Meet the insurtech: Otonomi

In simple terms, parametric-based insurance triggers claims when a certain event happens. If a parametric policy for a farmer is based on weather, after 14 days without rain, a claim for lost crops would be made on the 15th day.

In the cargo transportation industry, delays causing supply chain disruption are exactly the kind of event that can be addressed with parametric insurance. Founded in August 2020, insurtech startup Otonomi has set out to offer that product. 

"Each time there's a shipment or a cargo delay, our blockchain infrastructure detects the delay of shipment, communicates with a smart contract which automatically adjudicates in 45 minutes – instead of 45 days  – and processes the digital payments directly to the customer in minutes," says Yann Barbarroux, co-founder and CEO of Otonomi. 

The company established itself using a managing general agent (MGA) structure, developing its own software and algorithmic underwriting model. Otonomi also uses blockchain and decentralized finance (defi) technology to carry out its operations.

Otonomi's algorithmic underwriting model makes quoting premiums dynamic and incorporates advanced risk management in its calculations, according to Barbarroux. "Our platform is very much an end-to-end subscription price policy, claims administration and risk management platform," he says. 

The company has four "pillars" for its use of blockchain technology, according to the CEO:

Scalability – using Oracle APIs connects physical assets and blockchain, creating a bridge between freight containers, cargo logistics endpoints and blockchain smart contracts that is secure and makes greater scale possible.

Automatic adjudications – Using blockchain-based smart contracts containing the legal and economic provisions of a policy, administering the policies and adjudicating claims happens in a systematic, automated and transparent manner. 

Frictionless fund management – Uses digital wallets to streamline collection of premiums, collateral management and claim compensation payments. This removes reliance on outside payment infrastructure, wire transfers and bank checks.

Decentralized capital – As a blockchain-based solution, Otonomi is accessing decentralized capital to back and underwrite its policies.

For its reinsurance backing, Otonomi has also partnered with a decentralized source, Ensuro, a licensed reinsurer that uses blockchain technology for its operations. Also, Otonomi underwrites its coverage using syndicates and reinsurance balance sheets, but expects to put its own capital into underwriting as the company grows, according to Barbarroux.

At the start of 2022, Otonomi put another feather in its development cap by connecting with Lloyd's syndicate markets, which provide specialist insurance underwriting. From April through July, Otonomi took part in Lloyd's Lab, an insurtech accelerator program that Lloyd's operates. "Based on that incubation, we secured terms for papers and capacity from one of the syndicates and a few reinsurance companies," says Barbarroux.

Along with underwriting and technology developments, Otonomi's future plans include scaling up to cover more intermodal transportation models, other than cargo insurance for supply chain disruptions. "Because we fully automated, because we are a financial platform, we can essentially unlock capital in order to back a very large number of policies," says Barbarroux. "It's very much automation of operations that unlock the financial capital on the other end."