers such as Machine Cover have already announced they are developing parametric products for this market. But on a note of caution, Kuruvilla added: “It is unlikely that one insurtech will be able to hold the required capital to successfully protect businesses against future pandemics.”

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