It's no secret that 2011 was a record year for catastrophe loss:Carriers incurred $380 billion in losses compared to the previoushigh of $220 billion in 2005. In addition to unprecedentedtriple-digit heat and drought, the number of severe naturalcatastrophes globally was unparalleled.

2012 has not yet proven to be quite as extreme as 2011, butsignificant global insured losses are already accruing. Accordingto Aon Benfield, losses for the month of April are close to $1billion, with a significant contribution from U.S. storms andtwisters. May is typically the most active tornado month of theyear in the U.S., and the potential for greater losses like thoseseen in 2011 still exists.

With the possibility that thunderstorms, tornadoes and hail areeither increasing in frequency and severity or migrating locationsin which they most commonly occur, carriers and reinsurers areexpressing the need to become more aware of weather trends.

In recent years, carriers have focused significant effort andexpense on retooling their claims operations to become moreresponsive, accurate and efficient, as well as investing in newtechnologies including claims systems, interactive call centers,tracking and scheduling systems, and mobile applications. Thegreatest opportunity to gain or lose customer loyalty occurs duringa claim, and carriers' efforts to modernize have been relativelysuccessful in increasing customer satisfaction.

But customer loyalty is not the sole concern. Carriers typicallyspend 3-5 percent of every premium dollar in adjustment expense,and getting a response team on the ground can be challenging andcostly during the time immediately following a storm. The role ofthe field adjuster is still critical in surveying the damage,scoping out the loss, and taking photographs and measurements onsite—but it is a costly and time-consuming process to complete thiswork. The more of this claims work that can be done from the desk,the more efficiently and cost-effectively claims can beprocessed.

The good news is that there is an enormous opportunity tofast-track the process of accurately identifying the number andseverity of potential claims, thus reducing processing costs.Sophisticated weather and claims analytics tools are now availablethat can minimize the manual efforts associated with determiningthe extent of weather-related losses.

Advanced awareness of location-specific weather patterns canallow carriers to preposition staff and prepare resources—and thesetools can accurately map the areas in which to deploy adjusters,thereby saving time and expense. Furthermore, by clearlydelineating the area of impact and the severity of the storm,anomalous loss patterns can be more clearly identified by both sizeand location; claims that fall outside of the range of probabilitymay be the result of a prior storm or even fraud.

There are several trends in the most cutting-edge weathertechnologies and analytical tools that will bring down costs andincrease accuracy of claims processing.  But in order forinsurers to effectively automate some of their claims estimations,two important factors must be considered:

• For weather and environmental datato have value, it must be highly accurate; low-resolution data willbe insufficient to make useful predictions. Interactivehigh-resolution maps with detailed shape-mapping of hail size andlocation can provide much greater insight into the probablemagnitude of loss from a weather event. By leveraging these maps,insurers can not only identify which properties were likelyimpacted by a storm but also estimate the severity of the potentialdamage.

• In order to accomplish the most accurate estimationof damages, yesterday's toolbox of weather radars alone cannotaddress the issue: Weather data must be synthesized from multipleplatforms. Lightning, hail, wind and tornado damage frequentlyoccur simultaneously and can have regional synergistic effects.One-inch hail may cause minimal damages to roofs in one area, butcombined with high wind shear, the severity of damages can beincreased and the mapping of that damage may be directionallyskewed. Multiple platforms from computer models tointelligence-grade satellite processing are now available to assistin depicting a more complete picture.

A platform that integrates data sets from the carrier can alsobe quite valuable in accurately deriving a range of probable lossby property. By overlaying policy-in-force data onto weather tools,carriers can more quickly estimate loss reserves by calculating theproperty values and deductibles of the policy against thelikelihood and severity of the event.

Renee Beauford, vice president of claims for Hastings MutualInsurance Co., has found significant benefit in leveraging thesenext-generation weather analytics tools. "We use AER Respond on adaily basis, overlaying high-resolution weather data with ourclaims and [policies in force].  Ingesting theirnear-real-time data gives us an edge on deploying the rightadjusting resources to the right problems quickly andaccurately."

Integration of tools such as these into existing workflows canstreamline and standardize the process of analysis. Valuationtools, like those used by appraisers or contractors to determinebuilding and replacement costs, can also be incorporated intocalculations for even greater accuracy. Ultimately, the goal is forthe insurer to be in a position to anticipate and quickly respondto any claim initiated by the policyholder.

As weather- and Earth-observation companies acquire morehistorical-cause-of-loss data over time, the future of weatheranalytics is moving from the claims to the underwriting side,managing risk profiles based on statistics for more granularregions rather than using generalized maps that may not take theindividual variations between properties into consideration.Insurers may not be able to control the frequency of catastrophes,but they can certainly control their losses through better claimsmanagement—and ultimately, through better underwritingmethodologies.