How Business Rules Engines Can Help Insurance Companies Improve Their Parametric Insurance Policies
Parametric insurance is a type of insurance policy that pays out a predetermined amount based on a specific event or set of conditions. Unlike traditional insurance policies, which are based on assessing the cost of damage or loss, parametric insurance policies are based on data-driven triggers. Parametric insurance products have several advantages over traditional policies.
First, they are easier to underwrite than traditional policies because they are based on quantifiable data. As a result, the risk assessment process is more objective and less error-prone. Second, they offer faster payouts to policyholders because there is no need for time-draining loss assessments.
Finally, parametric policies insure against risks that are not generally not covered by traditional insurance products. One of the most efficient ways of building, deploying, and managing insurance products is by connecting insurance software systems to business rules engines.
What are Business Rules Engines
A business rules engine is a pluggable piece of software that allows non-technical users to automate mission-critical processes in their organizations. It does so by building and managing business rules. Business rules are powerful “if-then” conditional statements that instruct software systems when to take certain decisions. In other words, they are a set of guidelines that define how an organization should operate. They can cover everything from how to calculate pricing to how to manage customer data.
Rules Engines and Parametric Insurance
Rules engines can play a critical role in helping insurance companies develop and manage parametric insurance policies. By immediately verifying whether certain conditions have been met, business rules engines can help insurers quickly and accurately determine when a policy should be triggered.
Weather Insurance
Hurricane insurance is a type of parametric insurance policy that is triggered when wind speeds reach a certain level. Many leading insurance providers use business rules engines to automate the payout process.
The business rules engine takes into account a variety of data sources, including weather forecasts, satellite images, and wind sensors, to determine when a policy should be triggered. This enables insurance companies to provide fast payouts to policyholders, without the need for time-consuming loss assessments.
Agricultural Insurance
Crop insurance is another type of parametric insurance policy that is becoming increasingly popular among farmers. These parametric products pay out if a specific event, such as a drought or flood, occurs.
Insurers use business rules engines in order to analyze a variety of data sources, including satellite images, weather forecasts, and soil moisture sensors, to determine when a policy should be triggered.
Summary
Parametric insurance policies offer a number of benefits to insurance companies, but they also pose a number of challenges. One of the biggest challenges is accurately determining when a policy should be triggered. Business rules engines can help insurers overcome this challenge by automating the decision-making process.
By taking into account a variety of data sources and applying a set of predefined rules, business rules engines can help insurers quickly and accurately determine when a policy should be triggered. This can lead to faster payouts to policyholders and more efficient underwriting processes.
As the use of parametric insurance policies continues to grow, it is likely that we will see more insurance companies turning to business rules engines to improve their processes and drive growth.
