Weather refund promotions taking off in the UK

by Artemis on November 5, 2010

Finding ways to smooth your revenue stream whatever the weather is becoming easier with more types of weather risk transfer and weather insurance products available than ever before. Finding ways to refund your customers if the weather’s bad and not lose out yourself is increasing in popularity too it seems.

We’ve written about many weather refund promotions and weather guarantees in the past (our previous coverage here) but they’re now becoming so prevalent that we’re coming across companies doing weather linked promotions on our doorstep.

Walkers Crisps, a branch of Pepsico producing crisps and snacks, are running a promotional game called Walkers Rainy Days based around the weather at the moment. Participants get a code with a bag of snacks and after entering their code on the website have to choose a location where they believe it will rain. If they’re right then Walkers will pay them £10. We assume Walkers have a weather derivative or insurance contract running alongside this promotion so that they aren’t out of pocket, however the British press aren’t so sure and believe that Walkers are going to lose millions (article from the Daily Record here). If Walkers don’t have a weather hedge in place then they really haven’t done their homework into how easy that could be to make running a promotion like this almost zero risk.

Southern Railway, the rail operator for the southeast of the UK, are also running a weather refund promotion. Their Rainy Day Guarantee is designed to refund customers who book certain train tickets in advance and then can’t travel on the day. As well as for when a trip is rained off this promotion is also insurance against being unable to travel for other reasons (such as an event you were due to attend being postponed). Again, we expect that Southern Railway have a risk management program behind this deal with a weather risk component for all rain day claims.

It’s testament to the weather risk market and communities innovative product creation that we’re now seeing these deals appearing in our own neighborhoods.

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