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A Startup Trying to Help Car Dealers Weather Hailstorms
- neonate 7y agohttps://outline.com/psTmaB https://outline.com/psTmaB https://web.archive.org/web/20191112155656/https://www.bloomberg.com/news/articles/2019-11-12/how-one-startup-is-trying-to-help-car-dealers-weather-hailstorms https://web.archive.org/web/20191112155656/https://www.bloom...
- rudiv 7y agoYou are a gentleperson and a scholar.
- heyflyguy 7y agoWohooo! Real people solving real problems.
- zackbloom 7y agoCan anyone help me understand how having this data actually lowers insurance premiums? The same number of cars are being damaged by the same number of hailstorms with or without them.
- heyflyguy 7y agoThat's what I am wondering.
- lordnacho 7y agoYou want to look up adverse selection and moral hazard in an economics text about insurance. Basically if you have some mixed population where some are lower risk and some higher, and they're separable, the low risk people will decide the insurance is not worth the premium. That leaves the higher risk population on the books, which will cause problems for the insurer of they had assumed they'd get a nice sample of the population. So maybe some car dealers are aware of possible hail storms in their region but for some reason their particular shop is protected. Maybe by hills that drop the hail on the other side or something that which gross aggregates might miss. Moral hazard plays in as well. If you're protected maybe you place more cars outdoors than you would otherwise, raising the costs to the insurer.
- pg_bot 7y agoWouldn't installing canopy systems be a more cost efficient solution to this problem? Let's do some math, The dealership listed in the article (Rickenbaugh Automotive Group) currently has ~536 cars listed on their website(s) for sale. I'm going to assume that this number is a little lower than what is actually in inventory given that there are trade-ins and they probably don't restock inventory during the middle of the month. So I will round up to 600 cars to give them wiggle room for expansion and sales. Given their insurance policy is costing them $600k per year we are approximately spending $1,000 per car per year for insurance. There seem to be companies that make canopies for this exact situation. While I can't find pricing I would have to imagine that the ROI looks pretty attractive given the sheer cost of their insurance and the simplicity of the materials involved in building a canopy. (metal beams and mesh netting) Why not just solve the problem entirely instead of coming up with an exotic insurance policy?
- davidhyde 7y agoExactly. This "God's Joystick" essentially just gives the insurance industry more data to build more accurate risk models. It's essentially pricing the market more perfectly without solving the actual problem itself which is hail. The article should have pointed out to the reader that this should bring premiums down in areas that have so little chance of hail that it is not worth building physical protection. Right now, the data is not granular enough so insurance companies spread the cost over areas that they shouldn't.
- moonbug 7y agoyes because insurance companies are all about minimising profits
- throwawayhhakdl 7y agoPricing things with a better underlying risk model is likely to lead to more profit, or at least, a more predictable profit.
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- whitebread 7y agoI can see where relying on a black box could get really hairy though. What if it’s a light storm that produces virtually no damage but the device produces a payout? What if the exact opposite happened? Who is programming and vetting the code?
- lllr_finger 7y agoGreat points. Basing a damage payout on anything besides actual damage feels counter-intuitive. Insurance companies already know where heavy hail falls - there are several companies with products that correlate hail reports with the dual-pol radar Hydrometeor Classification Algorithm product. Any sort of black box won't be able to assess the hardness of hail, the distribution of hail or how the wind is driving it. I've seen damage from dense, hard 1" hail cores, and I've driven through softball hail thrown out the back of a storm without any damage.
- t0ddbonzalez 7y ago>"Two years ago he paid about $160,000 to insure $20 million worth of Cadillacs and Volvos on his lot, where about a third of the inventory is kept outside. This year he’s paying almost $600,000." Surely a dealer could install some hail-proof canopies for a lot less than $600,000? Something like this perhaps? http://www.wssl.com/Car_Lot_Canopy.html http://www.wssl.com/Car_Lot_Canopy.html
- t0ddbonzalez 7y agoSomething like this perhaps? http://www.wssl.com/Car_Lot_Canopy.html http://www.wssl.com/Car_Lot_Canopy.html
- eunoia 7y agoA little weird I can answer this, but I bought my Volvo through this exact dealership. They have a very space constrained layout especially for inventory display, as their dealership is at the junction of some odd angled non grid streets (namely Speer). I.e they’re an urban dealership that just doesn’t the have room.
