FloodFlash is an MGA offering a parametric flood insurance product.
The business recently announced a £1.9m seed investment round from investors including Pentech Ventures (investors in Impact 25 member Digital Fineprint), InsurTech Gateway (the InsurTech incubator created by VC firm Hambro Perks) and LocalGlobe (investors in Impact 25 Member Zego).
FloodFlash provides customers with a proprietary sensor to record water depth at the property and informs the company when water has reached a certain level. At that point, the company pays out a cash “settlement”. There is no need for a claims service; capacity is provided by Everest Re.
FloodFlash is using the lion’s share of the investment round to accelerate the development of the sensors and move forwards with a nationwide launch. The company is initially targeting SMEs as they are ineligible for Flood Re-backed policies. Co-founder Adam Rimmer tells us that up to 1 million businesses could benefit from the FloodFlash product across the United Kingdom.
FloodFlash will soft-launch via brokers later this year. The FloodFlash proposition is complementary to existing property policies, resolving situations where flood cover is excluded or extreme deductibles are applied.
Keen to ensure a geographical spread of customers, the business is, for example, working with new housing developers on floodplains (for whom policies also can’t be ceded to Flood Re) to build sensors into their properties, and with agricultural customers, another hard to insure group.
THE OXBOW PARTNERS VIEW
There are two interesting aspects of the FloodFlash proposition.
First of all, we see huge potential in parametric insurance. A reduction in the cost of devices, greater connectivity and advances with data analytics all make parametric products more feasible. It would be reasonable to say that parametrics is an under-discussed consequence of the current data revolution. It should be seen as part of a suite of developments that includes IoT, automation, efficiency etc.
But we also think that parametric insurance is interesting from a customer perspective. We argued in a 2016 blog that there is much to be said for certainty in the customer experience: would you rather have a certain and immediate £10,000 if your bathroom pipe bursts, or a range from £8,000 to £12,000 that requires a visit from a loss adjuster and multiple calls with the insurer? We think that in many – but not all – cases, certainty trumps indemnity.
Stripping back the insurer
One of the ways that FloodFlash is able to offer flood insurance where others cannot is through its low cost operating model. It has no need for a claims function in particular.
This makes us think of Laka, another InsurTech, which is a ‘digital mutual’. Its model is unique because members fund claims after the event. This means that Laka has no need for actuaries and reserving analysts for example, reducing its overheads and the cost to customers.
The similarity between the two models is using technology to fundamentally rethink the insurance proposition. Do insurers and insurance propositions need to look like they did ten years ago? The answer – if these models work – is “not necessarily”.