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Daniel: Hello and welcome to Insurance Business TV. I'm Danny Wood, news editor of Insurance Business Australia. And today we're joined by Karen Hardy, a broker and managing director of redicova. The people in Karen's town of Tully in the north of Queensland depend on agriculture, particularly bananas and sugarcane. And in this cyclone prone area, a year's crops can be wiped out in a day. But traditional cyclone insurance is very expensive. So Karen developed redicova a parametric insurance product to help these small communities have a more affordable way to deal with this natural catastrophe. Welcome, Karen. 

Karen: Thanks, Danny. It's great to be here. 

Daniel: Good to have you on. So, in your own words, how would you describe your parametric offering? 

Karen: So redicova is a very simple product and it's a wind product that is available to all northern Australians between Bundaberg in Queensland over to Carnarvon in Western Australia and including the Northern Territory. If you're located within 300 kilometres of the coastline, you're eligible. Basically people can buy units of cover so that they can afford or purchase as they can afford, rather than be told that they have to insure for a certain amount. 

Daniel: And it's essentially activated by by the wind strength. Is that how it works? 

Karen: It is. It's based on the insured's address, the actual insured address, proximity to severe tropical cyclones. So if BOM record a cyclone that passes over their insured address, they're paid 100%. 

Daniel: A lot of your customers are growing bananas and sugarcane. How is this idea going down with them? 

Karen: They actually love it because this is the first crop insurance per se that they've been able to purchase for a couple of decades. It's been around 20 years since the last crop insurance in northern Australia was available to them. So they're really enjoying it and they can see the value in it because they can utilize it particularly straight after a cyclone to rebuild, re-clean up, do whatever they need to do while they get their ducks in a row and refinance because they all have to refinance after a storm. 

Daniel: What about going back to when you launched the product? Because I imagine what were the challenges getting the banana farmers and sugarcane farmers on board with a skeptical about this at first? What were the challenges? 

Karen: Yes, I think they they were skeptical because it has been so long and they've been told for so long that crop insurance was just not available. So for a broker from Tully to actually achieve this is quite phenomenal. They love it though, and as I said, they can see the benefit in it and their take up is varied. The practical use of the product depends on their particular circumstances. Many farmers are in a situation where they're older. They may not want to to actually repair their damage or regrow their crops, so they're utilizing it as a cash backstop, I suppose. So banana farmers utilize redicova in different ways. Some have actually chosen amounts that they need to actually re plant their crops. Others use it for wages, some are using it for mortgage payments, etc. They can use it for any expense that they incur post cyclone. And it's they're loving it for the fact that they will have their money within three days. So that just gives them time to actually get their ducks in a row with their traditional banks, etc. and refinance after a storm.

Daniel: It strikes me that it's very flexible in that sense. So you can, you get this payout and you're not strictly supposed to you don't have to use it just to recover your banana crops. You can use that money for anything that you need need. 

Karen: That's right. We all incur expenses after a severe tropical cyclone. That's a given. And. Basically, you can use those funds for anything that you need to help or assist your recovery. So farmers love it because it is of that flexibility. They can utilize it to pay mortgages, pay wages, pay bills, pay for uninsured damage that they have incurred, and and crops are an uninsured risk at this point in time. So by hook or by crook, everyone can can jump in and utilize ready come for exactly the same purpose. But it was built with agriculture in mind. 

Daniel: This this question is coming off the cuff. But when we spoke last time, you were explaining that it is usually something that goes alongside traditional insurance and it can't do the job all by itself. I mean, can it do the job all by itself, or do you still encourage people who take it out to have traditional coverage, too? But I imagine that's super expensive. 

Karen: It is super expensive in northern Australia and that that's basically a given. But. It's not intended to be. A replacement for traditional insurance. The intention of redicova is to enable people to get cash in their banks quickly after an event so that they can they can recover, they can pay their bills, they can keep their staff, they can they can pay for those uninsured costs. So I do encourage people to maintain traditional insurance where they can get it if they can't get it. Well, that's a completely different story. They can use redicova to to cover those uninsured losses if if they require. 

Daniel: Let's go back to where it all began. But what drives your focus on on cyclones in particular, rather than floods or fires? Is it just, I guess, your location in Tully? 

