Industry Voice: How parametric opens the door to a new age of insurance offerings
Daniel Green, Co-Founder and Chief Technology Officer of Faye, speaks to Michelle Royle about the power of parametric solutions, and the hassle-free benefits they give customers
We’re living in an age of instant gratification. Consumers expect that Deliveroo, Uber Eats and DoorDash will bring anything from a three-course gourmet meal to a single chocolate bar to their door, in minutes, at the click of a button.
With this now the expectation, every industry is working on such frictionless experiences to support as few clicks as possible: transport, travel, concert tickets (when you can find them).
Fintech is no different, with ‘buy now, pay later’ technologies allowing almost instant access to loans and credit. But insurance suffers from the need to accurately assess damage in instances such as claims, and, depending on the processes and backlog of a company, this can take days to weeks (and sometimes months, due the back and forth legacy carriers are plagued with).
We agree on the exact trigger for a payment. From there, everything else is on autopilot
Why parametric is the solution
Parametric insurance solutions don’t suffer from this. Why? Because we agree on the exact trigger for a payment. From there, everything else is on autopilot.
Here are some examples in which parametric solutions can cover important inconveniences that result in a delighted end user:
• Paid for a lift pass but there wasn’t enough snow to take advantage of it? The company you purchased from can give you the value of your lift pass back and some spending money for a day back at the lodge. In the past you might have needed to gather proof that the skiing was cancelled – maybe you’d need photographs of the closed runs, or screenshots of the website, or (gasp) a letter from the resort (good luck getting that quickly) as proof
• Same with the flight cancellation. We have apps on our phones that tell us flights were cancelled, it’s on their website, you got an email, it’s on the screens at your departing and arriving airport, how is it they all know but your insurance company isn’t sure? (Although you still might need a screenshot of your boarding pass – you can’t always ‘pinky promise’ you were on the flight)
• Went to the beach but it was raining? Weather guarantee providers can compensate you for your fuel costs, with some extra funds to cover a trip to the movies with some popcorn. Because today, we have weather satellites and data on current conditions at our fingertips – you shouldn’t need to prove something that is public knowledge and was clearly occurring
• Missed a connecting flight and are now stranded for hours at the airport? Your travel insurance provider – Faye included – could send you funds for the inconvenience that would cover some food, lounge access, and maybe even your Uber to your destination once you arrive, instead of the train
• Your flight was cancelled or delayed by a specific amount of hours or your luggage didn’t show up at your destination. When it comes to lost bags, for example, you often know if your bags have gone missing or won’t be there when you land as the airline can proactively warn you. Many times they will share the last time they located your bags – and if they can automatically send these updates, your travel insurance provider can use that as proof to reimburse you for the inconvenience and per your policy benefits.
Though we, as travel insurtechs, can’t fix the myriad of things that go wrong in-trip, we can take the sting out of them
Taking the sting out of travel chaos
Right now, most travel insurance providers have begun introducing such benefits in relation to flight delays and cancellations, with some starting to work with weather and luggage problems.
Over time, we will continue to learn what can most commonly go wrong when people travel and price out the inconvenience benefit fairly so that it automatically takes effect. And though we, as travel insurtechs, can’t fix the myriad of things that can and will go wrong in-trip, we can take the sting out of them, and bring a smile to travellers’ faces when they realise they can afford that pricey airport dinner for two – drinks included.
Payments made easy
At Faye specifically, we’ve added an extra layer of ease to our parametric solutions. We send reimbursements directly to users’ phones via our Faye Wallet feature. We do so for common travel inconveniences – think delayed or cancelled flights, lost or delayed luggage, missed connections and more – as well as on approved claims.
Each Faye traveller can access the Faye Wallet via the Faye app, then add it to their Apple or Google Wallet. From there, they can tap and pay with the funds that were automatically sent to them after they experienced a travel failure. No waiting for a cheque in the mail. For those not keen on using this fintech feature, no worries: via Faye Wallet, travellers can transfer funds directly into their bank account.
Wedding saved
Thanks to Faye Wallet, our team was able to save Jeremy and Adam’s wedding gone wrong, when they became stranded in New York on their way to get married in Puerto Rico. As spelled out in an article for NerdWallet, here is how it worked:
• For the cancelled flight, the ‘trip inconveniences and snafus’ component of their plan granted the couple US$200 each ($400 total) when they were stranded, covering a last-minute hotel in New York. They were also able to claim up to $300 per person, per day ($600 total) under the trip delay component of their policy
• Their insurer sent the money through what it calls Faye Wallet, which works via Apple Pay and Google Pay. The digital debit-style card is intended to cover purchases that most travel insurance companies would require travellers to pay out of pocket for later reimbursement. Because the couple had packed for Puerto Rico, they needed to purchase warmer clothing for the much cooler temperatures in New York
• After spending the following full day in New York, they expected to board a Puerto Rico-bound flight – only to have that one delayed, then cancelled too. Because they had another cancelled flight, their travel insurance policy allowed for an additional $200 per person payment to their Faye Wallet. It also sent another $300 per person in trip delay coverage
• In addition, their Puerto Rico hotel was then deemed uninhabitable
• A Faye policy that was about $300 was able to provide the couple with about $3,000 in reimbursements and cover much of an impromptu New York extended layover.
Thank goodness our team was able to help them tie the knot – and even though it was in Central Park and not Puerto Rico, it was still definitely a trip to remember.