Catastrophic events are escalating in a major way in both frequency and severity, driving up costs for all parties involved. In 1980, the National Oceanic and Atmospheric Administration began tracking weather events that caused damages of $1 billion or more, and since that time the U.S. has experienced 308 weather disasters that exceeded $2.085 trillion in damages. What’s more is the top five years for weather disaster frequency have occurred in the past decade. According to the U.N Intergovernmental Panel on Climate Change (IPCC), this substantial uptick in storm severity and frequency is a direct result of climate change caused by humans, which is exacerbating the major events with warmer and wetter climate. So, what can the insurance industry do to better prepare, implement, and act when the time does come to respond?
As we’re thinking about New Year’s resolutions, we should also be thinking about the past year’s catastrophe response. What went well, what went poorly, and how can we streamline the bottlenecks? There are a few areas to focus on in the first quarter of 2022 to ensure your catastrophe response plan (CRP) is as strong as it can be and that you are ready to respond when your policyholders need you most. Let’s take a look at the first.
Key Components of a Catastrophe Response Plan
A critical first step in planning for any catastrophe season is evaluating your current CRP and comparing it against the prior year’s response. Was your company able to follow its CRP? Were any gaps or bottlenecks identified? Are there pieces that need to be enhanced or additions that need to be made to allow for a more effective and efficient response to your policyholders? Here are some key areas that seem to be overlooked:
Scalability of resources and systems. Did one outpace the other? Many insurers are able to bring on resources, but systems onboarding is delayed a week or more. This leads to a massive disconnect with an increase in costs and a delay in training employees and servicing clients. Create a scalable plan and find an opportunity to test it before you put it in place.
Alignment of independent adjusting firms, preferred contractors, and emergency response services (EMS). Ensure your current partners are delivering on your company’s promise and vision. Create partnerships with contractors and EMS providers that you can refer your policyholders to while also mitigating ongoing damages and delivering on speed of service. The faster the claims response to policyholders in need, the less likely there will be escalations in the future.
The most critical piece is to know your partners well. Just because an event does not occur in your territory does not mean there won’t be a mass exodus of field resources and contractors for another catastrophe in a different geographical area. Where will this leave you with your policyholders and ongoing day-to-day claims? Have a plan in place to respond.
Communications. In the claims industry, why does it feel that every time there is a catastrophe, it’s like the first one we have ever experienced? A lot of this stems from lack of communication and/or delivery of information to policyholders, vendors, managers, executives, reinsurers, and other stakeholders.
Do you have scripts for your first notice of loss (FNOL) department or vendor? If you know delay in contact will be present due to exposures, scripts should be modified to set the expectations to policyholders. Is there a plan for this in your organization?
Additionally, do you currently have omni-channel communication support? This can be hugely impactful to the productivity of your call center and overall enhancement of your customer experience. Let people communicate with you in the manner that best suits them, and you will see stronger and clearer lines of communication between all parties.
Clear and concise claims guidelines and cheat sheets. You may have an amazing set of instructions and guidelines, but there are few desk examiners or field adjusters who will read that 50-page document. Instead, make a one-page sheet of claims guidelines, and one for policies based on different perils (e.g. hail/hurricane/freeze). They won’t address every detail, but they will certainly improve the work product and consistency across the board, which subsequently can greatly enhance speed of service.
Evaluating Data and Technology
We have clearly entered the era of data. Insurance is a data-rich industry, but we struggle to leverage that data into actionable intelligence. If you have not already begun planning how to leverage data in your organization, then you need to. Data can drive your business and catastrophe response to the next level by enhancing customer experience, speed of service, and policyholder retention, all while decreasing escalations and litigation.
How can data minimize the severity of exposure during an event? Through catastrophe modeling and understanding exposure under historic data, insurers can communicate with their policyholders and understand exposure quickly and more proactively after an event. This allows them to deploy the services of EMS, adjusters, and contractors more effectively, thus enhancing the speed of service.
A great way to achieve this is to engage business analysts and data scientists to create data models for your book of business. Understanding what your past performance, exposure, indicators, and trends are based on the geographic locations and demographics of your policyholders will allow you to better respond when a catastrophe strikes. With strong business models and rules engines, many communications to policyholder, agents, and vendors can become routine and even automated.
Data can be your biggest asset; you just need to understand how to best leverage it for your business and claims response.
How to Mitigate Burnout
Most claims professionals who have experienced a large catastrophe know the extreme toll it can have on their mental and physical wellbeing. The long hours, stressful work environment, and heavy workload is extremely taxing. When a catastrophe event occurs, it requires elevated time commitments to handle the event properly and effectively. How can we better manage this?
Plan before storm season to leverage technology to scale, and to remove redundancy, automate processes, which ensures that claims professionals can focus on policyholders. People in general often fear change; there is certainly a fear that technology will replace humans in the claims industry (and in some cases this may be true). But what technology really does is allow claims professionals to focus on more meaningful tasks and perform at their highest level without being slowed by tedious minutia.
With that said, leaders still need to take the time to talk with the professionals who will be adopting the technology to ensure that they understand the processes, and that the implementations are effective and adopted rather than disruptive and ignored. Likewise, there are solutions popping up daily that tout to be the “best at automating x, y, and z,” so be diligent in reviewing these solutions. Test or pilot new technologies in the off season to ensure that it is compatible with your existing systems and infrastructure. Focus on those implementations that make the biggest impact with the lowest risk. Is it a chatbot to minimize drag on your call center, an app for your adjusters, drone usage, or virtual inspection tools? Evaluate the impact that each solution may have on the policyholder, as well. If a solution is implemented that saves some workflow time but ultimately is detrimental to a policyholder’s claims experience, then these are consequences must be evaluated.
Benchmarking for Improvement
All the planning and technology in the world means nothing if a company cannot truly measure the impact. Do you know where you sit with your customers? If the answer is no, then you must benchmark your consumer loyalty—and the first part of the year is the perfect time to do so. Engage a third party, perform your own focus group, create your own electronic or simple survey—whatever you do, ensure you capture the feedback that is important to understanding and interpreting your strengths and weaknesses. This feedback will allow you to measure the successes of your planning and improvement of your responses during a catastrophic event, from which your organization can continue to improve.
Let’s not make this like every other New Year’s resolution, started and forgotten all in a month’s time. Make planning and improving your claims process and catastrophe response a priority and resolve to make it better. After all, as Antoine de Saint-Exupery once said: “A goal without a plan is just a wish.”