Blockchain Parametric Insurer Otonomi Announces Lloyds Underwriter for Logistics Delay Coverage – Ledger Insights
Today, Brooklyn-based Otonomi, the blockchain parametric insurance startup that is also a managing general agent (MGA), said it has signed an agreement with Greenlight Innovation Syndicate 3456, a Lloyds underwriter to provide insurance coverage. That was the last step it needed to launch. Otonomi offers automatic cargo delay insurance starting with airfreight. Last year it raised $3.4 million in funding that included Greenlight Re Innovations as one of its backers.
The key to parametric insurance is removing the need to manually process claims, which radically reduces insurance costs and the time it takes to pay out claims. With Otonomi, it is expected to drop from 45 days to 45 minutes. The primary information needed to process a claim is the flight data available automatically.
Otonomi’s is not the first flight delay insurance, but it takes a very different approach to previous attempts. For example, in 2017, Axa launched fizzy, which used the public Ethereum blockchain to offer automated payouts to consumer travelers for flight delays. But the travel and airline industry was not so interested, and it did not gain traction.
In contrast, Otonomi’s offer is aimed at the supply chain sector. If a shipment of vaccines is delayed by 12 hours, the damage is significant. Instead of dealing with individual companies that ship packages, Otonomi targets freight forwarders and there are 118,000 of them in the US.
What is relatively unusual about Otonomi as a blockchain insurance company is that it does not try to cut out the middleman. Instead, it sells its insurance coverage through brokers such as RLI in the US. Otonomi’s CEO told us last year that the insurance offering is disruptive, but a disruptive distribution method was a step too far.
The challenge with parametric insurance is that people always try to game the system. Autonomy has a number of risk management processes, including blackout periods. For example, you cannot get cover at short notice if there is a storm forecast for tomorrow in the area. Parcel delay coverage is priced using a combination of regionality, seasonality, weather patterns, and departure and arrival points.
On a technical level, Otonomi has both public and permissioned blockchain solutions. Which one is used will depend on the region. The permissioned blockchain is Ethereum based using Kaleido’s offering. For the public blockchain version, it uses the Ethereum sidechain Polygon.
“At Otonomi, we are strengthening our footprint in uncharted territory in providing a complete overhaul of autonomous insurance, to address the issues in an industry crying out for innovation,” said Yann Barbarroux, CEO of Otonomi. “It’s a fantastic opportunity for logistics customers as they leverage aggressive technology and predictive analytics to raise critical capital and protect their liability exposure.”
