Data Crunching Catastrophes

How insurers are using climate data to better predict and manage weather risks.

June 28, 2017 Photo

When it comes to severe weather events, claims, risk, and litigation management professionals can count on one thing: They will happen. The when, where, and duration may vary, but there always will be an impact on businesses and citizens. 

From a claims perspective, the challenges grow as the intensity of severe weather events increases. In its Global Catastrophe Recap for February 2017, Aon Benfield estimates a nearly $1 billion toll on U.S. insurers for the month, due in part to the volume of severe weather outbreaks. 

To more thoroughly assess risk, protect against fraudulent claims, and ultimately validate claims for their customers, insurance providers are turning to an emerging set of advanced weather data tools. In 2015, Novarica stated in its Analytics and Big Data at Insurers report that 20 percent of insurers were using weather data already, while another 30 percent said they might use it in the near future as a key component of their analytics strategies—a number that has surely grown as more sophisticated tools hit the market. 

Access to sophisticated climate data not only enhances claims management, but also helps insurance companies expand their territories. Understanding which parts of the country are most vulnerable to particular types of extreme weather can give insurers a competitive edge and provide invaluable intelligence on where they should expand coverage plans. 

Whether determining where the highest probability is in a given month for hail, snowfall over six inches, or tornadoes, or assessing individual claims after a major weather event, climate data is indispensable for insurance companies. Following are some areas where insurers are making the most use of these emerging tools. 

When Lightning Strikes

The cost of U.S. homeowners insurance claims from lightning strikes totaled $790 million in 2015, paid out to nearly 100,000 policyholders, according to the Insurance Information Institute. Meteorologists have long viewed lightning as merely a weather byproduct, but over the past few years, lightning analysis technology has advanced significantly. Today, lightning activity is being used to predict atmospheric events, thereby improving citizen safety and helping businesses in weather-sensitive industries reduce risk and improve operations.

For claims and risk management professionals serving homeowners and businesses, lightning data can be analyzed at a granular level to learn where, when, and how often the most powerful strikes occur. Illustrating a historical, accurate picture of lightning strikes that indicates both predicted and actual storm severity levels helps insurers quickly and accurately dispute or verify storm damage claims and prepare for future events. 

In addition, ground-based lightning sensors that detect in-cloud lightning can help determine if a storm has a higher probability for downburst winds, large hail, and even tornadoes. Total lightning detection includes detection of in-cloud and cloud-to-ground lightning data, and this data is fundamental to the real-time identification of thunderstorm development, location, coverage, intensity, and trends. These sensors can pinpoint within 200 meters where cloud-to-ground lightning strikes.

The launch of a space-based lightning sensor will further aid lightning data collection by dramatically enhancing lightning measurement and research. In particular, the Geostationary Lightning Mapper will help improve severe storm tracking in remote but populated areas, and over oceans. 

All Hail Better Data

In the past, insurance companies were forced to investigate claims after a hailstorm through on-site visits with rudimentary tools such as tape measures and ladders. Today, with the help of satellite mapping and detailed weather data, insurance companies can investigate and track storms with unprecedented accuracy and precision.

This helps insurers find and address the most severe damage claims, and also identify which cases need further investigation. By layering weather data with aerial shots of a location, a claims professional today can gain a clearer understanding of each hail damage claim before visiting a location in person.

Through predictive weather analytics, insurance companies can plan ahead of major storms and better prepare for upcoming severe weather events. This also increases the efficiency of those analyzing the cases, allowing them to review over twice as many cases each week. 

By giving an insurer a better picture of each case, and the customer better tools for submitting claims with more details, hail data and weather tracking tools greatly improve the claims submission process.

Predicting Risk 

Climate models aid the study of weather and climate dynamics, and guide future climate projections. These models help answer questions such as: Which coastal regions will be more prone to flooding caused by predicted rising sea levels? Which areas are most vulnerable to the effects of climate change?

For insurers, these climate models can be used to conduct longer-term risk assessments and more accurately develop insurance products for each region they serve. 

The pervasiveness of global weather sensors, meanwhile, ensures that more accurate and detailed weather and lightning data can be captured and analyzed. At the same time, insurers can benefit from a growing diversity of Internet of Things-connected technologies, such as road and in-vehicle sensors. 

Additionally, radar technology can predict and detect potential flash floods and tornado touchdowns. Insurance companies can assess real and observed weather information when reviewing weather-related claims, and use ground-based sensors to determine if a weather-related event occurred in a given area.

Weather data not only helps insurers assess claims after an event, but also it can assist insurers in warning customers of impending weather risks. For example, a business can learn about the potential for power outages and flooding based on the location of its property. Weather data also can help customers from a human resources perspective if it is used to alert businesses of pending storms so that proper precautions can be taken for employee safety.

Severe weather presents a complex challenge for insurance companies and their customers. Access to advanced weather tools and technology arms insurance claims, risk, and litigation management professionals with the data they need to better validate claims and explore new growth opportunities.

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About The Authors
Mark Hoekzema

Mark Hoekzema is chief meteorologist and director of meteorological operations at Earth Networks. 

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