Due to their Atlantic location, countries in the Caribbean are at huge risk of natural disasters (most prominently hurricanes), that lead to significant physical and economic consequences. So as an islander facing these potential seismic setbacks, what are your options for coverage?
Each year a huge amount of investment goes into infrastructure and physical preparations in the event of a hurricane and the subsequent flooding risks. For example: the construction of sea walls, planting mangroves to act as natural barriers against sea waves and improving the structures and foundations of new and existing buildings in vulnerable regions. Though effective, and the first port of call, there is something else that helps a society recover from the long term effects of devastation… insurance.
That word often makes people’s toes curl. Insurance policies are shrouded with distrust and total confusion. Have you ever faced silly excess charges that make your initial insurance payment seem completely pointless? Or even had the nasty feeling that an insurance provider is doing everything they can to not payout?
Further to this, in a previous blog we’ve touched upon the fact that the average cost of hurricane insurance is inaccessible to most people, with traditional hurricane insurance products requiring you to pay premiums against the value of your home. (Read more here.)
Therefore, a completely acceptable question you probably have for us at Yokahu is why are you different? How can I trust you to actually pay out? From the day we created Yokahu and established our mission to close the hurricane protection gap, we vowed to be completely transparent, honest and do everything we can to ensure our customers and community understand all aspects of our operations and what we are able to provide. So… let’s go!
At Yokahu, our insurance is based off of a parametric approach and in this blog, we want to explain that. When you typically think of insurance, you’re probably thinking of indemnity insurance. This traditional approach means your payout will be equivalent to the exact loss of damage you encountered. Your damage will be inspected after the event occurs and a payout awarded to help you rebuild something specific, for example a damaged part of your house or replacing your car. The process can take time as the damage needs to be considered before the release of money is permitted.
With parametric insurance, the payout is determined by the severity of the event at hand and therefore can be triggered automatically. So if you have a hurricane insurance policy, a hurricane hits your home and ticks the criteria you signed up for (e.g. wind speeds above 74mph), then a pre-agreed sum of money is released to you immediately that you can spend on whatever you like to aid your recovery. This could cover damage to your home or even be used for food, electricity, water and supplies for your family. You could even decide to keep the funds safe in case your job or financial situation is put in jeopardy due to the hurricane. At Yokahu, we have arranged these funds to be transferred to your mobile phone so you have easy access to it.
It’s as simple as that! No catch, no secret wording or trickery. But, as we said earlier, we vow to be open and honest with you, so what are the downsides to parametric hurricane insurance? There are few things to understand and be aware of…
Firstly because parametric insurance works off of an event trigger you may find that you do not receive a payout even though you have experienced a small amount of damage during the hurricane that hit your island. At Yokahu our payment trigger is 2 fold:
You must experience wind speeds of 74 mph or over at your exact location. This determines whether you are eligible for a payment.
How much that payment is is then determined by the strength of the storm. We rank storms into 5 colour categories based upon the Minimum Sea Level Pressure of the storm. You can read more about how and why we categorise storms in this way here.
Secondly, you may unfortunately be faced with excessive, ill fated damage and the pre-agreed sum of money that is released automatically to you may not be enough to cover all of this damage.
These are things to consider and weigh up but if you decide to go forward with us at Yokahu and look for an insurance quote, we will always ensure you fully understand the criteria that will trigger your automatic payment, to ensure you never feel sceptical or shortchanged by us.
We hope you can now see that the benefits of the parametric approach means that immediate help, resources and security can be available to you and your family in the event of a hurricane from the equivalent of just $10 USD a month. It can offer great peace of mind, especially as research suggests that climate change could be leading to stronger hurricanes.
And we are very optimistic for our future. The parametric insurance model means that the more people that sign up for policies, the more levels of cover we can offer and the further it can all go. And of course, the more people in a community that have this type of protection means the faster their community can rebuild and get back to normal. This is the level of resilience we are aiming for, but more on that to come…
Please get in touch with us with any questions or thoughts you may have. We’d be grateful to hear from you and always happy to help.
We’re not quite ready to launch yet, but our waiting list is now open. Sign up with your details here.