Paying a claim is the moment of truth for insurers and policyholders alike, and industry leaders have the opportunity to distinguish themselves by out-executing their competitors and dealing with claims rapidly and effectively. 

The real claims lessons from Sandy, however, lie not so much in insurers' response to the disaster as in their preparations for the storm—and for similar events which seem to be occurring with greater frequency.  An ounce of prevention may still be worth a pound of cure, but, for P&C insurers serving the Northeast, thousands of dollars spent on preparedness and planning could have saved millions of dollars in claims payouts. As Sandy demonstrated, P&C insurance carriers—and their policyholders—benefit from detailed planning, thorough communications, and the kind of creative thinking that comes from asking tough questions about the effects of catastrophic events. 

There are four basic steps that insurers can take to mitigate the losses from the next Sandy, no matter where or when it strikes:

1. Partner with policyholders. Far-sighted insurers with policyholders in disaster-prone locations can do much more to plan ahead for catastrophic events. With advance warning, insurers can rent storage space, transport customers' valuables to safe locations, arrange for hotel rentals, and take other initiatives to prevent losses before they occur. Relatively small investments in such measures can yield significant savings in claims payouts after the event.   

2. Communicate intensively. Agents and captive brokers have explored social media along with traditional channels such as telephone and email to stay in touch with policyholders. On a regular basis—and on an intensive basis if and when a storm is approaching—customers should be reminded of what needs to be done in advance of a storm. Especially important in flood-prone areas are notifications regarding what is and is not covered by the insured's policy. 

3. Build preparedness into underwriting. Sandy caused major business disruption and put pressure on companies' supply chains. Many businesses were caught without continuity plans, backup power sources and other essentials. Insurers should work with commercial customers to develop preparedness plans, building discounts into pricing when such plans are in place, and should help such customers take advantage of new technological and process innovations such as sensors and connected devices that design more intelligent ways to move goods and store inventory.  Similarly, insurers can help policyholders identify immediately available sources of replacement inventory—be it thousands of square feet of carpeting or hundreds of flat screen televisions—to avoid losing income when customers come around to shop for items lost to storm damage. 

4. Empower the customer. Customers have been taught not to touch anything when disaster strikes and to wait for the adjuster to arrive.  The destruction wrought by Sandy, however, made it physically impossible for adjusters to reach large sections of New Jersey and New York. Customers can take an extensive physical inventory of their property using a digital camera or smart phone, and, if they have access to the property after the event, can record the damage using the same technology and send it on to the insurer. This can accelerate the claims process when an in-person visit is impossible. 

Of course, in addition to strengthening their claims preparation processes, insurers also have to take a look at large scale measures that major corporations, municipalities, and state governments might take to mitigate the impact of future events, including changes in zoning and modifications to building codes. As many commercial property owners learned, it's not always a good idea to have all of the building's electrical equipment in the basement. 

P&C insurers have made steady progress on automating some of the more labor-intensive parts of the claims process—the routine, everyday occurrences. Innovative technologies, however, can help insurers deal with extraordinary occurrences. This provides the opportunity, not only to decrease losses, but to form a lasting connection with customers who appreciate not only a rapid response to disaster but a thoughtful approach to limiting the damage incurred by extreme weather.