Blink Parametric’s new Hurricane Non-Damage Business Interruption solution, developed in the Lloyd’s Lab, is aiming to cut waiting times for payouts from months to days.
It’s the latest product from a company that has emerged as a leader in parametric solutions through identifying the right data and an innovative technology platform.
CEO and Co-founder Paul Prendergast joins Matthew to discuss his experience of the Lloyd’s Lab, the benefits of parametric solutions and some great advice on growing a successful company.
Talking points include:
- Making parametric solutions work for underwriters
- Distribution and the route to market
- Establishing partnerships with insurers
- Building trust between customers and insurers
- Opportunities in new asset classes
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Parametric, payments and protection – Podcast 113 highlights
Matthew: How did you start working in insurance? You were doing something very different with mobile phones previously?
Paul: It was a mobile device security start-up which wrapped technology around what big insurance companies were doing. It was fascinating meeting people who were managing 300-400 million euros worth of mobile phone insurance. We could see the problems they had.
When we started Blink, we focused on the underwriters first. If they and the regulator were comfortable with the product, then the outcome would be a great customer experience. We reached out to Munich Re Digital Partners and were the first insurtech in the FCA sandbox programme.
Building innovation capabilities with Munich Re was hugely important for us and there were others as well. We saw the sands shifting and decided it was the right time to launch a parametric type product.
Matthew: The temptation if you knew phones would have been to stay within that area. What attracted you to flight cancellation insurance?
Paul: It was all about the data. We wanted to build a parametric platform and have a simple product on top. There was lots of great flight data available that insurance companies used for other purposes and we knew that they trusted it. Our idea seemed very straightforward and it was a no-brainer for us to do it.
Matthew: What was it that allowed you to move so quickly and go to market with a real proposition?
Paul: We’ve been doing tech start-ups for 20 years and learned a lot along that journey. We certainly made mistakes in the past. It’s very easy for people to get caught up in what they think is important in a start-up, as opposed to what’s actually important.
Our experience has certainly helped us, and we’d worked with big insurers in previous businesses. We’re quick learners because we have to be.
Matthew: How did that flight cancellation product work, and why did you choose a parametric product right from the start?
Paul: We could see the difficulties underwriters had with new products. Our view was technology could remove some of the cost of launching new products or remove the need for third-party administrators (TPAs) or human intervention. We felt using data to build a great experience for underwriters would lead to a great experience for the insured party.
Flight cancellation is very simple. We track cancelled flights, offer a customer alternatives with other airlines, book and pay for it and get the customer on their way. Insurance isn’t only about getting customers cash quickly, but about resolving problems in real-time. That’s what parametric can do. When an insurance company reaches out to the customer, it just blows their mind.
Matthew: What is it about parametric that makes it easier for underwriters to underwrite new products?
Paul: They’re using historical data in a lot of cases. Looking at our new product, people trust hurricane data because it’s been around for a long time and there are lots of experts in the natural catastrophe (Nat Cat) space.
Good flight data goes back 20 years and we can provide cancellation data by route, by month and by airline. The data is strong, and actuaries and underwriters can trust it. Underwriters get comfortable very quickly when they trust the data.
Matthew: Blink has relationships with Blue Cross in Canada, Manulife and Allianz. Coming into the industry from outside, how did you get attention from those major companies and do deals with them?
Paul: Firstly, by having a very clear value proposition and understanding. Our job at Blink is to help our partners innovate in the parametric space and we provide a technical platform to launch innovative products. We take a very narrow piece of the insurance world and try to be the best on a global scale.
The second thing is enterprise sales and companies have to be patient. There’s an 18-month lead time from a positive meeting. Companies need to have strong enterprise sales experience to set that up and not expect to show something shiny and sign a contract a month later. It’s simply not how it works.
Lots of people complain about that, I don’t. It’s the reason why insurance is still there to be disrupted and improved. If this was easy it would have been done 10-15 years ago. We know how to sell enterprise and it’s a very different skill set than going direct to consumers. For every 10 great conversations, we might close one deal.
Matthew: Your new product, Blink Interruption, is a hurricane Non-Damage Business Interruption parametric insurance solution developed in the Lloyd’s Lab. What was your experience of the Lab?
Paul: It’s been fantastic. Lloyd’s Lab has a really good reputation, we talked to people that had done it and thought it looked really good. Their secret sauce is their mentors who have been phenomenal. The hardest thing for us is working out what should the product be? What’s the market and what are the nuances around that? Typically, we learn through selling and that takes a long, long time. We accelerated probably 12 months of insight into this particular space into 10 weeks.
In terms of the product itself, business interruption is going through a tough time, but when we looked at that space, we thought parametric could help bring back some trust, particularly to small businesses where liquidity is key.
We integrated 11,500 banks and credit unions in the US with the hurricane data and built all those models. It was done at breakneck speed, but the platform is so strong and resilient because we’ve been doing this since 2016.
Matthew: How does it work in practice when a client wants to use the product?
