This is the second half of a significant update to the FloodFlash broker portal. If you want to recap on how we got to this point, check out part one which is about changes we made to the quote form here.
FloodFlash smart quote is a new way to get the most out of our award-winning insurance – and it’s available now for all FloodFlash brokers. It represents a step-change in how parametric insurance can work for the mass market. Each quote gives brokers and clients access to insights that lead to better decisions on the parametric triggers for their policy.
Here’s how it works. We take the inputs that brokers submit on behalf of their clients, and produce a tailored quote. The quote includes trigger depths and payout values based on the client’s specific needs, as well as insights on how we arrived at those values.
The smart quote configuration shows the trigger depths, payout values and premium based on expert calculations carried out within the portal.
The insights section sits below the triggers. Each insight shows how the portal arrived at the detail contained in the smart quote. We plan to add more insights over time – so quotes can continue getting smarter.
Since launching in 2019, we have confirmed our belief that brokers and their clients are ready for parametric insurance. In fact, research we carried out as part of the 2022 Commercial Risk Report suggests that insurance buyers are positive about the impact technology can have on insurance products and premiums.
Every new insurance product has advantages as well as challenges. Our unique brand of parametric cover is no different. Simple policies, lightning-fast claims and real flexibility in how clients can use their payout are three big reasons that people love FloodFlash. We learned that one of the challenges came when selecting triggers.
Brokers and clients that are new to parametric cover needed more support when choosing trigger depths and payout values. That’s what lead us to the problem statement (you may recognise it from part 1):
‘I’m a broker trying to provide my client with FloodFlash cover but I am unsure how to help them choose their triggers because they haven’t experienced a flood before.’The problem statement we used to explore solutions to the challenge around setting triggers
If we provide the right help at the quote stage, then we can make FloodFlash attractive not just to early adopters, but all those brokers and businesses that struggle to cover their risks.
In order to make sure that we had the best solution for our problem statement, the FloodFlash product team sprang into action. With support from across the business, their task was to develop prototypes to test different solutions with real clients and brokers.
During the prototyping process, three strong options emerged. They were:
The product and development teams joined forces to produce functional examples and test each one. This process means that we can show research participants detailed ideas, without building the full functionality and losing valuable time and resource. Armed with detailed prototypes, we got testing.
We interviewed FloodFlash brokers as they interacted with each prototype, asking which features they liked, and which they didn’t. In the end, the Rule of Thumb (FloodFlash smart quote) prototype won by a landslide.
[It’s worth noting that this doesn’t mean that we won’t be going ahead with the others. We received some very interesting notes for the other prototypes which we will take forward for the future. In the short term at least, we knew what we needed to concentrate on.]
Every day people simplify complex or difficult decisions. Consider when buying a wedding ring. The simple rule of thumb is that the proposer should spend around three months salary. With pensions, it’s generally advised to save 10% of your salary if you start saving in your 20s, 15% if you start in your 30s and so on. Both of these are significant, and financially important decisions.
The rules that society has invented helps people navigate these tough decisions quickly and easily. Smart quote is essentially a more detailed rule of thumb, just like those described above (the working title for smart quote was ‘rule of thumb’). If we can apply logic based client inputs, then we can help them arrive at a trigger configuration.
At this point, we needed the expert help from the FloodFlash analytics team. FloodFlash Analyst Henry headed up the effort to design the logic that would help us arrive at smarter quotes for our clients. Initial exploration lead to some interesting, and very simple, options. Early iterations of FloodFlash smart quote used simple rules such as:
Each of these options had merits, but they didn’t match the complexity of businesses in the real world, and so we continued the exploration.
If smart quote was to be successful, we needed to make complex calculations based on a myriad of factors that would work for diverse businesses. After all, two neighbouring properties can (and do) have vastly different trigger configurations. This is where damage curves come in.
Damage curves (see examples below) depict damage as a proportion of replacement value for different classes of building. They typically represent averages for entire countries or regions and are designed to help link flood-depth and losses together. 100% on the Y-axis would mean total replacement value for that coverage category. You’ll notice from the examples below that none of the lines reach much higher than 40% of value. That’s because flooding rarely destroys a property or its contents completely.
Henry began researching the impact that flooding has on different types of building using data from many different sources. The most important of which was the Flood Hazard Research Centre at Middlesex University’s: ‘Flood and Coastal Erosion Risk Management – A Manual for Economic Appraisal’, otherwise referred to as ‘The Multi-Coloured Manual’.
Armed with the manual, Henry established the impact that different property factors would have on potential losses. What would cost more to restore, brick walls or wood? Do static caravans or houses incur worse losses? What impact does a basement have? The answer to these questions and a thousand more meant that Henry could start to build the complex calculations that would form our very own ‘rule(s) of thumb(s)’.
“Every single property experiences flooding differently. Costs can vary hugely, even between neighbouring businesses. The rules that we have created take these differences into account. The portal now produces smart quotes with insights that guide clients towards cover that suits them best.”FloodFlash Analyst Henry Bellwood
A smart quote may not be perfect in many cases, but it’s a good starting point. The research and data used in the calculator is based on UK averages. That means that smart quotes are perfect on paper. But everyone knows that there is a big difference to floods that happen on paper and those that happen at real businesses.
Each smart quote is designed to show a client a starting point. We share the insight behind the calculation then they are free to make adjustments based on what they know about their business. That’s why the insights are so important.
“The thing with statistical models is that they will always be wrong for any one instance. However, there’s still a huge benefit in using them if we can understand why they are wrong in each instance. The ‘Insights’ provide brokers with the ‘why’, helping them tweak the configuration accordingly.
“Brokers and their clients will always know more about their property than any model could. Smart quote uses the science behind the models to give brokers a head-start in their efforts to get the best cover for their clients.”FloodFlash Analyst Henry Bellwood
If a client says: “Hold on. I keep my stock far higher than it says here…” then great! The broker can make tweaks to their configuration based on client feedback. The most important thing is that they have started with an insight, then added their own to arrive at a trigger configuration that works for them.
Smart quote represents a step change in how parametric insurance can work for the mass market – removing one of the key challenges to finding suitable cover. The best thing is, the quotes and the insights that come with them can only get better from here.
We plan to monitor the launch of FloodFlash smart quote very closely. Over time we will add to the insights available, and tweak smart quote based on feedback from brokers and clients. In the coming years we expect to learn even more about what cover people need. Smart quotes are only going to get smarter.
If you have any questions or feedback, please get in touch at email@example.com. Every message we receive helps us improve a little more each day.
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