Even though it’s considered “perhaps the largest external swing factor in business performance,” one critical variable is often still treated as a constant, if not overlooked entirely: weather.
IBM is hoping to change that.
The technology manufacturer has formed a strategic new alliance with The Weather Company designed to combine unprecedented amounts of data from the Internet of Things and cloud computing with weather forecasting systems, in order to better predict meteorological conditions.
This is a massive undertaking, as this new network will incorporate data from over 100,000 sensors and aircraft, as well as smartphones, buildings, and motor vehicles. This will amount to 2.2 billion global forecasting points, which can produce more than 10 billion weather forecasts a day.
WSI, the B2B division of The Weather Company, hopes that the integration with the IBM cloud will allow its data to also incorporate supply chain economics and consumer habits, providing valuable insights to enterprises worldwide.
This could be a game changer for the insurance industry, from a business perspective, as well as a health and safety one.
For example, improved weather prediction analytics will provide more advanced notice of impending hail storms. Since insurance companies pay over $1 billion in claims for hail damage every year, agencies can save money by warning clients about incoming storms before they happen.
In fact, brokers who use WSI’s Weather Alert service to text policyholders about impending storms can save $25 per client in hail-heavy regions, which adds up to millions of dollars every year.
“We’ve done some tests with hundreds of thousands of policyholders and found that when we send them warning that hail could be hitting their cars in the next half an hour, about 50% take action to protect their vehicles,” said Andy Rice, vice president, products and analytics, WSI.
When viewed in a broader context, this can help enterprises prevent widespread damage to their business operations through such actions as advising that automobiles be placed under cover at a dealership or suggesting that facilities raise the heat in anticipation of a deep freeze.
“While the tendency is to focus on direct property losses, the indirect consequence of business interruption is a huge exposure for many businesses. Lost revenue due to the inability to open, provide services, etc is in some cases a more significant exposure in terms of financial loss than direct property loss,” said Mark McLaughlin, Director of Strategy, IBM Global Insurance.
In addition to preemptive notice, insurance companies will be able to use this tech infrastructure to better handle claims and assist with disaster relief.
“They can immediately send text messages saying, we know your neighborhood may have been affected by a tornado. We’ve deposited money into your bank account for a hotel tonight, and we’re setting up operations at the church on Third and Main Street to look at cars and help file claims,” said Rice.
Brokers can then request digital photos of household damage, and begin expediting claims immediately.
“It creates really good opportunities to open up these two-way communication portals and increase the company’s ability to react and be on the side of their policyholders,” he said.
Finally, Rice foresees that this partnership with IBM will provide greater opportunities to manage risk using telematics. He notes that while 27% of accidents occur during inclement weather, only 8% of miles were driven during such conditions.
“There’s a disproportionate amount of accidents compared to miles driven, which shows that weather is just as important as nighttime driving in terms of being a risk factor,” he said.
