Let's talk billions: The impact of weather on insurance
Weather is an integral part of how we live, whether we’re reaching for our smartphone in the morning to figure out how to dress for the weather or are reminding our kids to grab their coats before they head out the door for school. Every time we get on a plane, we keep our eyes glued to the forecast for signs of bad weather that might keep us grounded at the airport. And when we’re looking forward to the big game, we keep a weather eye out for delays and cancellations—even for disruptions to our television signal.
But weather has become so central to our personal lives that we often forget that weather and business are also connected. Indeed, we need not look far to see that weather means business. However, IBM’s intended acquisition of The Weather Company has refocused attention on a multi-billion-dollar secret that organizations are using to surpass the competition and bring satisfaction to customers and CEOs alike.
- 3 billion: The Weather Company uses 3 billion weather forecast reference points to collect real-time weather data.
- 15 billion: The Weather Company produces more than 15 billion forecasts during an average day.
- 17.4 billion: The five most destructive weather events of 2014 caused total damages of $17.4 billion worldwide, with insured losses reaching $11.8 billion.
- 26 billion: The Weather Company app handles 26 billion inquiries every day, making it the fourth most used app in the United States.
- 40 billion: Insurance fraud (excluding health insurance fraud) has a yearly impact of more than $40 billion in the United States.
- 500 billion: The costs incurred by routine weather events totaled more than $500 billion in 2014 in the United States alone.
Weather means insight
You’ve read about the billions of dollars in expenses that businesses incur because of the weather. You know about the billions of data points that The Weather Company and IBM bring to the table. But how can you act on weather insights? Here are some ideas to help insurance companies make weather insights actionable:
- Customer engagement
Insurers can engage policyholders with weather alerts to help them prepare for weather events, and they can also proactively reach out to policyholders who have been affected by a weather event, reaffirming the company’s commitment to them. Moreover, insurers can incorporate insights from weather events when developing products and creating marketing campaigns.
Perhaps most important, insurance companies can use weather alerts to help policyholders avoid damages that can lead to claims. When policyholders are alerted to an imminent weather event, they can begin taking steps to avoid weather-related damage. Similarly, insurers can use accurate and timely weather data to move resources into place before major weather events, preparing to meet their customers’ needs afterward.
- Risk management
Weather data has two primary applications to risk management. First, weather data can help insurers accurately predict claims reserves allocations before a major weather event. Also, using weather data, insurance companies can evaluate claims data in context, allowing them to flag suspicious claims. Using these methods, insurers can begin using weather data to fight back against insurance fraudsters.
Insurers who use telematics programs to monitor driving behavior and set pricing can benefit from the additional context that weather data provides. As noted in the report, Cloudy with a chance of mishap, “For example, knowing that a customer is driving the legal speed limit under clear conditions is very different from realizing that the same driver is moving at that pace through a blizzard.” In insurance, context is everything.
Before you slip into your coat or grab your umbrella on your way out the door, find out how IBM and The Weather Company can bring your company the insights needed to overcome the business challenges that face it in the IBM Institute for Business Value Executive Report, Cloudy with a chance of mishap. To learn how insurers can use analytics to drive customer retention, producer lifecycle and credential management and fraud management, view the respective demos today. You’ll find that by adopting weather analytics, you can provide your organization with the data-based insights it needs to stay ahead of the storm.