Karen: Yes. Well, when we started, I had a vision. We were going to offer multi perils. However, that was just too broad for London's appetite at the time. So they said focus on one particular product. So I focused on wind because that's what I know. And that was the burning issue at that time. Because remember, we started this journey seven years ago. Now it's so long. And cyclone was was the burning issue, obviously, as our weather patterns change. Flood and fire have now bushfire that is have now become a concern as well. And we have built the system so that we can tack on those perils as required. But at this point we are wind only and the reason is because we're we're familiar with wind. We've we've been through a few storms and we know what happens. And it's not a good it's not a good outcome for communities. 

Daniel: You mentioned London, and this goes back to you winning the Valerie Baker Insurance Award, which recognizes excellence in the intermediary area of insurance. And you journeyed to London, you convinced Lloyd's of London to back your product. What were the challenges getting them behind you? 

Karen: The challenges never cease, Danny. Actually, they probably get harder as you go along. Obviously, their job is to vet candidates or vet cover holders to make sure that their intentions are sincere or the product is needed. So it was everything that I put forward was challenged by London, and rightly so, because that is their job. But they have supported me. They they loved my passion and my vision, which for assisting community. And that's what the Lloyd's ethos is all about, is is helping people survive and thrive. So, yes, it is a challenge. 

Daniel: So, I mean, so how is redicova doing in the market? Can you give us a sense of of how you're doing after a few years? Are you happy with how things are? 

Karen: Well, we're in our second season now and we have our avid supporters. There's people that understand and know the value of it. So it's been polarizing. I suppose there are those that that wouldn't live without it now. But it is a hard gig because consumer education, it's just such a different product compared to traditional insurance. So education is paramount. And getting the message out there that it's simple and it's quick. And I think that's part of the concern with consumers is it's so simple and they're not used to that in the traditional market because we're all used to product disclosure statements that are 65 pages long with, you know, lots of conditions, etc.. So our product is simple. It's literally if that wind passes over your situation, you get paid. And that's a massive departure from traditional insurance. 

Daniel: I imagine the problem you have is is probably similar to any broker trying to get a new idea out there. Is there something that can be done to help you educate the masses about about your idea? Or are you just relying on yourself to go out there and do it yourself? 

Karen: I know we we undertake training with different cost of groups, etc. and Kate Tilley sends out EDMs to brokers etc. when we update websites, etc., which we have just done. And that's those changes are from broker feedback and consumer feedback. So we're listening to what we're being told. You know, our system was too complex, it was too hard, there was too much information because our original website was my, my brain dump, I suppose, onto a website, which was just too much for people. I wanted it to be transparent. I wanted people to have all of the information at hand. So we've simplified everything. We've made the process a lot easier. So that's just ongoing and training wise, I mean, all of our our product training, it is is done for the benefit of, of community and brokers have accepted that and I would love to do more of it. But just because of our location, we're a little bit we're a little bit far away from everybody. 

Daniel: I was watching the news this morning and there's a cyclone forming off the coast of north Queensland somewhere. Is that something you're keeping an eye on? 

Karen: Yes, we actually our system monitors all activity within Australian waters. So we're very aware of the three systems at the moment that are kicking around. But thankfully all of the modelling that I have received from GDP indicates that New Zealand's going to cop this one, so it's not going to actually cross the coast. It should stay far out at sea. 

Daniel: So yeah, taking a wider focus for a second and just looking at natural catastrophes generally and what all the different stakeholders Government Insurance Council do about them. I mean, what more would you like to see done about, I guess, helping people deal with these things? 

Karen: Parametrics are definitely a way of the future, particularly for different types of risk. The traditional insurance market is is tied because of its indemnity conditions. Assessments need to occur. And that's the problem, is we don't have enough assessors in the world to actually, you know, be responsive and respond quickly after a natural disaster. So I believe that parametric. Do have a place in the market and they are a simple trigger as as such that pay quickly. So we're filling that that gap that can't be filled in our traditional market. I think everyone has a good crack at. Trying to help victims of natural disaster. It's just the tyranny of distance and our locations that that make it very, very difficult. So, yeah, Parametric is definitely the go. 

Daniel: Karen Hardy, who developed redicova a parametric insurance product from Tully in North Queensland. Thanks for your time on Insurance Business TV. 

Karen: Thank you very much. It was lovely to be here.