How Insurers Use Climate Data to Analyze Risk

Stephen Busateri, Global Managing Principal, Insurance, Verizon Enterprise Solutions

The ability for insurance companies to use weather data analytics to track the impact of climate patterns is a potential game changer for insurance companies.

Every year, thousands of property claims are filed due to climate-related events, including the failure of electronic devices, building facilities, and infrastructure. These claims are both personal and commercial in nature and represent a significant area of loss for insurance companies.

Until recently, insurance companies didn't have easy access to real-time weather data required to study climate effect and analyze ways to protect customers and better manage risk. Insurers relied mostly on historical weather data to determine if climate and weather patterns can increase insurance claims.

The Evolution of Climate Analytics

The ability to gather and hone climate data for practical purposes has been an incremental process. Traditionally, weather data was made available in aggregate through subscriptions to weather services. This information was infrequently updated on an expeditious basis, which made it difficult for insurers to use the data for policy pricing, underwriting or claims, or to provide additional information to subscribers so they are better prepared to deal with inclement weather and other adverse conditions.

This is all changing with the proliferation of the Internet of Things and machine-to-machine technologies. Today, companies like Weather Analytics and Weather Telematics offer almost immediate access to climate and weather data. These companies update climate data in real-time using a sophisticated set of sensors that connect and communicate with other computers and data centers.

In addition to satellite data, Weather Telematics uses sophisticated sensors physically attached to vehicles to gather instant snapshots of road conditions, as well as data pertaining to solar radiation conditions, barometric pressure, moisture, and ionization conditions.

This information is then analyzed in aggregate and provided to companies that rely on near real-time weather data to operate their businesses.

Business Transformation through Big (and Better) Data and its Impact on the Consumer

Internet of Things solutions, and the improved data analytics gleaned from them, can lead to business improvements and better subscription protection for insurers across all lines of insurance.

Personal line insurance companies have the opportunity to factor-in possible road conditions when pricing policies for their customers. They can also use this data to examine road conditions when a vehicular accident claim is made.

Commercial lines insurers can use these solutions to better comprehend the statistical net effect of solar radiation and ionization conditions on electrical equipment failure when underwriting business property insurance.

Data analytics can also help specialty health insurers understand the effect of climate on the operation of in-home and wearable medical devices.

Insurance companies stand to benefit from claims avoidance initiatives by providing climate and weather alert data in more real-time to their insured. The most obvious of these use-cases is the ability to share road condition data to drivers of personal and commercial vehicles.

By having GPS data coupled with better knowledge of road conditions, drivers can be more careful behind the wheels.

Vehicle operators supplied with better data are better able to avoid vehicular accidents. This is a great example of how real-time climate analytics — powered by connected IoT technologies — can improve the way insurers do business.

Visit Verizon Insurance Solutions to learn more about Verizon and how you can use Big Data to help improve your business outcomes.

To contact Stephen Busateri, please email Carlos Arcila at carlos.arcila@verizon.com.