What IBM’s Weather Company Acquisition Means for the Insurance Industry

IBM’s acquisition of The Weather Company unites vast data and advanced cognitive and predictive analytics capabilities and has the potential to extend the range of data products and services insurers could consume.

(IBM Senior Vice President Bob Picciano [left] joins The Weather Company Chairman & CEO David Kenny at the IBM Insight Conference in Las Vegas yesterday. Photo courtesy of IBM.)

IBM’s acquisition of the Weather Company, announced yesterday, upon closing will unite a staggering array of big data- and cloud-related assets that have the potential to be developed into powerful new applications useful to the many weather-sensitive industries, including insurance. IBM reports that the combination of technology and expertise from the two companies will serve as the foundation for the new Watson IoT Unit and Watson IoT Cloud platform, building on a $3 billion commitment made by IBM in March 2015 to invest in related offerings and services.

Matthew Josefowicz, President & CEO, Novarica.

Matthew Josefowicz, President & CEO, Novarica.

Of the many potential benefits to insurance customers, the deal puts IBM squarely into the third-party data business, according to Matthew Josefowicz, president and CEO, Novarica (Boston). “The deal highlights the growing importance of data sources in an analytics-driven, big-data world and puts IBM into the same segment as CoreLogic and LexisNexis, which feels like a seismic shift,” he comments. “Having proprietary access to this level of weather data could be a great asset to IBM as it continues to position Watson as an underwriting and claims resource for insurers.”

The two firms announced a definitive agreement whereby IBM will acquire the Weather Company’s B2B, mobile and cloud based web properties— including WSIweather.comWeather Underground and The Weather Company brand. The terms of the deal were not disclosed. IBM is not buying The Weather Channel—The Weather Company’s TV presence and most famous brand—but the Channel will become a client to IBM, licensing weather forecasting data and analytics under a long term contract.

Vast Expansion of Data and Services Reach

IBM frames the deal as uniting what it calls its own powerful cognitive and analytics platform and The Weather Company’s dynamic cloud data platform, which powers the fourth most-used mobile app daily in the United States and handles 26 billion inquiries to its cloud-based services each day. When complete, the deal would extend the reach of IBM’s cloud data services capabilities and expand The Weather Company’s business capabilities and consumer reach on a global scale. The Weather Company’s cloud-based data platform will allow IBM to collect an even larger variety and higher velocity of global data sets, store them, analyze them and in turn distribute them and empower richer and deeper insights across the Watson platform. The Weather Company’s mobile and web properties analyze data from 3 billion weather forecast reference points, over 40 million mobile phones and 50,000 flights per day, according to an IBM source.

John Kelly, SVP, IBM Solutions Portfolio and Research.

John Kelly, SVP, IBM Solutions Portfolio and Research.

“The Weather Company’s extremely high-volume data platform, coupled with IBM’s global cloud and the advanced cognitive computing capabilities of Watson, will be unsurpassed in the Internet of Things, providing our clients significant competitive advantage as they link their business and sensor data with weather and other pertinent information in real time,” comments John Kelly, senior VP, IBM Solutions Portfolio and Research. “This powerful cloud platform will position IBM to arm entire industries with deep multimodal insights that will help enterprises gain clarity and take action from the oceans of data being generated around them.”

Insurance is one of the industries that can gain from those insights, according to Kimberly Harris-Ferrante, VP and Distinguished Analyst, Gartner Research, who characterizes the acquisition as representing several major changes issuing from digital business evolution. “It moves IBM into the data broker market and gives them a platform to leverage their technology to provide advanced analytics for additional modeling and precision with the application of weather data to the insurance industry,” she comments. “Insurers will be able to layer this on top of existing Internet of Things projects—including telematics—to provide greater business value, such as improved value added services, loss prevention, and customer intelligence.”

Connecting Predictive and Cognitive Assets with Data

IBM’s acquisition of The Weather Company has the potential to improve the quality and extend the range of data products and services insurers could consume, according to Mike Fitzgerald, a senior analyst at Celent. One of the issues holding back insurers’ progress with analytics is the lack of clean, well-defined curated data available in packaged solutions, he notes. Most big data sources remain messy and diffuse and require additional investments in skills and technologies.

Mike Fitzgerald, Senior Analyst, Celent.

Mike Fitzgerald, Senior Analyst, Celent.

“The value to insurers of purchasing meaningful data from credible sources will only increase,” Fitzgerald comments. “Beyond the raw data, IBM should also be able to provide value to insurers by connecting its predictive and cognitive assets with weather data, yielding insights that competitors cannot.

The range of assets that IBM will be able to employ upon the acquisition’s close will include some of the world’s leading meteorological data science experts, precision forecasting capabilities and a high-volume cloud platform that ingests, processes, analyzes and distributes enormous data sets at scale in real time. The Weather Company currently offers a broad range of data-driven products and services to more than 5000 clients in the media, aviation, energy, government, and insurance industries.

Effective Monetization of Weather Information

The scale of The Weather Company’s mobile and web properties is further illustrated by the fact that they handle seven times the volume of the world’s leading search engine, while serving 82 million unique monthly visitors. “The Weather Company’s platform can ingest a wide range of data at massive speed and scale, supporting an incredible volume of queries at very low latency,” according to an IBM statement. “IBM plans to advance The Weather Company’s digital advertising platform and skills, which have driven effective monetization of weather information through data-driven advertising, to build additional ad-sponsored consumer and business solutions.”

The Weather Company’s chairman and CEO David Kenny sees the next wave of improvements in weather forecasting resulting from the intersection of computer science and analytics—which will only be boosted by a successful union with IBM. “Upon closing of this deal, The Weather Company will continue to be able to help improve the precision of weather forecasts and further deepen IBM’s Watson IoT capabilities by enabling the integration of global atmosphere and weather insights with enterprise information to create disruptive industry solutions that optimize decision-making,” he comments.

Anthony R. O’Donnell // Anthony O'Donnell is Executive Editor of Insurance Innovation Reporter. For nearly two decades, he has been an observer and commentator on the use of information technology in the insurance industry, following industry trends and writing about the use of IT across all sectors of the insurance industry. He can be reached at AnthODonnell@IIReporter.com or (503) 936-2803.

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