Paul: Consider a chain of restaurants that is on the path of a hurricane. That’s Trigger 1. Trigger 2 is analysing the client’s banking records for the last 18 months and modelling where the business would have been if the hurricane didn’t hit. We then track whether the restaurants are closed, whether revenue is down 50% in week one, etc, and then make the first payout.
People are interested in how quickly we can build this product, and what a great experience it is for the insured party who usually waits six to 18 months to get a payout. In a lot of cases, the impact of a lack of liquidity is worse than the impact of the hurricane. We see ourselves as being that first responder, getting money in within days so the client’s business can stay alive. The product is also completely configurable subject to partner market requirements.
Matthew: There’s a question around moral hazards. How do you stop someone shutting their doors while the hurricane passes, going on holiday for two weeks and getting a payout?
Paul: There are a couple of other data points we’re plugging into. We’re plugging into 10-15 different accounting software packages and working with credit card providers to get external data. The real resolution is that we see this product being part of the bigger BI product where traditional claims processers and our insurance partners will get involved.
We can build this product to mitigate a lot of the concerns. For example, if the client’s gross margin is $10,000 a week, we’ll pay $7,000. We’re removing the motivation to just take two weeks holiday after a hurricane.
Matthew: Distribution is another challenge. What does the route to market look like?
Paul: It’s the same as we’ve been doing since 2016. Working with large insurers selling or launching business interruption products, that realise they need to go to market with something more customer-focused. They can only do that if it’s sustainable from a profitability point of view and that’s what we can offer.
There are reports that 30-40% of SMEs won’t be renewing their Business Interruption insurance this year, which is a huge drop. We believe that insurers who go to market with something innovative like this could change that metric substantially. That’s a route to market we’ve successfully done over the years and that’s what we’ll continue to do.
Matthew: Presumably, you’ve also got to find brokers as well to help distribute it?
Paul: In a lot of cases, the insurance parties have that broker channel established. We’re talking to one now with a massive broker channel, all looking for something new and interesting.
Most insurance companies have a great brand, great distribution, and they understand the risks. The bit they’re missing is the product innovation piece. The ability to move quickly and provide a product that they can tweak in a matter of weeks, not six to 12 months.
Matthew: Beazley has been supporting you on this product. What’s does your partnership with them involve?
Paul: It’s about the Blink platform and working together to build the next generation of products. There are lots of opportunities and we always say that we’re peril agnostic. It just happened to be hurricane this time, but it could be flood, earthquake, cyber, reputational damage.
Launching this latest product showed the market how quickly we can innovate and build, and we’re thrilled to be working with Beazley.
Matthew: There’s potential for covering other perils. Are you looking to get it right for hurricanes before moving into new areas?
Paul: We’re fascinated by some new asset classes. As better data comes out, things like IP will be very interesting. When we looked at BI and Non-Damage with hurricane, there’s a huge protection gap in the States right now and that’s our initial focus for the next six to nine months.
We’re always looking at what’s going to be the next interesting product. Intangibles will be fascinating but I’m not 100% sure that the data is absolutely rock solid. If any underwriter out there disagrees, give us a call and we’ll start building the product.
Matthew: Parametric products have been around for decades but haven’t yet taken off. Why is that?
Paul: It’s something we talk about a lot with our partners. The fear from an underwriter’s point of view is that they wake up and a huge payout has happened, but nobody checked it first. For me, the big thing is reducing the risk for the underwriter, which we can do by validating the way we look at this.
If there was a Covid-19 lockdown in London and every company got a payout because it was parametric, that’s too blunt a tool for that kind of payout. A percentage of businesses have been impacted badly, but a large percentage have just got on with it. We only want to give payouts to the people who’ve been impacted.
That’s what open banking and real-time financial analysis can do. As more data points in the validation side of things emerge, as opposed to just the trigger, it will make parametric or automated indemnity much more palatable for underwriters.
Matthew: What is your one key bit of advice for people starting a company, or in early stages?
Paul: Identify a segment of the market and look at it globally. Don’t try to be number one in Ireland or Belgium, pick a piece that the company can be the best at. Our job is to be the best at this piece of the parametric space.
That would be the number one thing, validate that as much as possible. Don’t be that person that builds something and six years in, nobody’s bought it. Validate as early as possible and talk to people. There are lots of people who will be happy to talk, and if they all don’t like the idea, maybe it’s time to reassess?
Matthew: You’ve been a great friend to InsTech London. What was it that gave you the motivation to sign Blink up as a corporate member?
Paul: InsTech London is just incredible. We’ve known yourself and Robin since the pre-Blink days and it’s great to have seen it grow from London to global. You talk to people about all sorts of interesting global deals and bring together fantastic founders from the US, Israel, and all over Europe. There’s a real international focus.
It’s great to see large insurance companies getting involved with InsTech London as well. They’ve realised the need to partner with innovators, so that’s incredible. The podcasts are fantastic, I listen all the time and there’s some great information in there.
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