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

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

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

How it works

For a small premium, a homeowner or renter can purchase a policy with limits of $1,000 to $15,000. The applicants provide their name and address and choose a limit. If a hurricane strikes within pre-established parameters and they suffer an economic loss, they collect their payment within 24–48 hours after the end of the storm with no claims adjustment hassle. They receive an electronic deposit and can use the money to pay for such things as temporary housing, debris removal and repairs to uninsured property.