Although we tend to think of emerging markets as underinsured,it may surprise you to know the United States also has a sizeableprotection gap in the difference between total economic losses andinsured losses. The problem is magnified by natural catastrophes.Windstorms and earthquakes can cause damage to a wide range ofassets that aren't insured, forcing people to pay for losses thataren't covered.

In developing nations, parametric insurance is helping close thegap by providing rapid payouts with minimal claims intervention.One such example is a business interruption coverage offered by MiCRO and Swiss Re inGuatemala. That model can be adapted in developed nations and isalready showing tremendous potential in places where extremeweather events are a statistical certainty.

Recognizing that parametric insurance has brought a level ofstability to developing economies, Assured Risk Cover, aninvestor-funded Silicon Valley-based startup, set out to design aparametric hurricane policy for the U.S. market. Whether it's alandslide in Guatemala or a hurricane in Florida, the emotionaltoll is the same: The first 24 to 48 hours after a catastrophe arestressful for residents. An effective way to help reduce the stress(emotional and financial) is to provide quick access to funds thatassist in covering what's excluded from a Homeowners policy.

How it works

For a small premium, a homeowner or renter can purchase a policywith limits of $1,000 to $15,000. The applicants provide their nameand address and choose a limit. If a hurricane strikes withinpre-established parameters and they suffer an economic loss, theycollect their payment within 24–48 hours after the end of the stormwith no claims adjustment hassle. They receive an electronicdeposit and can use the money to pay for such things as temporaryhousing, debris removal and repairs to uninsuredproperty. 

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