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Custom Parametric Insurance Software
With 12 years of experience in insurance software development, ScienceSoft applies AI, big data, IoT, and other advanced technology to build robust and accurate solutions for index-based insurance.
The Essence of Parametric Insurance Software
Parametric insurance software helps automate the index-based insurance model, where payouts are fixed against particular peril indices (parameters) and issued automatically upon predefined risk events, not the actual loss incurred.
Parametric insurance solutions often rely on cloud, AI, IoT, big data, and blockchain to eliminate manual workflows across data intake, premium calculation, risk prediction, and payments. Such software offers centralized storage for parametric insurance policies and provides vast self-service options to drive high client satisfaction and boost the insurance teams’ productivity.
- Necessary integrations for index-based insurance systems:
- Business software: CRM, accounting software, business intelligence systems.
- Payment gateways of banks and non-bank payment processors (e.g., PayPal, Stripe).
- Customer interaction channels: email services, messaging services, etc.
- Risk-relevant data sources: satellite imagery, radar, GPS tracking, stationery asset tracking, computer vision, financial data management, and other systems of the insurer, third-party agencies, public authorities, and corporate customers.
- Implementation time: 9–15+ months for a custom parametric insurance solution.
- Development costs: $200,000–$1,000,000+, depending on the solution’s complexity. Use our free calculator to estimate the cost for your case.
- Payback period: <12 months.
Why Build Custom Parametric Insurance Software
The global parametric insurance market is projected to reach $29.3 billion by 2031, growing at a CAGR of 9.9%. Mature insurance carriers and insurtech startups widely adopt this model thanks to its simplicity, better risk predictability, and lower operational efforts. Still, there are few market-available software systems that can fully capitalize on its benefits.
If you want to seamlessly integrate the index-based model into your insurance portfolio, building a custom software module for it would be the most feasible option. Custom parametric insurance software offers maximal functional flexibility, meaning you can adapt it to your existing workflows, policies, and legacy systems. Custom solutions are also built to comply with all insurance regulations you are subject to — a common pain point for out-of-the-box software.
Key Features to Look for in Parametric Insurance Software
At ScienceSoft, we build flexible and scalable insurance software with unique functionality tailored to the needs of each client. Below, our experts share a comprehensive list of features that would form the core of a robust parametric insurance system.
Support for diverse parametric insurance types
- Property and life insurance against natural disasters and extreme weather conditions: earthquake, wind, flood, hail, drought, wildfire, tropical cyclone, etc.
- Agriculture insurance (crop and livestock insurance, yield insurance) against weather and climate risks, insufficient production, and market price volatility.
- Business insurance against catastrophic events and business interruption: supply chain disruptions, cybersecurity breaches, power outage, etc.
- Travel insurance against flight delays and cancellations, luggage loss, and inappropriate weather conditions.
- Renewable energy project insurance against the lack or excess of solar radiation, rainfall, wind, etc.
Parametric insurance term management
- Setting up and updating payout triggers for various parametric insurance types:
- Cat-in-a-box triggers (based on the event severity in a predefined area, e.g., a magnitude 4 earthquake within 50 miles of the insured facility)
- Index-based triggers (based on the level of a chosen index, e.g., if the expected crop yield in the region falls below the predefined level).
- Configurable terms for policy duration and availability in particular regions.
- Rule-based or AI-powered analysis of historical loss and payout data and suggestions on the optimal coverage amounts (for particular peril indices, customer segments, etc.).
- (optional) Parametric insurance term formalization in the blockchain smart contracts for the fully automated and traceable claim settlement.
Parametric insurance pricing
- Automated calculation of parametric insurance prices for various products and customer segments based on custom formulas.
- Scenario modeling and profitability analysis for various parametric insurance pricing strategies.
- Prescriptions on the optimal parametric insurance prices based on the analysis of demand, price elasticity, claim costs, risks, and profitability.
- Calculating personalized premiums for custom products based on the requested policy type, duration, coverage limit, client’s location, etc.
