It was a heavy blow for the leading European cloud provider OVH Groupe from Robaix in France: Last March, one of its data centers in Strasbourg burned out. According to media reports, around 3.6 million Internet pages were temporarily offline. Even worse: Because OVH’s backup was a chargeable additional service that not all users had booked, some of the data was lost forever. That was also bad news for those who advocate a European alternative to the dominant cloud providers from the USA because they fear for data protection.
A start-up from Berlin has now launched an insurance policy for companies that want to protect themselves against the risk of their cloud provider failing. The digital insurer Element promises compensation on an hourly basis if the cloud services fail. To this end, the company is cooperating with the also still young US specialist provider Parametrix, which is already selling coverage in the USA.
The company has developed a monitoring system that can very quickly identify a failure of the cloud systems in a certain region. The payment of the compensation to the customer is automatically due if such a failure exceeds the agreed insured minimum period. The 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 data storage in the “data cloud”, ie on the servers of specialized service providers such as OVH, Amazon, Google, SAP or Salesforce, promises companies more flexibility compared to their own mainframe, because they can access the data from almost anywhere via the Internet Can unlock additional volume at the push of a button.
When it comes to digitization, the insurance industry is more of a laggard compared to other industries. This is taking its toll at a time when customers are aligning their expectations with big tech companies when it comes to speed and service. Resourceful founders have therefore started new companies that promise insurance in a contemporary form. This also includes the digital insurer Element, which was created around the Berlin company forge Finleap.
Compared to traditional insurers, Insurtech pursues a slightly different business model: It develops digital insurance on behalf of corporate customers such as VW Financial Services or Vodafone. They then sell the policies to their end customers under their own names; the Element brand does not appear. This white label approach saves Element its own expensive sales apparatus. This also applies to the new cloud protection. The cooperation partner Parametrix offers them directly on its website, and sales through brokers are also planned, said an Element spokesman.
With its protection against financial damage as a result of a cloud failure, Element is targeting e-commerce providers and payment service providers in particular. But the insurance could also be interesting for cloud providers themselves, said the spokesman. The target group are both small and large companies, and there is no upper limit to the sum insured. The 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 relied on the cooperation with the Talanx subsidiary Hannover Re, among other things.
It is Element’s first international collaboration, and the launch of cloud insurance is already planned for three other European countries. Insurtech does not tell you which one.
The offer is a so-called parametric coverage. In contrast to other insurance companies, the benefits here do not depend on the specific amount of damage. Instead, the decisive factor is whether the agreed reference value comes into play – here the failure of a cloud service over a certain period of time. CEO Eric Schuh is convinced that parametric cloud failure insurance will set new standards in the market. According to him, customers can benefit from minimal waiting times, fast payouts and complete transparency. Such policies could be used to insure risks that were previously considered uninsurable.