It is understandable to ask why the weather insurance industry needs blockchain technology beyond just keeping up with the latest in technology advancements and trends.
The answer is that many traditional insurance products are still standardized, slow, and costly.
According to Swiss Re Institute in the last ten years, only 30% of catastrophe losses were insured. That means 70% ($1.3 trillion) is not covered and those losses are borne by individuals, business, and governments.
Extreme weather has also been on the rise in recent years creating more urgency for new types of insurance products and services. According to NOAA, during the first 9 months of 2018, the U.S., alone, has experienced 11 weather and climate disaster events with losses exceeding $1 billion. These weather events impact areas of business like — agricultural, energy, tourism, travel, and retail.
While some improvements have been made with parametric or index insurance, a product that pays a fixed amount when a triggering event such as a natural catastrophe, or rainfall, cold, heat, or drought occurs. This event-driven product does remove the qualitative judgments of calculating damages by insurers and government agents by using a third-party data source to verify the claim these programs can still be hampered by lack of capital, bureaucratic delays, and many operations are still too small to participate.
Therefore, insurance, especially weather is ripe for decentralization
In short, decentralizing weather insurance can produce a customizable, fast, no-touch procedure that will save insurers millions every year and hopefully lead to closing the protection gap.