Parametric insurance application processing
- Real-time capture of parametric insurance applications from multiple channels: a client-facing app, an agent portal, email, messaging apps, etc.
- Support for various insurance application formats (PDF, XML, etc.).
- Automated data extraction and validation using OCR, RPA, and AI technologies.
- Flagging the applications that contain missing, inaccurate, or contradictory data and automatically routing them for manual check.
- Geography-based KYC/AML verification for new customers.
- Automated billing for valid insurance applications.
Policy administration
- Customizable templates for various types of parametric insurance policies: business insurance, travel insurance, crop insurance, etc.
- Automated policy generation and submission to customers triggered by receiving a predefined premium payment.
- Automated policy updating with new customer data, coverage, and premium terms.
- Rule-based policy renewal or cancellation.
- Centralized storage for all issued parametric insurance policies.
Risk evaluation and control
- Automated capture and validation of risk-relevant data depending on insurance types:
- Weather data.
- Geospatial data.
- Geopolitical data.
- Telematics.
- Trade market indices.
- Flight data.
- Traffic data.
- Data breach reports, and more.
- AI-supported calculation of the probability of predefined payout triggering events.
- Real-time monitoring of exposure indices across various perils and locations.
- Alerts on the event severity levels reaching the predefined values.
Claim payout automation
- Automated payouts triggered by the pre-specified events, with no need for manual claim submission.
- (For hybrid parametric insurance) Automated collection and processing of the proofs of loss (e.g., images and videos of the damaged property and injuries) provided by policyholders.
- Customizable payout schemes, including:
- Double-trigger payout schemes (partial payouts for the events of lower severity), e.g., X% of a pre-agreed limit is paid when daily rainfall exceeds 10 mm (first trigger) over five non-consecutive days (second trigger).
- Staggered payout schemes (progressively higher payouts for the events of increasing severity), e.g., +Y% of a pre-agreed limit is paid for every mm of cumulative precipitation above a predefined threshold.
- AI-based triaging of claim payouts based on the analysis of event time and severity, predicted damage volume, etc.
- (for blockchain parametric insurance) Instant domestic and cross-border payouts in crypto.
- Automated calculation and tracking of parametric insurance metrics: sales, retention, claim settlement, financial performance, workforce productivity, etc.
- Customizable dashboards for various parametric insurance roles: agents, policy managers, risk analysts, etc.
- Automated reporting on the required parametric insurance KPIs.
- Forecasting of parametric insurance demand, total premiums written, and claim costs (by period, customer, product, region, etc.).
Customer self-service options
- Configurable self-registration forms for individual and corporate customers.
- Automated customer pre-qualification against the given requirements: age, location, etc.
- Automated premium payment processing via the connected payment gateways.
- Notifications to customers about the application status changes, successful payments, expiring documents, etc.
- AI-based chatbot to help customers solve operational, technical, and security issues.
Customer features:
- Managing and updating personal/business information.
- Template-based creation of parametric insurance applications.
- Paying premiums by a preferred payment method: bank transfer, card, digital wallet, direct carrier billing, etc.
- Uploading the proofs of loss and submitting them to the insurer.
- Full history of parametric insurance transactions.
- (optional) A self-service parametric insurance price calculator.
Security and compliance
- Permission-based access control.
- Multi-factor authentication, including biometric authentication.
- A complete audit trail of parametric insurance activities.
- AI-powered fraud detection.
- Data encryption.
- Compliance with FIO, NAIC, NICB, IFRS17, OFAC, CCPA, CPRA, SOC1 and SOC2, GDPR (for the EU), NYDFS (for NYC), IA and SAMA (for the KSA), and other relevant global and local regulations.
- (optional) Parametric insurance data hashing, timestamping, and recording in the immutable blockchain ledger.
What makes ScienceSoft different
We achieve project success no matter what
ScienceSoft does not pass mere project administration off as project management, which, unfortunately, often happens on the market. We practice real project management, achieving project success for our clients no matter what.