Technical Pricing for cloudINSURE
Pricing Framework
The cloudINSURE pricing model uses a specialized risk assessment framework tailored to cloud infrastructure outage risks. The premium calculation incorporates historical outage data, cloud provider architecture, and the policyholder's specific cloud configuration.
Pricing Components
1. Base Risk Assessment
Premium calculation starts with a baseline risk assessment that considers:
| Factor | Description | Impact on Premium |
|---|---|---|
| Cloud Provider | Historical reliability of the specific cloud provider | AWS and Azure typically have lower base rates than smaller providers |
| Service Type | Different cloud services have varying reliability records | Compute services often have higher premiums than storage services |
| Region | Historical stability of specific cloud regions | Newer regions may have higher risk loadings |
| Number of Availability Zones | Distribution of workloads across availability zones | Multi-AZ deployments receive premium discounts |
| Redundancy Configuration | Level of built-in redundancy in the insured's architecture | Highly redundant setups qualify for lower premiums |
2. Exposure Calculation
The exposure component factors in the financial impact of downtime:
| Parameter | Description | Calculation Approach |
|---|---|---|
| Sum Insured | Maximum payout amount for covered downtime events | Directly proportional to premium |
| Hourly Coverage | Amount of coverage per hour of downtime | Higher hourly rates increase premium |
| Coverage Period | Duration for which the policy provides protection | Longer periods increase total premium |
| Trigger Threshold | Minimum downtime duration required to trigger a payout | Lower thresholds increase premium |
3. Risk Modifiers
Additional factors that may adjust the final premium:
| Modifier | Description | Premium Impact |
|---|---|---|
| Historical Claims | Previous claims history of the insured | Recent claims may increase premium |
| Cloud Architecture Review | Assessment of the insured's cloud architecture resilience | Well-architected deployments receive discounts |
| Deductible Period | Initial downtime period not covered by the policy | Higher deductible periods reduce premium |
| Industry Sector | Industry of the insured business | Critical sectors like financial services have higher rates |
| Peak Usage Patterns | Whether usage patterns include predictable high-demand periods | Highly variable workloads increase premium |
Premium Calculation Formula
The cloudINSURE premium is calculated using the following general formula:
Premium = (Base Risk Rate × Sum Insured × Coverage Duration) × Risk Modifiers
Where:
- Base Risk Rate is derived from the cloud provider, service type, and region factors
- Sum Insured is the maximum payout amount
- Coverage Duration is the policy period expressed in months
- Risk Modifiers are multiplicative factors applied based on the insured's specific circumstances
Example Calculation
Scenario: E-commerce platform using AWS EC2 in us-east-1
| Parameter | Value |
|---|---|
| Base Risk Rate | 0.008 (0.8%) |
| Sum Insured | $100,000 |
| Coverage Duration | 12 months |
| Multi-AZ Deployment | Yes (0.85 modifier) |
| Historical Claims | None (1.0 modifier) |
| Industry Factor | E-commerce (1.2 modifier) |
Calculation:
Premium = (0.008 × $100,000 × 12) × 0.85 × 1.0 × 1.2
Premium = $9,600 × 0.85 × 1.2
Premium = $9,792 per year
Risk Mitigation Recommendations
Insureds can reduce premiums by implementing these risk mitigation measures:
- Multi-Region Deployment: Distribute workloads across multiple cloud regions
- Multi-Cloud Strategy: Use services from multiple cloud providers for critical functions
- Enhanced Monitoring: Implement comprehensive monitoring and automated failover systems
- Regular Testing: Conduct regular disaster recovery and failover testing
- Architecture Review: Undergo regular cloud architecture reviews and implement best practices
Each of these measures can qualify for premium discounts based on their effectiveness in reducing outage impact.