Otonomi, a blockchain insurance company from Brooklyn, offers shippers a solution to mitigate financial risks associated with cargo delays. By utilizing their AI-assisted algorithm built on blockchain technology, the company promptly provides delay quotes to cargo owners who are time-sensitive. They have modernised the claim process by implementing a proprietary parametric mechanism that ensures transparency and efficiency in an ever-evolving industry.
ELIMINATING MANUAL CLAIMS PROCESSING
The key advantage of parametric insurance lies in its ability to eliminate the need for manual claims processing, resulting in a significant reduction in insurance costs and claim payout time. With Otonomi, the claim processing time is expected to decrease from an average of 45 days to a mere 45 minutes. The primary information required to process a claim is automatically available flight data. Otonomi‘s services are specifically tailored to the supply chain sector. For instance, if a shipment of vaccines experiences a 12-hour delay, the potential spoilage can be substantial. Instead of dealing with individual companies that send packages, Otonomi focuses on collaborating with freight forwarders, of which there are approximately 118,000 in the United States. Parametric insurance poses a challenge due to individuals attempting to exploit the system. To address this, the company has implemented various risk management processes, including blackout periods. For instance, if there is a storm forecasted for a specific area tomorrow, coverage cannot be obtained on short notice. The pricing of parcel delay coverage takes into account factors such as regionality, seasonality, weather patterns, as well as departure and arrival points. What sets Otonomi apart as a blockchain insurance company is its unique approach of not eliminating intermediaries. Instead, they distribute their insurance coverage through brokers like RLI in the US.
NOT THE FIRST TIME BLOCKCHAIN HAS BEEN USED IN DELAYS MITIGATION
According to Ledger Insights, AXA, an insurance company, has been testing blockchain technology through its program, Fizzy, to address a similar problem from a traveller’s point of view. Fizzy aimed to provide automation, transparency, and trust to the consumer. The concept was that a customer could purchase insurance and not worry about it, as the first notice of loss (FNOL) would be automatically sent to the insurer once their flight was delayed by two hours or more. The compensation amount was predetermined and sent directly to the customer’s bank account without the need to file a claim. The project was terminated in 2019 after two years of operation.