NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Monday, October 7, 2013

Last week, the American chemicals and biotech giant Monsanto announced that it would acquire a company called the Climate Corporation for $930 million. Given Monsanto’s controversial image in India, some people may have assumed that an outfit with a name like that would likely be a nefarious plan to achieve world domination by controlling the weather like the villain of a superhero film. Nothing of the sort.

ClimateCorp is actually a very interesting company which straddles an intersection between technology and retail financial servicesin an innovative way. Moreover, its approach holds an important lesson for us in India. ClimateCorp is a provider of weather insurance. However, it does so in a retail, online, productised and data-driven way.

Conventionally, weather insurance in the US has been a negotiated and large-scale service which is accessible only to big businesses. ClimateCorp, which was founded in 2006 by two ex-Google employees (funded, among others, by Google Ventures and Vinod Khosla), provides weather insurance to small farmers and agri businesses.

Anyone who needs weather insurance goes to climate.com, signs up and buys an insurance product optimised to their exact needs. If the extreme weather event they had insured against occurs, then they get the payoff with practically no further interaction.

The heart of ClimateCorp is an elaborate software system for analysing weather. It has detailed historic data as well as captures micro-level weather information from a huge range of sensors. It provides adjustments for individual locations as well as gathering pace of climate change. What makes CimateCorp different from the older style of weather insurance is the innovative use of huge amounts of data (big data, as the jargon now goes) to create a new type of business.