By Keith Daleb and Bob Marinelli
This article, republished with permission, originally appeared in print in Claims Magazine and on the web at Property Casualty 360.
Catastrophic weather events seem all too common these days. In 2017, damage from natural catastrophes contributed to an annual total of about $134 billion in claims, the second-largest insurance impact in history.
A study published in Nature in June 2018 showed that tropical cyclones worldwide are moving more slowly over land and water, dumping more rain as they stall. We saw this firsthand with Hurricane Harvey in 2017, which was followed quickly that year by the devastation of Hurricanes Irma and Maria.
In 2018, major CAT events continued. U.S. weather catastrophes included hurricanes Florence and Michael and Tropical Storm Gordon. Additionally, volcanic eruptions in Hawaii, devastating wildfires in California, and winter storms on the East Coast affected millions of people and their communities.
For the insurance industry, the news isn’t just doom and gloom. A look at CAT-related claims data from the past 10 years shows that some providers who cover public entities see a favorable trend in losses from hail, wind and winter storms (the top causes of some of the biggest weather-driven losses).
How can this be, when big storms arguably have the most severe impact on municipalities? The answer lies in a customer-centric approach to safety and recovery, with analytics-based risk prevention and mitigation efforts, improved underwriting, and rapid claims response.
Preparing communities to reduce the impact
Unlike a retail store, which can take the time to rebuild, customers in the public sector — municipalities, counties, public schools and community colleges, for example — can’t shut down in the wake of a natural catastrophe. Local governments must be able to continue essential operations, such as public safety services.
Take the example of a small town where a dozen municipal departments, including the police department, were housed in one town hall building. All of the town’s digital information was kept on flash drives. When a tornado blew through and wiped out the building, that town couldn’t function. Residents asked leaders for help, but officials couldn’t even write a check to fund initial recovery efforts.
That small community, with fewer resources than a large city, shouldn’t have been in such a dire situation when their capabilities were put to the test.
Having an emergency preparedness plan in place can help reduce a disaster’s impact on a municipality’s essential services and financial stability. Risk and insurance partners who help their customers develop such plans may also reduce the costs of related claims by working together to identify loss exposures.
An emergency plan should include processes for before and after a CAT event.
- Mitigation: Eliminate or reduce hazards to lessen their potential for causing a loss. For example, remove or tie down objects that could be tossed around by the wind.
- Preparedness: Develop a call-up list so responsible personnel can act quickly and effectively. Stock supplies and equipment, maintain a resource list and back up digital information.
- Response: Stabilize damaged facilities to avoid deterioration and retain or re-establish control to deploy emergency response personnel.
- Recovery: When the situation is stable, engage your agent and insurance carrier to help you evaluate the damage and determine the next steps.
Risk managers and insurance providers must reiterate this messaging with customers often, but it’s especially critical to do so when a storm begins to take shape.
Data analysis & risk management response
Predictive analytics is no longer a fad — it’s the way of the insurance industry. Just as meteorologists track an approaching hurricane’s path, risk managers keep an eye on that storm’s direction and intensity level in order to target customers in the area and send out mitigation and preparedness communications as needed.
Predictive modeling is in continuous development to better track CAT exposures. Hurricane models consider losses from wind and storm surge, but after Harvey dropped more than four feet of rain in Texas, flood risk became a more urgent point of interest. Data continues to be gathered to address the industry-wide flood modeling gap. As that model evolves, so too will the accuracy and efficiency of coverage for flood-related losses.
Claims partners analyze storm data to get an idea of when and how they will be able to assess the damage. Are there enough adjusters in the area? How soon will they be able to get to the affected communities? Will it be useful to employ technological resources in addition to “boots on the ground”? The more quickly an insurance provider responds, the more quickly the customer can get back to business.
Innovations support a customer-centric approach
Insurance providers should first envision the best possible user experience for their customers and then use innovative thinking to create that ideal customer experience.
In the event of catastrophic weather, customers should be notified in advance and have a plan in place before a storm hits. Then, when it’s time to start putting the pieces back together, insurance providers that use InsurTech solutions — such as drones and virtual inspections — to meet their customers’ needs will have a competitive edge. Here’s why:
Drones: Following a storm, using drones to do inspections helps triage damage and prioritize which customers have the most urgent need.
Virtual inspections: “Walking” the affected area alongside the adjuster allows insurance providers to more quickly assign any additional experts required to assess the scope of damage.
Once a loss occurs, these forward-thinking tools and practices help lower the cycle time of claims and get the insured paid more quickly.
When high-impact hurricanes Harvey, Irma and Maria hit back-to-back-to-back, partners throughout the industry were still working on the aftermath of the first storm when the second and third followed.
A large number of properties affected were public entities and schools in particular. Providers who took a proactive approach and employed technology helped students return to their classrooms in a relatively short time.
This customer-centric focus before, during and after storm claims adds value to products and services for the insured — and if they have a good experience, they are likely to stay loyal to the company that creates it. For the insurance company, this approach can help the overall losses decrease over time, no matter how hard the winds may blow.
Keith Daleb is the vice president of claims at Trident Public Risk Solutions. Bob Marinelli is the risk control manager at Trident Public Risk Solutions.