Insurance Startup Raincoat makes immediate payments after climate disasters: The next generation of parametric insurance at scale.

Insurance Startup Raincoat makes immediate payments after climate disasters: The next generation of parametric insurance at scale.

Raincoat, is an insurance startup, is designed to make payments immediately after a climate disaster and to help cover losses that most insurers don't, like the loss of income if a storm destroys the power grid.

When Hurricane Maria hit Puerto Rico in 2017, Jonathan Gonzalez's mother was dealing with long-term medical issues at her home deep inside the island. She had survived the storm, but the hurricane had torn a wheelchair ramp from the side of her home and caused other damage.

Gonzalez helped her file an insurance claim, but had to wait for the insurance company to acknowledge the loss. The claim was denied, and Gonzalez started working with two cofounders to design a better system.

Raincoat, which launched its first product in Puerto Rico in 2021, takes a different approach. It is "parametric" insurance, meaning that it pays a set amount when a disaster happens, rather than requiring proof of specific losses.

The payments depend on the magnitude of disaster and the level of coverage someone buys. The payments depend on the magnitude of disaster and the level of coverage someone buys. It paid out customers relatively small amounts in the days after Hurricane Fiona last year—often $50 or $100, enough to replace food that spoiled after the power went out, for example.

In bigger events, people will get more support. (Maria was a Category 4 hurricane; Fiona was a Category 1 hurricane, causing far less damage overall.)

Raincoat's product is designed to be accessible for lower-income families, with the most affordable version starting at $25 a year. It is offered through third parties like banks, partly because the startups realized that it would otherwise be hard to reach customers.

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