It was a blow to the European cloud leader OVH Groupe de Robaix in France: last March, one of its datacenters in Strasbourg burned down. According to media reports, around 3.6 million internet pages were temporarily offline. Worse still: OVH’s back-up being an additional paid service that not all users had reserved, part of the data was lost forever. It was also bad news for those advocating a European alternative to the dominant US cloud providers, as they fear for data protection.
Today, a Berlin-based start-up launched an insurance policy for companies that want to protect themselves against the risk of failure of their cloud provider. Digital insurer Element promises compensation on an hourly basis for cloud services failure. To this end, the company cooperates with the still young American specialist supplier Parametrix, which already sells blanket in the United States.
The company has developed a monitoring system that can very quickly identify a failure of cloud systems in a certain region. The payment of the indemnity to the customer is automatically due if such a breach exceeds the agreed minimum insurance period. Time-consuming assessment of the damage that has occurred is no longer necessary and customers should benefit from particularly rapid settlement.
Cloud solutions are booming. The storage of data in the “data cloud”, that is to say on the servers of specialized providers such as OVH, Amazon, Google, SAP or Salesforce, promises companies more flexibility compared to their own mainframe, because they have access to data from almost anywhere via the Internet Can unlock additional volume with the push of a button.
When it comes to digitization, the insurance sector lags further behind other sectors. It’s wreaking havoc at a time when customers are aligning their expectations with those of big tech companies for speed and service. Ingenious founders have therefore launched new businesses that promise insurance in a contemporary form. This also includes digital insurer Element, which was founded around the Berlin-based company forge Finleap.
Compared to traditional insurers, Insurtech pursues a slightly different business model: it develops digital insurance on behalf of corporate clients such as VW Financial Services or Vodafone. They then sell the fonts to their end customers under their own name, with the Element branding not appearing. This white label approach saves Element its own expensive selling device. This also applies to the new cloud protection. Cooperation partner Parametrix offers them directly on its website, and sales through brokers are also planned, a spokesperson for Element said.
With its protection against financial damage resulting from cloud failure, Element specifically targets e-commerce providers and payment service providers. But insurance could also be of interest to the cloud providers themselves, the spokesperson said. The target group is made up of both small and large companies, and there is no upper limit to the sum insured. Insurtech can also rely on the financial strength of a reinsurer, he said. He didn’t want to say which one it is. In the past, Element has relied, among other things, on cooperation with Talanx subsidiary Hannover Re.
This is Element’s first international collaboration, and the launch of cloud insurance is already planned in three other European countries. Insurtech doesn’t tell you which one.
The offer is a so-called parametric cover. Unlike other insurance companies, the benefits here are not dependent on the specific amount of damage. Instead, the deciding factor is whether the agreed baseline comes into play – here the failure of a cloud service over a certain period of time. CEO Eric Schuh is confident that parametric cloud outage insurance will set new standards in the market. According to him, customers can benefit from minimal waiting times, fast payments and full transparency. Such policies could be used to insure risks that were previously considered uninsurable.