Weather plays an important role in shaping consumer and commercial decisions to protect their assets and for insurers looking to provide tailored solutions to consumer needs. Major events, including hurricanes, floods and snowstorms, radically impact both individuals and businesses. And localized incidents, such as hailstorms, tornadoes and lightning, pose immediate threats to life, property and other assets.
In 2014 – a single year – the five most destructive weather events caused damages of $17.4 billion worldwide.
A significant percentage of the planet is vulnerable to weather events. In many coastal areas, risk has grown steadily with increased property development. The inability to manage weather-related risk can also limit economic development, especially in high-growth areas around the globe.
Insurance companies understand the importance of weather data; for years, the industry has incorporated historical weather patterns into its underwriting and pricing models. However, advances in weather science, analytics, geolocation and cloud computing now enable insurance companies to apply weather-related insights in new, innovative ways.
Opportunities for Applying Weather Data
A great strength of weather data insight is that it can create opportunities across a number of different functions within traditional insurance firms, including customer engagement, claims and risk management. Let’s take a look:
For insurance companies, the least costly event is the one that never occurs. Insurers can use weather data to identify the potential for a significant weather-related event and notify customers to take action to protect life and property.
If weather data predicts a hailstorm, for example, an insurance company could send a text message to warn policyholders in the storm’s path of potential damage. That warning would detail the precise location and timing of the expected hailstorm and strongly urge customers to take action, such as moving their cars to covered locations.
Similarly, an insurer could recommend that customers move to higher ground or prepare defensive barriers in advance of a storm surge. Companies can personalize and tailor these alerts to:
Different methods of notifications based on demographics and preferences, such as text messaging, landline phone or in-house monitoring system
Actions customers should take, such as removing potential debris hazards before a wind storm, clearing gutters before severe rain events or insulating pipes before rapid freezes
The location of critical assets, whether at home or at work
After an event, weather data can also assist customer-service professionals by helping them identify customers who need to be contacted. By knowing which policyholders in an affected area may have sustained damages and reaching out to them directly, representatives can quickly ascertain whether individuals have sustained losses and initiate processing.
This interaction can assist victims who aren’t able to easily access their policy information and, more important, can help to rapidly identify those in need of medical attention or immediate repair services.
Given the advent of both mobile technology and more advanced analytics, proactive outreach can serve as a powerful customer retention tool for insurers. Pre- and post-event touchpoints with customers provide important information about customer behavior and offer insights into contact preferences, product and service needs and brand image.
In the past, weather-related events often left organizations in a catch-up mode, facing significant increases in call volumes and claims. Further, these unforeseen situations made it difficult to predict exactly where to align field resources, such as adjusters, to rapidly evaluate claims and provide short-term support to those impacted.
Incorporating weather data into operational processes, such as workforce scheduling, third-party contracting and vehicle optimization, can help to decrease the delays associated with managing peak activity and provide assistance to those facing individual losses or business continuity disruptions.
At the same time, insurers can integrate weather and social media data, such as Twitter feeds, to assess the reputational risks of inadequate response times. Monitoring the social chatter of weather event victims can identify potential customer concerns and issues, enabling the organization to adjust its resources accordingly. In addressing these claims-related issues, insurers can realize both tangible and intangible value. Reducing the time it takes to compensate individuals for their losses is more than a source of relief to those affected; it is a source of direct revenue and customer retention.
Weather data can be used with advanced analytics to help insurers better manage financial assets. Traditionally, firms have used long-range forecasts to develop actuarial models that drive more effective product profitability and reinsurance placements, but weather data can also influence short-term financial decisions. The liquidity necessary to support rapid, on-site payments to claimants can also lead to significant cash flow needs for large events.
As a result, firms must decide how much cash to set aside to pay claims. Too much in reserve increases the amount of cash on hand, which likely reduces investment income; too little, and the company may need to seek short-term financing or liquidate longer-term investment assets and incur higher-than-expected costs of funds. Advanced weather data can help an insurance company better manage its cash positions and determine optimal reserve amounts in advance of a storm.
As insurers increasingly build similar products that compete against one another in the public marketplace, they will be looking for ways to differentiate their offerings. The ability to take advantage of advances in weather forecasting and advanced analytics and incorporate weather into decision-making processes can provide unique value to insurers and customers alike.
Effectively incorporating weather data into a variety of insurance activities can mean the difference between remediation and prevention, and can help to mitigate the impact of events that are truly unpredictable and unavoidable. In short, the effective application of weather data can enable the insurer to offer unique value that centers on risk but improves customer retention and well-being.
Intrigued? Learn more about insurance companies how can leverage The Weather Company’s Alerts for Insurance to enhance customer relationships, reduce costs and improve operations.