target audience: TECH BUYER Publication date: Mar 2023 - Document type: IDC Innovators - Doc Document number: # US50446623
IDC Innovators: AI for Parametric Climate Insurance, 2023
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Abstract
IDC Innovators are emerging vendors with revenue <$100 million that have demonstrated either a groundbreaking business model or an innovative new technology — or both. This IDC Innovators study profiles five vendors in the AI for parametric climate insurance market: Understory, FloodBase, Arbol, Descartes Underwriting, and Kettle. Solutions offered by these companies add valuable insight for climate risk and allow users to develop a parametric insurance policy that fits their needs more directly than traditional insurance products.
AI for parametric climate insurance is an emerging industry with players both old and new. While the aims of this industry are largely aligned, there are large differences in the breadth of solutions and the scale of their deployment that has led to a wide range of capabilities between offerings. The two primary categories of specialized parametric climate insurers and wholistic parametric climate insurers are the starkest divide currently in this industry. Specialized offerings face challenges of maintaining growth within their specialization or choosing to expand, whereas the wholistic offerings face the challenge of ensuring the depth of their insights while maintaining broad coverage of a wide range of weather and climate potentials.
"Unlike traditional insurance, which compensates policyholders for actual losses incurred, parametric insurance automatically pays out a certain amount upon the occurrence of a predefined event such as a fire or storm," says Ritu Jyoti, group VP, Artificial Intelligence and Automation Research at IDC. "The AI-powered parametric model is disruptive and makes insurance more automated, data-driven, and transparent, with faster and more certain payouts."