Parametric cover is becoming increasingly popular with consumers with its automated claims payouts based on a pre-agreed trigger. To enable Italian financial institutions to offer new and relevant parametric products, Aon partnered with tech experts, the regulator and banks to test the Smart Insurance Platform (SIP). During the six month trial, over 600 travel policies were bought to pay an amount if the rain fall was above a fixed threshold or if a flight was delayed by more than two hours.

It has been an exciting journey from the lab committee to the ‘sandbox’ testing period. We at Aon have advised on parametric solutions to support CeTIF (Research Center on Technology, Innovation, and Finance) at the Cattolica University of Milan, the main sponsor of the project. We also collaborated with:

• Reply for digital/IT solutions
• IVASS, the Italian insurance regulator
• Plus, Banca Mediolanum, Banca Popolare di Sondrio, UBI Banca, Cargeas, Mediolanum Assicurazioni, Filo Diretto Nobis and Gruppo Reale that were keen to bring new offerings to their customers

All roads lead to blockchain

Blockchain was chosen to deliver the platform to enable insurance companies, banks and other distributors to handle and issue parametric policies. This is due to its benefits of:

• digitization of underwriting to increase speed
• automatic claims payment
• reduced time to market for new products and distribution channels
• transparent information sharing amongst all parties with guaranteed immutability where the data cannot be changed once inputted

During the testing period, employees of the participating banks and insurers were invited to buy the travel insurance. In terms of customer experience, the whole process from platform access to final contract was delivered in just an average of eight minutes. The customers have praised the selling process and the clarity of the policy warranties Further, some 171 warranties were paid out of over 600 policies sold with 65% of claims paid in less than two days. Plus, there was a 60% saving in claims management costs.

What’s next?

The collaboration is now targeting the second half of 2020 to go live and transition from sandbox into reality.

Going forward, we will be integrating new products and offering commercial policies.

Please contact the authors if you’d like to take part in the initiative.

About the Authors

Alessio Izzo joined Aon’s Reinsurance Solutions in 2010 as Deputy Head of the Non Marine Facultative Division. Previously he worked at the RIB (Reinsurance International Broker) where he was first head of the Property and Casualty division, then head of the Non Marine Facultative department and finally head of the London branch. He is an Economics graduate.

Chiara Accomando graduated in Insurance Law, and has been in Aon's Reinsurance Solutions since 2014. She works in our Financial Lines Department (D&O – PI and Cyber) and is focused on Innovation and InsurTech.