- mhb 7y agoI was wondering how they were going to do this with AI and drones...
- netsharc 7y agoDrones fly around and use ML to recognise hail, and when it detects hail, sends a signal to self-driving cars to (cue Monty Python's Holy Grail:) "Run away! Run away!"
- giarc 7y agoI live in a city with big, annual summer hail stones. Many dealerships have built canopies and it seems to be working. I also have friends in the auto industry and the interesting thing is they said hail isn't the worst thing, they actually profit quite a bit. Basically insurance will appraise the new value of each car and write a cheque (ex. $10k for each car). The dealership can still sell the car as "hail damaged" and offer the buyer a $5k discount. Buyer thinks they are getting a great deal, the car just has some dimples, but $5k is $5k right. The deal then makes an additional $5k off the car. However this breaks down if hail insurance premiums are going up.
- travmatt 7y agoDealers can take the money, fix the damage and still sell the car as brand new - if it hasn’t been titled yet, body work doesn’t need to be disclosed to the buyer. Dealers usually have in house body shops or relationships with body shops and pay labor + supplies in the repairs. A bigger issue is the backlog of work that quickly accumulates in the aftermath of a hailstorm.
- pfranz 7y agoI imagine "the market" would correct for that profit. The $10k for each car comes from their insurance premiums. If they don't need the full payout, it make sense to want to pay less in premiums.
- seattle_spring 7y agoThis was basically The Climate Corporations business model to the T, before they switched to farm insurance. Their name was Weatherbill.
- LatteLazy 7y agoAm I missing something or will this make no real difference? Ultimately if there is a hailstorm then the insurer has to pay out, premiums have to cover that. Measuring whether there was a hailstorm or not might help to prevent fraud. Fixed payouts would help to reduce the cost of accessing damage. But neither change the core maths here: more, heavier hail means more payouts, means higher premiums.
- Cthulhu_ 7y agoYeah, reading the headline I was suspecting it would be something that would erect a cheap weather-proof roof or something like that. Why not put on inflatable car covers when there's bad weather coming up? Or invest in a bigger showroom or a roof without windows; if the insurance premium for not having that is 100's of K's a year then it makes financial sense to invest in something like that.
- viggity 7y agook, so a canopy is likely to catch the wind and possibly cause additional damage. But what about a net canopy system. Say, perhaps with 1cm sized holes. Big enough holes that the wind can't do a ton of damage, but small enough that the really disastrous hail gets caught and the mid size stuff gets slowed down as it likely deflects off the net. Anything that gets through undeflected is unlikely to damage the vehicle.
- caseysoftware 7y agoLet's apply some old school tech. Forget about insurance and canopies, think Atari Missile Defense. A swarm of small pulse lasers surrounding lots, along poles on the inside, and generally build a defense network that takes out hail on the way down. Design it after Israel's Iron Dome. Sure, the targets are smaller, in a adversarial environment, and don't have heat signatures but it would be amazing. :)
- sneilan1 7y agoI agree. This will be expensive at first so we roll it out to luxury brands.
- cardiffspaceman 7y agoThis setup could be blown away by the wind that accompanies the hail storm.
- benjohnson 7y agoGut reaction: Because Ice/Snow needs an incredible amount of energy to go from solid to liquid, the lasers would have to be melt-flesh-in-an-instant powerful. Not so good for the eyes of airplane pilots.
- auiya 7y agoI've never understood why car lots carry so many redundant inventory choices to just sit around in the elements and rot. It seems immensely wasteful.
- sokoloff 7y agoMoney is cheap to borrow and selling used cars is fairly profitable. Better to sit on a car for an extra 6 months, paying 2-3% than lose a sale entirely.
- chasingthewind 7y agoWhat if we built solar farms on top of car dealership lots that doubled as a canopy? Canopy + energy. I wonder if anybody has done that yet.
- quantumfoam 7y agoPlease stop trying to help this industry, let it die.
- nulbyte 7y agoThe startup may be new, but the rain lottery has been around for a while. Are car dealers really just now getting wind (no pun intended) of it?