More (weather) derivative goodness.
As you may recall, a couple months ago Weatherbill announced a partnership with Priceline, underwriting a promotion they ran that would reimburse the cost of your holiday package if it rained more than half the days during your stay.
It’s always important to put theory to the test and so I was happy to see that the promotion seems to be a success:
In June, 12% of Priceline’s site traffic clicked on a promotion. While the Sunshine Guarantee promotion may attract only a niche audience (0.2% of Priceline shoppers), those who do click on this promotion are highly likely to convert – an impressive 24% of Sunshine clickers will complete a booking. Despite attracting relatively few clickers, it resonated with its audience and led to strong conversion rates, showing just how effective a smaller, targeted promotion can be.
I’m sure we’ll see more and more of these sorts of embedded derivatives in weather-sensitive consumer products. While you may go to the time and effort of directly hedging your wedding, the average person – even if they were aware of an easy-to-use product like Weatherbill – probably will be too busy/apathetic/forgetful to hedge something smaller – like a day out golfing. But embed the coverage into the product (or at least make it as easy as ticking a box) and I think demand will be very high. The days of “NO RAIN CHECKS” are surely soon behind us…
