Accurate weather forecasting is critical for risk management, according to Matthew Porcelli, a meteorologist at The Weather Company. Digital Insurance spoke with Porcelli about how insurance companies need access to accurate weather data.
Porcelli grew up obsessed with weather, which is a common story among meteorologists. He has been working for The Weather Company in various roles for 18 years. Currently, he is on the enterprise side, where he's helping corporations understand how weather impacts their business.
Porcelli is also a storm chaser. "I love it. Two years ago now, I was chasing the first tornado ever recorded in the state of Wisconsin, in the month of February. I was literally on the tornado that changed how we do tornado siren tests in this state. It used to only be from March to October, and now they have to do it year round."
The following conversation has been lightly edited for clarity.
Can you share about the impact of accurate weather forecasting for the insurance industry?
It's an industry where weather is absolutely essential and integrates into every facet of an insurance company, and so making sure you have the most accurate data is both important from the underwriting process where you're trying to understand risk all the way to considering the timeframe around an actual loss. Every moment from the preparation to the moment the event is happening, to the immediate aftermath, as well as the long-term resolution of claims. Weather can be a critical component across that entire spectrum. At the end of the day, if you don't have the most accurate weather data, then you're undermining the quality of the solutions provided to policyholders.
There's a whole host of different ways you can look at accuracy, because there are so many private weather providers out there today. One thing that's really interesting about accuracy is we have both public and private weather vendors out there, and so it is extremely difficult to assess accuracy across the spectrum of companies that are out there. And so this is why Forecast Watch is so important. Forecast Watch is a third-party weather data provider that pulls in information, they look at 24 different weather data providers, and evaluates accuracy off of a set of requirements.
Would you explain more about the use of timestamped, hyperlocal forecasts being used in claims?
I love looking at timelines for insurance companies and when they can take what actions. One way to look at a timeline for insurance companies is when I have a claim, and the events leading up to that claim and the events following that claim, I think you'll understand why this is so important to have accurate, timely weather information as well. Today, insurance companies really only have interactions with their policyholder for two events, and maybe a third, but it's going to be when you sign up for a policy, and it's going to be when you have to file a claim. That third is they might send you a birthday card if you have an agent, but usually these are touchpoints that are few and far between, and an area that insurance companies are really trying to improve is this idea of trust.
And to be trusted, you need to be there. You need to be the trusted advisor to your policyholder. And so one component we've really been pushing is there are things you can do to protect your property from having impacts to weather. You can secure loose objects, you can make sure you have gutters that have leaf protectors, and even roof damage. You could have damage to your roof that may have happened, if it's a vacation property, when you were away from home and you were unaware of it, and you start getting a leak in your roof, and you don't notice that until the damage is much worse. And so there's all forms of mitigation and messaging that you can do well in advance to make sure people are prepared.
A lot of policyholders are not aware of the gaps in coverage they have with their insurer. And so we found in many places, things like flood insurance, people are unaware what their insurer is covering for flood damage. So when an event happens and then they suddenly find out their insurer is not covering flood that's a very negative touchpoint. So having this ability to notify their policyholders of gaps in coverage, even if there's a nearby event.
The first hurricane that makes landfall in a given year, if it's not impacting your policyholders, it's a good time to remind people about the dangers of hurricanes. So that's like the long range, the short range, which gets really interesting, are mitigation tactics. You can take even 30 minutes before an event occurs. So we provide 30-minute hail forecasts, where insurers can alert their policyholders to move their cars into a garage, or maybe if they're getting ready to leave from work to travel home, you get a notification saying, 'Hey, it's better to stay put wait for this storm to pass before you drive out there.' And this is a positive interaction, and we see a high level of interest from policyholders taking in that information and taking action on it.
Then we have when the event happens. Even a notification that an event has happened within minutes of it occurring can be incredibly valuable. A lot of these insurance companies do not have the call centers on demand to handle volume, and so by knowing within minutes that an event has occurred, like a massive hail event, they can actually spin up third-party call centers or push notifications prior to people calling in to say, 'Hey, we understand you were impacted by a hail storm. Here are the steps you can take to file a claim digitally through our app.'
We have one major insurer we work with, there was a hail event within Denver, Colorado. This was many years ago, but they got 5000 claims calls within the first 30 minutes following an event. So imagine trying to handle that with normal operations. You're behind the curve. It's hard to catch up.
The other thing we found with insurance companies, is a satisfaction around the speed to a claims payout. We hear this all the time right now where you have a major cat event, there's not enough adjusters to go out and assess the damage to a home and so leveraging weather data.
Do you think parametric is a realistic solution to fill insurance gaps?
I've always looked at parametric insurance as being supplemental insurance that can be incredibly valuable for insurance companies, because you don't need to send out an adjuster. It's based on if a specific criteria occurs, we pay x out to you based on the policy you bought. It's not related to damages.
Parametric is much more designed around shorter time scales, you can buy parametric insurance for a specific event. I just booked a camping trip that had a policy request on there to cover me for if it rains during my trip, I actually get paid out. But you can use data, short-term forecast data. You don't have to do this exhaustive underwriting study to do parametric analysis; you can just look at what the forecast is for the next seven days, look at what the risk is, and then price it appropriately. So this is one of the reasons why I find parametric so critical. It fills the gap between your standard policy and if you need additional supplemental insurance, if there's a major weather event that might impact you.
What is the impact of the defunding of NOAA and FEMA?
We have, and will
What do you see ahead?
I have three main lines I usually say about insurance companies: insurers need to be available, they need to be relevant and they need to be trusted.
If you look at the breakdown today, 50% of insurers are agent based, and somewhere between 25% are online and 22% are mobile, direct insurers. If you look at that breakdown, I think it's really important whether you're getting your insurance digitally or whether you are getting your insurance through an agent, is to continue to provide information to be relevant on a day-to-day, rather than just when there's a catastrophe.
