We had a few mentions of WeatherBill early in this blog's life but I couldn't figure out how to make money off their output, it looks like a product made for selling, not for buying....I purloined the "product made for selling, not for buying" bit from an insurance man who evaluated every insurance product on the basis of whether he would use it to insure his own business or if he would underwrite it for his agents to sell. A very handy mental map. You'll see why that line came to mind in this post from Greentech:
The startup says it will help farmers insure against bad weather.
WeatherBill says it will use probability to insure farmers against the unexpected.
The question now is which side -- certainty or chaos -- will win.
The company, which received a $42 million injection from Google Ventures, Khosla Ventures, NEA and others today, has produced a product called Total Weather Insurance. In a nutshell, it exploits the magic of probabilistic computing, the underlying technology of Google and other search engines, to predict weather patterns and help farmers plan accordingly.
The company's algorithms continually examine streams of incoming weather data, past history, local conditions and other factors to devise a personalized insurance policy for a farmer. Then, if the farmer experiences unusual amounts of rain or snow, or a lengthy drought, WeatherBill pays the claim automatically. (Last year we predicted Google would shift its green investments toward technologies that took advantage of its expertise in probability.) Founders David Friedberg and Siraj Khaliq came from Google.
The company charges $15 to $75 per acre per policy. Here's an example of how it might work. Let's say a farmer buys drought coverage for $10 an acre for the month of July. The farmer under this policy might get $100 per acre if rainfall is 2.31 inches less than normal, and $50 an acre if it is 1.15 inches less than normal. Premiums are calculated on the likelihood of loss. But what if nothing bad happens: the accumulation of those premium payments indicates why WeatherBill opts to be an insurer rather than a company that provides weather forecasting and planning services.
“Nine years ago we had a very dry growing season in rural Ohio. A year later we experienced 14 inches of rain in 10 days. The flip flop of weather from one year to the next is the biggest challenge farmers face,” said Steve Wolters, a farmer growing corn, soybean and wheat in Celina, Ohio in a prepared statement. “It makes sense to me to take advantage of WeatherBill’s automated weather insurance programs that pinpoint the weather conditions expected to affect my land and pay me if they happen."
Insurance, of course, is a cash cow. The millions of acres controlled by large agribusiness firms mean that the market potential is huge. How many times have you collected on your homeowner's policy or auto policy? Warren Buffett made a substantial portion of his fortune through insurance. When I practiced law, I felt I could have done my job more efficiently if I owned a parrot that was trained to say, 'Coverage denied.'
Traditional insurance, however, avoids assuming one type of risk like the plague: acts of God, otherwise known as earthquakes, lighting, tornadoes and bad weather. WeatherBill assumes some of these risks. The company also notes that 90 percent of crop losses around the world are caused by inclement weather. And the recent droughts in Ukraine and floods in Australia underscore that weather is getting wackier as the climate changes....MORE including some sharp comments.That last sentence is troubling because:
a) "Wackiness" is the exact opposite of what insurers look for, it reduces them to being just another punter on one side or the other of a bet.
b) Not even AGW-rabid climatologists are claiming that the weather in 2010 is the result of the 7/10 degree C rise in average world temperature over the last century. At most an actual scientist might pitch the line that "X" weather is "consistent with" some model or other.
c) In the case of the Russian/Ukraine heat wave of last summer NOAA a seriously AGW bunch said:
...The Russian heat wave of 2010 has been an extreme and abrupt event. The July heat did not simply follow on the heals of a sequence of progressively warmer summers over recent decades, but stands out as a discrete event that is reminiscent of the often sharp year-to-year swings in this region's July surface temperatures during the last 130 years. In many ways,the heat wave is a "black swan" event in that it is well beyond the normal expectations in the instrumental record....The part between the ellipses is worth a read.
....Despite this strong evidence for a warming planet, greenhouse gas forcing fails to explain the 2010 heat wave over western Russia. The natural process of atmospheric blocking, and the climate impacts induced by such blocking, are the principal cause for this heat wave. It is not known whether, or to what exent, greenhouse gas emissions may affect the frequency or intensity of blocking during summer. It is important to note that observations reveal no trend in a daily frequency of July blocking over the period since 1948, nor is there an appreciable trend in the absolute values of upper tropospheric summertime heights over western Russia for the period since 1900.....
And contrary to what some were saying last August the Pakistani floods were probably weather not climate.
See "Rogue storm system caused Pakistan floods that left millions homeless" at EurekAlert.
So if you are paying insurance premiums based on global warming, whether to WeatherBill or the more sophisticated marketers at MunichRe, you may be violating M*A*S*H's Radar O'Reilly's first rule of poker:
"When I lose I like to know why."