5 tips for earthquake catastrophe planning

The irony of calling a CAT plan a cat plan shouldn't be lost on anyone. There are so many fangs, furry legs and moving parts to managing an earthquake catastrophe that any number of things can go wrong. The only way to herd the proverbial cat is through proper catastrophe planning. Here are some tips for agents, brokers and adjusters to help them give insureds an excellent claims experience following an earthquake.

1. Adequately staff the CAT team

An insurance company's CAT plan should start with adequate staffing. The response team needs to be large enough to provide a timely response to the number of commercial and personal lines properties that may be impacted in any particular geographic area. As an insurer's book grows, so too should its response team. CAT teams should include property underwriters, earthquake certified adjusters, contractors, engineers, geologists, forensic accountants, and designated support personnel from IT and accounting.

The insurer should contract with independent adjusters who are properly licensed in the state and experts who can deploy as soon as a quake occurs. The team should arrive on site to conduct initial inspections of every damaged property within days, if not hours. Remember that demand for quality insurance adjusters will rise dramatically after a quake, and it is easier to scale down rather than to find additional team members following a quake.

Although hiring additional temporary staff may be necessary, cross-training existing employees ahead of time to fulfill CAT team support roles provides better management.

2. Create a call tree and a CAT center

A quake with a magnitude large enough to result in damage should trigger communication to the team through the call tree. The call tree should include phone and e-mail contact information, as well as back up numbers for CAT team members. It should state the protocol for team notification and describe first responsibilities. An analysis of the quake's magnitude and damage radius must be done to determine how many policies in force may be affected and how many claims professionals, experts and ancillary personnel will need to be called into action.

All crucial CAT team members should deploy immediately to the designated CAT center. A backup office location should also be designated if the center is subject to being impacted by a quake.

The CAT plan should also include provisions for adequately equipping the CAT center. If additional computers and phones are needed, this equipment should be procured before an event. If more equipment needs to be purchased at the time of the quake, know where it can be found and who is responsible for procurement.

A paper copy of the CAT plan and call tree should be distributed to all team members and kept at their homes and the office in the event that internet access is compromised during an earthquake. Key CAT team members should also have ready access to laptops so they can fulfill their role remotely if they're unable to reach the catastrophe center. The CAT plan should also designate back-up personnel to fulfill essential initial duties in the event a lead is unable to immediately report.

3. Contact insureds immediately and maintain communication

Immediate communication with insureds is the first priority of the CAT plan. The critical importance of providing insureds with clear and useful information cannot be overstated. A well-organized catastrophe plan and team will give insureds confidence and peace of mind when they need it most. The CAT team should begin by phoning all insureds potentially impacted by a quake to verify loss or damage. The CAT plan should include a comprehensive claim in-take reporting form so details of the loss can be passed along for triaging and adjuster/expert assignment. This enables those who will have contact with the insureds to be prepared to explain the claim process and to provide them with coverage and limit information. Timeliness is key since the insureds will want to know when field adjusters and experts will arrive on site, what resources may be available for temporary housing, and when and how payment will be made.

The catastrophe center should have a 24-hour claim in-take hotline to assist insureds day and night. Important earthquake claim information should also be posted prominently on the insurer's website for insureds as well as insurance agents and brokers.

(Photo: iStock)

4. Communicate with agents and brokers and the department of insurance

Insurers should send bulletins with response timelines and other essential information to their agents and brokers advising them of CAT plan procedures for reporting and adjusting claims, along with contact information for the catastrophe team.

Following a quake, a designated CAT team point of contact should also notify the Department of Insurance and proactively advise them of the CAT plan deployment. The department's familiarity with the insurer's procedures can assist in the coordination of private and public response efforts in the disaster area.

5. Field team readiness

An insurer may have adequate staff and experts set to respond, but how do the CAT teams reach insured locations when the area is so severely damaged that it has been closed by civil authorities? Although field adjusters can't breach blockades, they can maintain constant communication with the catastrophe center and insureds to keep everyone informed of timelines for property access. Knowing that help is on the way is good; knowing when it will arrive is better. Drone access is now making inspection possible in areas otherwise inaccessible. Although drones do not (yet) constitute a complete inspection, catastrophe teams with properly registered and licensed drones may get enough damage information for insurers to begin payment.

Catastrophe plans must anticipate the possibility that field adjusters from outside the area will need to be deployed first to assist insureds because adjusters in the immediate area are busy digging out themselves. Therefore, the catastrophe plan should include contingency transportation plans for out of area adjusters. In a severe quake, anticipate airport and road closures and plan alternative routes. Because housing will be quickly impacted, make hotel arrangements for adjusters immediately. Consider booking reservations at a hotel a distance from the epicenter to limit the possibility that the hotel could also be subject to potential damage from an aftershock. Just as drones elevate catastrophe plan responsiveness, so do mobile emergency response vehicles (MERVs). MERVs function as mobile field offices and double as sleeping quarters for adjusters when hotel space becomes unavailable.

How an insurer handles their claims is the fastest way to build or break their relationship with insureds and their reputation in the industry. In assisting an insured to select an earthquake insurer, agents and brokers should ask about the insurer's catastrophe plan so they have confidence that their clients will be well cared for during a catastrophic event. An insurer with a well-organized catastrophe plan will be prepared to deliver on its promises.

Beth Ossino is claims manager at Golden Bear Insurance Company, which writes commercial earthquake insurance in California, Oregon, Washington, Idaho, and Alaska, and writes personal lines quake in California only. Visit www.goldenbear.com for more information.

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