Adaptive Insurance offers businesses new protection against power outages

The increase in severe weather risks like hurricanes and tornadoes, can knock out power to millions of residents when power grids are affected. The impact from losing power can be especially hard on small and medium-sized businesses, since according to FEMA, 40% of businesses do not reopen after a disaster and another 25% fail within one year. According to the Electric Power Research Institute, a power outage can cost a business an average of $5000 per minute.

An Austin-based company is seeking to increase the odds for many businesses by offering a new option to protect against climate risks. Adaptive Insurance, which uses AI and climate data to provide short-term, parametric coverage can help companies craft a policy that enables them to select the outage period and coverage amount needed for recovery. Through its GridProtect coverage, Adaptive can verify the outage via third-party data and pay the insured, often within days. Covered perils include wind, precipitation, wildfires, floods and even temperature fluctuations (heat or cold).

A parametric policy can provide insurance for a short duration before a traditional policy goes into effect, and technology is improving the options available.

Technology’s role in verification
“Adaptive’s technology plays a critical role in identifying and verifying the outages and businesses affected,” Adaptive CEO and co-founder, Mike Gulla, told Digital Insurance in a statement. “We can’t do what we do without the technology. We use real-time grid data to proactively identify outages at a granular level, i.e., street addresses. We also use our technology to cross-reference with weather data and integrated IoT devices to help verify that an event occurred. All of which allows us to completely automate the claims process.”

The ability to reduce the financial shock of a power outage can remove much of the financial uncertainty for businesses. Power grid failures have increased in frequency as systems age and weather becomes more severe. In Texas, over 210 climate-related outages have occurred since 2000.

As many companies find new uses for AI, Adaptive is using it proactively. “The core of our technology lies in our AI model. It powers the data analytics that lets us build better products and pricing models with customization, flexibility, and rapid deployment that weren’t available even five years ago,” says Gulla. “We can integrate the claims processing as well as risk management and underwriting, all leading back to confidently identifying and verifying the outages and businesses affected.”

Initially, Adaptive is focusing on the commercial market and SMBs (2-500 employees) in the U.S., an underserved market that suffers $150 billion in losses annually from power outages, however, only 60% of the companies have insurance. “We are targeting business types more acutely affected by business interruptions caused by weather events and the increasing gaps in traditional insurance, including those in retail, hospitality, professional services, clinical and medical offices, manufacturing and construction,” shares Gulla.

Adaptive Insurance is one of the first companies from Montauk Climate, an incubator that is focused on climate technologies. “Climate and weather events cause $1 billion in damage every three weeks in the U.S.,” said Philip Krim, founder and partner at Montauk Climate in a press release. “We launched Adaptive to address this immense and growing problem with a novel approach that is both effective and scalable.”