(Bloomberg) -- Sudden downpours on a planned big city weekend, a family glamping getaway or tee time with friends: We’ve all experienced weather ruining our vacations. With climate change growing more unpredictable by the year, Los Angeles-based Sensible Weather Co. is offering a hedge: supplemental insurance coverage that automatically sends you a refund if the weather turns bad.
The climate tech and insurance startup currently partners with a small range of travel and recreation companies, from resorts to theme parks, to offer a weather guarantee as an add-on to reservations. The cost ranges from 8% to 12% of the total booking price.
Founded just before the Covid-19 pandemic hit, Sensible Weather obtained $12 million in Series A funding in 2022 from San Francisco-based Infinity Ventures, including Certares Ventures and executives from Airbnb, Pacaso, Plaid and Toast. Its latest investor is EP Golf Ventures, a partnership fund between the Professional Golfers Association of America (PGA America), a nonprofit trade association with 28,000 PGA professionals, and Elysian Park Ventures, the sports venture capital firm owned by the Los Angeles Dodgers. The investment amount is not publicly available.
“Golf rounds are slightly down in California since the beginning of the year, and that’s because of weather,” says Arjun Chowdri, chief innovation officer at PGA America, adding that plans to offer a weather guarantee provide value to PGA professionals who run golf facilities, with the individual golfer having a better experience.
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Approximately 13 companies currently offer Sensible Weather coverage, including luxury outfitters Autocamp, Collective Retreats and Yonder Escalante, as well as the ski lift ticket platform Liftopia; Midtown Manhattan hotel the Renwick signed on March 21. “Now we just need the partnerships to really sell it at scale,” says Nick Cavanaugh, founder and chief executive officer of Sensible Weather. “With PGA and others, we’re going larger and larger.”
How does it work?
Sensible Weather promises weather insurance with no claims to file and no waiting periods for your refund. Let’s say you paid $12.78 to protect a $115 one-night camping trip in Tennessee in June, and then it rained for at least three hours. Under the terms of the Sensible Weather guarantee for that booking, you’d receive a 100% refund.
Another example: If a family purchased $230 worth of tickets to a Mississippi water park and paid $9.50 for the weather guarantee, they’d get a full refund if it rained three hours. The parameters vary according to the brand, location and time of year.
Because Sensible Weather continuously monitors the weather in guests’ locations, the claim is automatically triggered when conditions are met; customers receive a text message to collect.
“We have an enormous amount of weather and climate data sitting behind the scenes housed on Amazon cloud services, so hundreds of terabytes of data which we churn through on the fly to understand the probability that your beach vacation may get rained out,” Cavanaugh says.
The formula that Sensible Weather’s staff of engineers and data scientists uses comes from sources including the National Weather Service, the National Oceanic and Atmospheric Administration and NASA. Radar, satellites and modeling centers feed into the algorithms the company uses to understand risk.
The property perspective
Noah Ellis, CEO of Yonder Hospitality, sees offering Sensible Weather protection as primarily about guest satisfaction, especially for highly seasonal properties. Partners do get commission revenue, but it’s small, he says.
“We’re about 4 ½ to 5 hours from Las Vegas and Salt Lake City,” he says of the Yonder Escalante location, near Bryce Canyon National Park. “You’ve really given up a day, each way, to come visit us. If you’re trying to have a campfire or cook a meal over a fire, it can really ruin your experience” should it rain. There would also be certain hikes guests couldn’t do—slot canyons, which are very narrow canyons between rock formations, can become deadly when an inch of rain pours into them.
“Giving guests that mechanism to have some control and peace of mind for us is really important,” Ellis says. Approximately 12% of bookings have added on the weather guarantee so far, depending on the month.
Hedging risk
Cavanaugh says risk factors in his business model are no different from travel insurance. There’s a margin included that reflects what goes to the company, plus the 2% commission that goes to its partners. “All of these things add up to the price that the consumer pays when they purchase the weather guarantee. We’re selling this thing that ultimately covers a low-probability event but we add odds on top of that to make sure that on average, we’re covering our losses,” he says.
And, of course, it’s not meant to be a replacement for more robust travel insurance. “Typically, with travel insurance you’re getting a lot more, says Meghan Walch, director of product at InsureMyTrip, pointing to coverage for delays, lost bags or emergency medical care. “It’s a whole package of coverage, with some benefits related to weather.”
The latter are limited, however, to flight delays or cancellations and trip interruptions resulting from inclement weather. There’s also the effort of filing claims and what may be a long wait for a refund.
Europe is the next step for Cavanaugh, with partnerships with Campsited in the UK and to-be-announced tour operators and mountain destinations in France and Switzerland. Sensible Weather also plans to offer new types of weather guarantees in the near future to cover a range of “perils,” as they’re called internally: Wind, air quality, too much snow or not enough snow. With a service like this, maybe rainy days and Mondays don’t always have to get you down.
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