New Understory Tie-Up Aims to Help Insurers Reduce Claim Costs
A little over a year after Understory began working with Pacific Specialty Insurance Company, the two organizations are now announcing a collaboration aimed at lowering the amount of money insurers pay policyholders for weather-related property damage.
Madison, WI-based Understory, a weather technology startup, says it worked with Palo Alto, CA-based Pacific Specialty to reduce the amount in insurance claims it paid out following a severe hailstorm in Denver earlier this year.
“Understory is changing how we handle weather-related property damage claims,” Cory Candelario, a vice president at Pacific Specialty, says in a prepared statement. “Because of Understory, we are able to make better decisions within our claims processes.”
The weather stations Understory builds and installs in cities across the U.S. can measure things like rain, hail, wind, temperature, and humidity. These solar-powered stations, which typically sit atop flat-roofed commercial buildings, each have a desk lamp-sized sensor mounted to a 10-foot pole.
Understory owns and operates its weather station networks. The startup makes money by selling some of the data it collects to businesses like Pacific Specialty and Madison-based American Family Insurance, says David Moe, a senior sales engineer at Understory.
Moe says his company recently analyzed data from several insurance carriers of varying sizes. (He declined to identify them by name). Understory says it found that the data it gathers using its sensors can cut insurers’ claims expenses by 15 percent in the aftermath of a storm. The goal of Understory’s partnership with Pacific Specialty is likewise to “reduce weather-related property damage insurance claims by 15 percent, which could amount to $455,000 for a single major storm event,” according to a press release.
Pacific Specialty and Understory first announced they were working together in May. Moe says there is no revenue-sharing model with the new collaboration; instead, it’s aimed at deepening the relationship between the two organizations, he says. They’ve worked together to use sensors, cameras, inspection data, and other tools to better understand how different types and severities of weather damage connect to an insurer’s bottom line, Moe says.
Providing more and better data to insurance adjusters helps them make more accurate damage reports, so carriers don’t end up paying out more in claims than they need to. Moe says that following a hail storm, for instance, insurers typically send adjusters to every property that could be a potential loss.
“One of the things that we do with our data is we improve the way in which [Pacific Specialty and other insurers] assign adjusters,” he says. “We build profiles for adjusters on the skill sets that they have, and how they efficiently manage claims.”
Understory has set up its networks in five metropolitan areas: Denver; Dallas-Fort Worth, TX; Houston; St. Louis; and Kansas City, MO. The company estimates that there are about 6 million homes within two miles of an active station, Moe says.
The Dallas area, in particular, is a place where “carriers are really struggling to insure right now, just because of how hard it gets hit by weather,” Moe says. Understory believes that makes insurers with policyholders in the area good candidates for using the startup’s hardware and software tools.
Moe says that in addition to retrospectively analyzing weather data, Understory is also working with insurers to develop a messaging platform they could use to alert policyholders when inclement weather enters the area.
“We’re working on short-term forecasting,” he says. “Essentially if one of our stations on the southwestern corner of the metro [area] gets hit, can we then project out which direction that storm is moving and then proactively message policyholders, to mitigate loss? [An insurer might say], ‘Put your car in the garage, bring patio furniture inside, protect your assets in the next 15 or 20 minutes, because hail is on the way.’”
Moe says some leaders at his company are currently attending a conference in Munich, Germany organized by Digital Insurance Agenda, as Understory considers expanding internationally.
In addition to insurance, Understory’s technology has applications in agriculture, providing hyperlocal weather data that helps farmers manage their fields. Monsanto Growth Ventures, the investing arm of agrochemical and seed giant Monsanto (NYSE: MON) co-led Understory’s Series A funding round last year.
“We’re actively working in agriculture right now,” Moe says. “We’re deploying in Argentina as we speak, and also looking at deploying to two countries in western Europe for agriculture in the next several months.”