This UK startup has just received further funding. The idea is simple: the insured (a householder or small business) has a sensor fitted to a wall. The height of the sensor above the ground determines how much premium is payable. And if it detects that flooding has reached a specified depth then it automatically triggers a fixed payment, bypassing the need for a claim or a loss adjustment.
Flood insurance has low penetration in many countries, and might not be available in some vulnerable areas. Solutions like these might be a viable option for those who can live with the "basis risk" (in particular the risk that a damaging flood might fall short of the depth required for a payout).
Looking at natural hazards more generally, we can expect to see more innovative insurance solutions that make use of technology such as IoT and satellite data. Other examples are Assured Risk Cover in Florida (parametric wind insurance) and Jumpstart Recovery in California (soon to offer parametric earthquake cover).
The ‘event-based’ FloodFlash policy pays a fixed sum directly to the policy holder when a breach against a pre-determined trigger flood level occurs, also known as parametric insurance. The in-house water sensor detects if the pre-set flood level has been breached feeding this information back to the FloodFlash.