Twenty-five years ago, insurers and reinsurers responded to rebuild communities destroyed by the devastating forces of Hurricane Andrew. In 1992, Andrew was the costliest natural disaster in US history. Losses totaled $15.5 billion (almost $27 billion in 2017 dollars). Today, it remains one of the costliest natural disasters, second only to Hurricane Katrina.
Are we better prepared today for an event of Andrew's impact? If the same event occurred today, we would face the challenges with the same commitment, but would be armed with technology and, hopefully, lessons learned from Andrew and other large natural catastrophes.
Talk with insurance professionals who responded to Hurricane Andrew claims. They will describe the difficult task undertaken by a shaken industry that, to be honest, was not prepared for an event the size of Andrew. Companies did not have the resources or processes in place to handle the number of claims reported or the severity of the damages. Adjusters were unprepared for the conditions they faced in the field. The seemingly simple task of finding the risk was complicated by the level of destruction. Street signs and landmarks were no longer standing. Finding insureds could be even more difficult. Adjusters and insureds would write contact numbers on building remains. Insurance agents became "switchboards," relaying information between the adjusters and insureds.
Today's technology certainly makes it easier and faster to access and assess claims information. Technological developments influence every step of the claims process today. Companies get real-time information about conditions on the ground and provide valuable information to their insureds through social media. Satellite imaging provides data about damage without adjusters setting foot on site. Companies are developing online and mobile applications that allow efficiency in reporting claims, jump-starting the adjustment process. GPS systems make locating risks a matter of following voice commands on your cell phone. Drones can "fly ahead" and determine if you can access and assess the damaged area. Smart Home technology can send an alert and verify the cause of loss. Sophisticated estimating software programs used by adjusters allow insurers and reinsurers to set accurate reserves early in the claim.
All the technological developments of the last 25 years allow us to respond faster, but are we prepared to respond better? Many insurance companies and professionals haven't been tested by a large natural catastrophe. We can't allow a sense of complacency to grow in the absence of a significant event. No software, gadget, or mobile app can take the place of a carefully developed and tested Natural Catastrophe Response Plan and well-trained, compassionate professionals. We're at the start of the 2017 hurricane season so now is a good time to review plans:
* Make sure any Natural Catastrophe Response Plan is both specific yet flexible. Clearly define roles, responsibilities and procedures. Anticipate, however, that every part of the plan may need to be adjusted to respond to the changing conditions on the ground. Have contingencies in place.
* Know the resources available to you. What expertise do you have in the claims department? Can you pull resources from other functions? What vendors do you need lined up to respond to a large event? If you are relying on vendors, be sure to clearly define--either in writing or through a detailed discussion--what you'll require from them.
* Train all responsible participants. Make sure everyone has a clear understanding of their roles and duties and has the expertise they need to execute the plan with autonomy. If the plan changes existing procedures, make sure everyone is familiar with them. Place particular importance on training the team taking loss reports. The information they obtain can help triage claims. The information they provide to the insured can set the tone for the claims adjustment and the customer's satisfaction.
* Establish a Communication Protocol to ensure that the company's message to the media and public is clear and consistent.
* Test and reevaluate the plan with smaller events. A small natural catastrophe may not warrant the implementation of a Cat Response Plan. It is, however, a great opportunity to test the plan. Most importantly, work with the vendors you will be relying on so that they become familiar with your personnel, systems and procedures in a less demanding environment.
* Recognize and acknowledge the toll on the insured. Your company may be handling thousands of these claims, but for the insured, this is the only claim that matters and it's devastating.
Events like Hurricane Andrew change and define the insurance/reinsurance industry. In the 25 years since Hurricane Andrew, technology has changed how we do our jobs. But technology can't replace preparation and professionalism. What our profession does best remains the same -- we rebuild homes, business and communities. We make the world more resilient. Let's make sure we are ready.
Category: Climate/natural disasters: Disaster risk, Resilience