Parametric Insurance Offers Hope Amid Systemic Challenges

Heather Habes’ commentary was included in a Law360 article on the growing popularity of parametric insurance policies, which provide an automatic payout of a predetermined amount once an index for a specified event is triggered. Heather notes that she welcomed the potential benefits of parametric policies and the ways technological advancement may unlock additional forms of coverage, such as by measuring air quality in a wildfire-affected area to trigger an automatic payout for smoke damage.

"I'm in LA; we've had lots of recent fire losses, and I have thought about whether parametric insurance would make sense for some people in fire zones to have quick resources in fire events," Heather said. She also advised policyholders to understand the limits of these policies.

"For now, the guidance is that it is not meant to replace a policyholder's traditional insurance program, and it's usually a supplement to a property coverage or something that will provide more comprehensive risk protection," she said.