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Insuring Any Kind of Weather

Insuring Any Kind of Weather

Posted on 06 Jun 2024

“The time to repair the roof is when the sun is shining.” – John F. Kennedy

The extreme weather conditions that are starting to be seen as the norm have produced increasingly high payouts from the world’s insurance companies. In the first half of 2021 alone, an estimated £65bn of insurance claims were settled as a result of global weather disasters. 

These global weather incidents might be seen as adding uncertainty to the global insurance sector, however increasingly accurate and nuanced weather forecasting can be seen as a counter-balance to this, adding increased certainty and consistency to all those involved in the industry, from the underwriters and brokers to the end customers.

OpenWeather for Insurance Underwriting

Real-Time Weather Monitoring for Dynamic Premiums:

With OpenWeather products, Insurance companies are able to integrate real-time weather monitoring into their underwriting models. This allows insurers to be able to dynamically adjust premiums to reflect the actual risk at any given moment. For instance, during periods of heightened storm activity or extreme heat, premiums might be temporarily increased to account for the elevated risk of claims. Conversely, calmer weather periods could lead to reduced premiums, attracting new customers.

Historical Weather Data for Risk Modeling and Product Development:

The integration of long-term historical weather data with internal claims data can help insurance companies model risk more accurately. By analyzing the correlation between weather events and claim payouts over extended periods, insurers can build sophisticated models that accurately predict the likelihood of future claims based on specific weather patterns. This data-driven approach allows for more precise risk assessment, enabling insurers to offer premiums that are tailored to the unique risk profiles of individual customers and regions.

Historical weather data can also play a crucial role in the development of new insurance products. By analyzing the frequency and severity of specific weather risks like high winds, heavy rainfall, or extreme temperatures, insurers can build innovative products. For example, parametric insurance products can be designed to automatically trigger payouts based on predefined weather thresholds, providing rapid financial relief to policyholders in the aftermath of extreme weather events.

Fraud Detection

Having instant access to detailed historical geographic weather data can help insurance companies validate claims, and detect any possible fraud. As a result, fewer claims will be made, reducing the administration overhead for the company, as well as reducing premiums for the customers.   

Parametric Insurance

Insurance brokers who have access to increasingly detailed weather data can develop accurate risk proposals, and find the best possible insurance product at the best price for their client. There is an increased usage of parametric policies that trigger payouts to the client when specific weather events occur, even when they may not have suffered any direct effect themselves. For example, a hurricane may not have damaged the premises of a retail business, however it may have affected transport links, the ability to order stock, and reduced business. For example, 21% of annual motor vehicle accidents are caused by adverse weather conditions. Obtaining accurate historic weather data for any geographical location can allow these payouts to be automated, reducing the overall administration costs for the insurance company, and increasing customer satisfaction. 

Customer Service

Using detailed weather information can help Insurance customers and brokers analyze their exact risk exposure to certain types of weather conditions, enabling them to constantly monitor their insurance policy profiles to make sure they are always up to date, and that their insurance due diligence process is optimized.  

Insurance companies can also use global weather alerts to inform their customers of any weather conditions that may have an impact on their business. This not only helps the customer prepare their infrastructure, but also reduces the likelihood of a claim being made, increasing customer engagement and ultimately a higher level of customer retention.

Customers can also be given additional weather information to notify them of secondary perils - the follow-on conditions that occur as a result of the main weather event, such as additional minor storms, temperature fluctuations etc. 

Insurance companies have also been known to offer customer incentives to adopt certain behaviors when there is a higher risk of weather disruption - for example offering motor insurance customers a coffee voucher to avoid using their vehicles during heavy rainfall. 

Government Flood Initiatives

As most homeowner insurance does not cover flood damage, there are specific government initiatives to pool together insurance companies to provide specific flood risk cover to customers. The organizations may also offer local communities help in mitigating flood risk, as well as helping homeowners in flood-risk areas insure their properties sufficiently to obtain a mortgage. 

For example, in the USA, the National Flood Insurance Program (NFIP) delivers flood insurance to more than 5 million policyholders, and utilizes detailed weather data to create an accurate rainfall model for specific locations. Recent updates to its risk model has resulted in the premiums for 23% of policyholders falling, despite the overall increase in global weather related incidents. 

In the UK, the National Flood Forum is an independent organization that offers insurance advice and help to homeowners in flood-risk areas obtain the most suitable and cost effective flood damage cover.

How OpenWeather can help

OpenWeather provides a number of products that can be used within the insurance industry, all of which give accurate and detailed weather information.

The new OpenWeather Alerts Collection uses precise forecasts, combined with our detailed knowledge of specific industries to keep you updated with targeted weather alert information.. We can send tailored alerts for different weather events such as  extreme temperatures, wind, floods, rain, fire risks, fog, and thunderstorms. Our weather experts carefully craft these alerts to give you the information you need.

The OpenWeather One Call API 3.0 Weather Data for Timestamp endpoint gives 45 years of historical archive as well as a 4 days ahead forecast for any timestamp. This is perfect for a wide variety of insurance underwriting applications.

The History Bulk  can be used to extract hourly historical weather data for over 45 years, for any chosen location or coordinate, and includes 15 weather parameters. This data can be utilized in insurance modeling applications, and help both insurance companies and brokers create the most relevant insurance products for their clients.

The Daily Forecast 16 Days  is available at any location on the globe. The forecast includes daily weather data, with the response data available in JSON or XML format. This information can be used to constantly monitor the predicted weather on an ongoing basis, helping the insurance companies manage their daily activities.

The insurance industry is constantly changing and adapting to the conditions. Understanding those conditions, and preparing for them can create stability in an increasingly unstable climate. 

In addition to our nuanced weather products, OpenWeather's Meteorological Service provides personalized, actionable weather data and forecasts tailored to your needs. With this service, you can gain insurance industry specific insights for informed decision-making, accurate underwriting, and long-term planning.

About OpenWeather:

OpenWeather provides weather data for any location on the globe using a proprietary hyperlocal forecasting model with a resolution from 500 m to 2 km, globally. More than 6,000,000 customers from logistics, agriculture, insurance, energy, retail, and many other sectors, are working with the company's weather products. 

OpenWeather cooperates with global meteorological agencies such as MetOffice and NOAA, and enhances its model with data from radars, weather stations and satellites. The company provides great availability of service at 99.9% for enterprise-level products. 

The products can be easily integrated into complex IT systems and are ideal for ML analytic systems. OpenWeather is a member of Royal Meteorological Society and an Achilles-certified supplier. OpenWeather ethical initiatives include support of educators and students, not-for-profit subscriptions for the general public to increase weather awareness, and recent Ukrainian donation programme.

For more information on how to gain access to our OpenWeather products, please email us.

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