Shared with the kind permission of The Insurer
Yokahu founder and CEO Tim McCosh caught up with ESG Insurer to discuss next steps in the parametric start-up’s efforts to provide cover for hurricane-exposed communities in the Caribbean.
One of the major challenges in providing hurricane insurance to at-risk communities in the Caribbean is that cover is unaffordable for the majority of people. Lloyd’s coverholder and insurtech start-up Yokahu has sought to remedy this challenge with the creation of a parametric-based product which allows people to select their own level of cover.
Partnering with Lloyd’s insurer Chaucer, the start-up has initially targeted four – Jamaica, US Virgin Islands, the Bahamas and St Lucia – and is using central pressure as the trigger for the policy to provide best correlation with the economic impact of an event.
McCosh, who has previous experience in developing parametric solutions for the Caribbean at both Meridian Risk Solutions and THB, said the first few months since launching Yokahu have been a “learning exercise” with a focus on building trust and positioning the brand.
“There are a number of ways in which this is innovative for the region,” he told ESG Insurer. “Most insurance in the Caribbean is still distributed in a traditional way, through visiting a broker and physically receiving quotes and signing a policy.”
“We have removed the need to visit a broker and operate through an app to operate on a mobile-first basis. The target for this policy is the middle class and above.
“The typical rate for hurricane cover in the Caribbean is just not affordable for most people – we have tried to design policies where people can select the level of cover they have and pick their premium.”
The use of parametric triggers takes away the costly and slow process of claims adjustment. “With our policies, payment should arrive the next day subject to how the customer chooses to receive it – we use PayPal at the moment, and we are looking at adding bank transfers as an additional option.”
One of the notable components of the policy is the use of central pressure rather than headline windspeeds as the trigger.
This was due to the difficulty in establishing accurate windspeeds at an insured’s precise location, with central pressure providing a more accurate measurement of economic impacts from an event.
“Pressure is more accurately measured than windspeed. When we compared headline windspeeds versus pressure, we found pressure was a 15 percent improvement on windspeeds in terms of the significance of economic impacts.”
McCosh said the use of pressure as the trigger favours both the insurer and the customer. “We will be paying more when they really need it during the worst storms,” he said.
Scaling up through education
Although the initiative is still in its early stages, McCosh said Yokahu is already beginning to investigate ways in which it can expand the product.
One of the key avenues the insurtech is exploring is ways in which the product can benefit the wider community. “In the Caribbean, it is probable that a hurricane will happen at some point – it is just a question of when,” he explained.
“Until now, there hasn’t been an opportunity for employers to offer a product such as this as part of their employee benefits.” By doing this, McCosh believes it won’t just be the employee who benefits. “It is likely that the whole community will suffer impacts in the event of a hurricane. By providing this benefit to employees, companies will help provide an injection of capital at the bottom of the economy, helping everything restart faster.
“As a result the hit to the economy is lessened, allowing that business to get back to recover as quickly as possible.
“Even if the business itself has seen limited impacts, by ensuring employees benefit they can help reduce the economic downturn in the aftermath of a hurricane and ensure that people keep spending money.”
McCosh believes it is through these types of partnerships that the product can ultimately be effective. He said Yokahu was currently actively reaching out to companies to establish these partnerships.
“We are actively reaching out to companies through connections at the moment to build these partnerships which we believe could help build resilience in those communities.
“We are still learning every day but it is rewarding – people want this cover and it is now about finding the right ways to deliver the product and build trust in the brand.”