Why weather alerts matter in insurance

Research Director and North American Leader for the IBM Institute for Business Value (IBV), IBM

Connectivity drives our daily activities, with mobile devices and the Internet of Things supplying our seemingly endless need for more data in more areas of our lives than ever. In a late 2015 press release, Gartner forecasted 6.4 billion connected things will be in use worldwide in 2016, up 30 percent from 2015, and will reach 20.8 billion by 2020. The big data storm from all these devices spans everything from wearable devices with health statistics to social media, with one notable exception—weather.

Weathering the storm

Given the prominence of weather in shaping our daily lives, that people are often oblivious to its impact is quite remarkable. We may hear about a chance of thunderstorms, but rarely do we react to the potential for damage to our homes or automobiles. We may catch a news segment about an upcoming snowstorm, but often we don’t take the preventive action to clear our gutters or even allow enough time to get home before road conditions become challenging.

Insurance companies are all too aware of this quirk of human nature, given insurers’ business interest in proactively evaluating and reducing the impact of weather events on their policyholders. For the insurance industry, this quirk is especially troubling given estimates of the increasing costs of extreme weather events and climate change in the years to come.

For example, Munich Re—one of the world’s largest reinsurers—has researched insurance costs from the increasing numbers of extreme weather events worldwide. In just three months during the 2013–2014 winter season, Munich Re unearthed several findings: 

  • Extreme weather in North America resulted in losses of $4 billion and insured losses of $2.3 billion.
  • Flooding in the UK incurred overall losses of $1.5 billion, of which $1.1 billion was insured.
  • Snowstorms in Japan resulted in the year’s costliest natural catastrophe for the insurance sector worldwide, with overall losses of $5.9 billion and insured losses of $3.1 billion.

Digging into the data

Today, insurance companies have the unique opportunity to use weather data supplied by vendors such as The Weather Company. These vendors offer real-time access to millions of weather sensors worldwide to keep us apprised of rapidly changing weather conditions having the potential to cause us inconvenience or harm. Through alerts that are based on highly accurate, localized forecasts, insurers now have the opportunities to notify customers about the likely potential for hail, lightning, snow or freezing conditions having a direct impact on individual property and safety. Further, insurers can provide immediate guidance on how to prevent incidents before they occur.

Advances in weather forecasting, big data and customer relationship management (CRM) are providing new opportunities for insurers to add value to their customers’ lives while at the same time reducing potential claims. The recent study, Cloudy with a Chance of Mishap, provides additional insight about these and other opportunities to leverage weather data in insurance. Then take a deeper dive to discover how insurance companies can use weather data to improve customer relationships, as well as reduce costs and improve operational efficiencies.

Learn more about how the Internet of Things and insurance industry–specific weather data solutions can positively impact your business.