6 steps to prepare claims teams for hurricane season
A recent report by the Colorado State University Tropical Meteorology Project calls for 18 named storms, eight hurricanes and four major hurricanes.
We read numerous articles this time of year about how homeowners and businesses can prepare for hurricane season. But what about their insurers? There are many things that insurance carrier claims teams can be doing to prepare for what is predicted to be a busy hurricane season.
On top of a global pandemic, 2020 brought 30 named storms (top winds of 39 mph or greater), of which 13 became hurricanes (top winds of 74 mph or greater), including six major hurricanes (top winds of 111 mph or greater), according to the National Oceanic and Atmospheric Association. For this year’s hurricane season, a recent report by the Colorado State University Tropical Meteorology Project calls for 18 named storms, eight hurricanes and four major hurricanes. The entire country is hoping for a continued swift economic recovery from the pandemic, but property insurers must continue to be vigilant and prepare for another storm season.
As legal counsel representing these carriers, we understand what it looks like to be on the receiving end, facing an onslaught of hurricane damage claims. Now is the time to strengthen forces and prepare for efficient, thorough and orderly claims processing. Here are six steps claims teams can take to prepare for the next catastrophic event:
1. Test new technology
From new forms of claims communication to advancements in drone technology and satellite imagery, technology has changed the game for claims professionals and adjusters. The pandemic seems to have skyrocketed forward the use of technology in all facets of life, and insurance is no exception. Some tools can assess property damage from a safe distance, which could both reduce in-person interaction and aid in managing claims efficiently, but these tools are most effective when those operating them have had a chance to get familiar with them before a natural disaster strikes. Make sure your claims team, at all levels, and key partners are well-trained in utilizing new technology before the onslaught of claims ensues.
2. Anticipate exposures of now-empty properties
It stands to reason that storm-related damages may be worse this year than in years past because of the unique circumstances presented by the pandemic. Over the past year, many businesses have switched to a work-from-home model, leaving commercial properties vacant. With a lack of personnel on-site, some of the usual hurricane preparation activities — boarding up windows, applying storm shutters, sandbagging — may not be top of mind or may not be feasible due to illness, incapacitation or geographical distance this year.
Many smaller businesses have closed down completely, which raises questions about whether the insureds are both willing and able to protect their now-empty properties. If a property experiences water-related loss, will the insured take immediate steps to prevent mold growth? If not, and mold growth ensues, will that damage be covered? A policyholder’s failure to mitigate damages may impact coverage, damages or both. Perhaps the policy excludes losses to vacant properties. Perhaps time element losses are excluded during idle periods. As with most losses, the policy language remains of critical importance in these situations.
3. Sharpen investigative tools
Claims handlers now more than ever will want to be vigilant about making sure that claims are investigated, measured and adjusted appropriately. Underwriting information may be outdated as many business owners have made significant changes to their properties in recent months, such as adding outdoor space or additional windows to ensure proper airflow and adequate social distancing. And a July 2020 survey from porch.com found that 76% of homeowners in the U.S. had carried out at least one home improvement project since the start of the pandemic. This may mean that the risk has materially changed since it was underwritten. If a property is underinsured because of improvements made since the policy’s inception, and there is no coinsurance penalty or limits are not capped at scheduled values, then the insured may seek damages far in excess of what may have been anticipated at the time of binding. Moreover, the boom in renovations during the pandemic has caused supply shortages for the construction industry. The price of materials, which are often in scarce supply after a hurricane event regardless, is increasing dramatically and quickly, and this may increase the cost of repair for hurricane-damaged structures as well.
Additionally, policyholders are often able to recover from the Federal Emergency Management Agency (FEMA) for hurricane damages. Although such recoveries are often conditioned upon exhausting private insurance first or reimbursing the government if a private insurer pays the claim, carriers will want to satisfy themselves that insureds are not seeking a windfall — that is, seeking to recover for the same damages from multiple sources, often called double recovery.
4. Ensure claims teams are adequately staffed
High-exposure claims related to hurricanes can stretch the industry’s resources both internally and externally. Having a crisis response team in place that is equipped to work in a remote environment will allow for claims to be triaged quickly. Trusted vendors and service providers will be in high demand once the claims start rolling in. Making sure your claims team knows who to call, and a bit of advanced planning can streamline the process.
5. Use this hurricane season as a training opportunity for rising claims executives
With nearly 400,000 employees expected to retire from the insurance industry workforce within the next few years, according to the U.S. Bureau of Labor Statistics, companies need to make sure the next generation of claims professionals is well-trained to understand the nuances and challenges of managing catastrophic claims. Proactive education and training are critical, and carriers risk losing institutional knowledge without it. The time is now for companies to invest in their human capital.
6. Beware of burnout and keep staff energized
Hurricane season can be a stressful time for property insurers. And the past year has been a challenge for many property claims handlers, between the Texas freeze and the influx of COVID-19 claims, on top of the effects of the pandemic on the general population. This might be the time to recognize your team for its achievements and emphasize the good work you are doing to help people in crisis.
With the threat of hurricanes and other climate-related catastrophes looming, the time for claims teams to prepare is now.
Taylor Davis (taylor.davis@clydeco.us) is a partner in the Atlanta, Ga., office of Clyde & Co., where she advises and advocates for the insurance industry and corporate clients involved in complex contractual disputes and civil litigation.
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