Disaster planning is especially critical for agencies and brokerages, which during a large-scale catastrophe must help their customers and their own businesses. The good news is that independent agents and brokers are perfectly positioned to educate and assist their customers and keep their businesses running before, during and after a disaster.

A Solid Continuity Plan Adds Value

It's hard to convince a business owner to invest the time and resources to develop a solid plan—which requires a detailed analysis of operations and input from employees. And management must be brutally honest about the company's vulnerabilities and weak links, says Jeffrey Friedman, CEO of Building Intelligence, a software developer specializing in operations and risk management. “Sometimes it's like seeing a therapist—you're talking about all the terrible things that could happen,” he says.

But a solid continuity plan gives a competitive advantage because it helps businesses resume operations more quickly after a disaster. Well-prepared businesses also realize financial savings, says James Breitkreitz, vice president of property and B&M services at Zurich Services Corp. Insurers like Zurich consider pre-emergency planning as a differentiator of superior risk from the rest. “Ultimately, all these factors go into risk assessment, which has an impact on pricing and capacity,” he says.

Your Current Plan Probably Won't Cut it

Many companies think just having insurance is all the disaster planning they need. Others focus on a single area like data recovery. While important, neither are comprehensive, Katz says. Even a strong plan does little to address how business will resume after the disaster.

Rhulen says most businesses fail to analyze supply chain weaknesses, train employees, conduct test exercises and address crisis communications and social media in their disaster plans.

Testing the Plan is Essential to Success in a Real Disaster

To ensure a plan will work when it's needed, it must be tested. This can be done in several ways; the simplest of which are one-hour “tabletop” exercises working with an underwriter and claims people work through a simple disaster scenario, Rhulen says. Then there are more elaborate tests. Rhulen cites an independent agency in Florida that shuts down the office for a day to conduct an exercise that simulates the aftermath of a hurricane hitting its 200 homeowner insureds. The agency walks through the calls and paperwork that would arise from the event. In some industries, multi-day exercises are not only common, but required by regulators; in mining, cave-in scenarios with rescue teams and simulated exercises are typical, including simulation of the communication that must take place to shareholders, employees, the media, citizens and regulators.

Such intensive testing may be hard for smaller businesses, but it can be done during slow seasons, or by testing by department rather than the entire company, Rhulen says.

Insurance is Important, but Mind the Gaps

Businesses need comprehensive insurance for disaster protection. Determining the appropriate amount can be done via property and risk assessments, along with recovery options, says Jamie Miller, head of North America property for Swiss Re Corporate Solutions. Online resources include the Institute for Business and Home Safety's free “Open for Business” program.

Besides building and content insurance, companies need business interruption and contingent (supply chain) business interruption, Miller says. A flood-specific policy should be purchased from either a commercial insurer or the NFIP.

The gap between insured losses and total economic loss is increasing, with more of the uninsured component falling to the government, Miller says. Swiss Re Corporate Solutions offers specialized index-based (parametric) products that settle on an event's characteristics rather than the loss, allowing for fast payment. For example, an energy company facing a major hurricane can buy an insurance product to receive a payout if the storm makes landfall as a Category 3 hurricane or higher.

Employees are Essential

“Business continuity begins with people and what's best for them,” Breitkreitz says. Employee buy-in and training is essential; they guide you through the troubleshooting process, and are vital in recovering the business and helping clients through a large-scale disaster.

If you do nothing else, make sure your people are safe when implementing a disaster plan. “In the 48 hours before a hurricane, a business must do many things to get the facility ready for the storm's arrival. Make sure they're doing it safely,” he says.

The other element to consider in a major disaster is when employees suffer severe losses of their own. “If they can work from home during the storm, it's probably better for them and the company. They have their own personal issues to deal with from the storm, but must keep the business running,” Breitkreitz says. “This also spreads the risk because employees aren't concentrated in one area.”

The Weakest Link: Your Supply Chain

When determining vulnerabilities, take a close look at a company's vendors and suppliers, and the earlier the better, Breitkreitz says. “You have to consider not just whether you can operate, but if your upstream suppliers will have product.” Line up alternative suppliers, especially if a natural disaster is approaching, and check in with them regularly to make sure you're at the top of their list if you need to use them.

The unusual weather events of the past several years are indicative of global climate change, which can disrupt supply chains in the short and long term, Miller says. Businesses and their supporting infrastructures have “a multi-decade lifetime” that must be able to withstand extreme events not just today but 10 years from now. “As the climate system changes and sea level rises, considering this new risk landscape of the future in today's planning will lead to more sustainable communities and less destruction and disruption,” he says.

Communication is Key

Communication is essential during a disaster—from a basic employee phone tree to the nuanced messaging on social media. Firestorm, which was involved in disaster management for the 2007 Virginia Tech campus shooting, helped the school craft its messages to the media. Disaster planning can help manage the consequences of an unavoidable event, and the outcome is long-term, Rhulen says.

Use a Consultant—or Not

Consultants can be invaluable in helping a business create, test and implement a disaster plan. In many instances, they work with a company's insurance agent or broker—sometimes in a crisis situation.

“When a company has a crisis, the people it first calls is an insurance agent and a lawyer,” Rhulen says. “Agents often don't know the answer because they've sold a product that provides financial remuneration but doesn't help the company manage the crisis.”

Consultants can also help agents. Agility Recovery, which provides services including power, office space, staff and technology in a disaster, worked with two of the three biggest insurance agencies in the New Orleans area during Hurricane Katrina, says Andre Selvyn, a sales executive from the company. Agility reps were on the ground well before the storm hit, and staffers were taken out of New Orleans in mobile units before the storm, enabling them to service clients immediately after the disaster hit.

Don't Overlook the Basics

Not all mitigation is complex: Part of disaster mitigation often comes down to something as simple as cleaning your gutters.

The two most common claims seen by Grange Insurance each year are either fire or wind/hail related, accounting for about 78% of all annual commercial claims and racking up $20 million in claims for its policyholders in 2012, says vice president Ken Kozek.

These claims are frequently preventable. To protect against electrical storms, unplug expensive electrical equipment and use surge protectors, and consider a lightning protection system or commercial generator if your area is prone to storms.

Regular roofing inspection and maintenance can protect against losses, especially in early spring when melting ice can cause leaks. If a storm is brewing, inspect the roof for loose debris, which can be hazardous in high-wind conditions.

And don't skimp on general maintenance and housekeeping. “You would be surprised how many small businesses have overloaded surge protectors in the coffee break area, electrical cords in high-traffic areas and sprinkler systems that haven't been inspected in years,” Kozek says. “These things might seem like common sense, but we settle thousands of dollars in losses every single year from disasters caused by these very things. In fact, electrical fires are consistently ranked by our industry as one of the top causes for commercial fires.”