Almost a year ago to the day, Superstorm Sandy struck a dozen states in the Northeast resulting in nearly $18.75 billion in auto, homeowners and business insurance claim payouts, according to ISO’s Property Claim Services. Simulated weather events and coverage scenarios along with established vendor relationships allowed many insurers to respond quickly.
Of the nearly 1.58 million Sandy claims that were filed, most were homeowners’ insurance claims. With more than half filed in New Jersey and New York, insurers settled 93 percent of those claims, according to the Insurance Information Institute (I.I.I.).
Sandy insurance claims were also filed in Connecticut, Delaware, Massachusetts, Maine, North Carolina, New Hampshire, Ohio, Pennsylvania, Rhode Island, Virginia, Vermont and West Virginia.
The I.I.I. reported that Sandy is now considered the third costliest storm in U.S. history, after hurricanes Katrina and Andrew.
According to Joe Louwagie, assistant vice president of Property Claim Services at Verisk, the figures reflect the ultimate loss projected.
“We’re not saying that all claims have closed, but even with the wind‑versus‑water personal‑lines homeowner coverage questions that were out there and the commercial questions that were there, that’s included in the total projection,” said Louwagie.
Despite the staggering number of claims, Louwagie applauded the insurance industry in its handling of Sandy-related claims, especially considering the vast area of the nation impacted by the storm.
“We think, based on our discussions with carriers and observations compared to all the different catastrophes, that the industry did a phenomenal job. If you look at the complexities of the catastrophe, the area impacted, the unexpected aftermath from an inspection‑access perspective and the gas shortages, we think the industry did very well in representing both the brand of the claims profession and the insurance industry as a whole,” the PCS AVP said.
Even though media reports emphasized payment delays and lack of coverage, he pointed out that hundreds of thousands of homeowners and small businesses were paid in a timely fashion.
“Every disaster offers lessons learned for future events and Sandy was certainly no different,” said Jeanne M. Salvatore, senior vice president and consumer spokesperson for the I.I.I. “If we can learn from this disaster, we can be better prepared for the next one.”
Louwagie outlined learning opportunities that arose as a result of Sandy and past storms.
“One of the reasons the insurance industry and the claims industry do so well at handling these is because they really take a deep dive after each big catastrophe. They look at some of the potential to do even better for the next time,” Louwagie said.
He offered the gas shortages as an example where claims adjusters could not find sufficient amounts of gas to arrive at their appointments. As a result, they had to adjust the number of appointments they could handle per day. He said that obviously impacted timeliness.
Adapting quickly is one lesson carriers learned by conducting systematic planning throughout the year.
“The carriers that do a lot of systemic planning, such as simulated preparation events, scenario modeling, have an advantage in that they’ve thought through these unique scenarios and are able to more quickly get to paying the correct amount and providing great service,” Louwagie said.
Another way carriers learn from past catastrophes is by holding simulated events.
“Where they’re injecting into those scenarios, the logical issues ‑ what happens when there’s gas shortages and… access [issues] – how does that impact the staff modeling? Considering that if a carrier…is starting at a baseline of four field inspections per day, what are the scenarios that could cause that to go down to two per day, and then the impact on how many staff you actually need to send to the event. Those carriers that are modeling that out every year, regardless of whether an event happens, tend to be very well‑prepared when something actually does happen,” he said.
Carriers also simulate preparation within the supply chain. Having well‑established relationships with third‑party vendors assisted carriers in resolving claims more quickly.
“That’s certainly true in the property and auto lines. To give you an example, on the property side, carriers that have well‑established relationships and contracts in place with vendors for tree‑service companies tend to work with companies that are charging a fair price versus maybe an exorbitant price with gouging after a catastrophe,” said Louwagie. “Those carriers that have residential‑housing relationships developed with vendors have a much better chance of getting great service to their displaced customers versus having difficulty in finding residential housing or, when doing so, being charged, again, an exorbitant price.”
Policyholders were not the only ones to benefit from established vendor relationships.
“Simple things like the ability to get cars for the adjusters. You can imagine, after an event like Sandy, how many individuals were renting cars. Carriers that had well‑established contracts with rental companies were much more able to get cars to their adjusters, versus having them drive from halfway across the country and having many‑day delays in getting there. Having those relationships established beforehand was very important,” Louwagie said.
The most important scenario, according to the PCS AVP, is the relationship carriers have with independent claims adjusting firms and projecting whether they will have the supply available when needed.
“Independent claims adjusting is a very important part of catastrophe claims handling, which is why the preparation for that and the relationships with quality independent adjusting firms are so important,” Louwagie said. “If you think about it, after a catastrophe, those carriers that have well‑established relationships with independent claims‑adjusting firms have a higher probability of success. Carriers cannot staff to catastrophes, obviously. They have to project how many staff adjusters versus independent claims‑adjusting firms they’re going to have,” he said. “The number of claims adjusters is of limited supply, so having that relationship in place gives a higher potential of getting high‑quality adjusters, and then it also allows preparation for the catastrophe before it ever happens.”
Some carriers go as far as to model different coverage scenarios, Louwagie said.
“Obviously, the actual coverage decision is based on the actual event at hand, but talking through beforehand the wind‑versus‑water issues can more quickly lead to the company coverage position, versus having to start those discussions from scratch. It’s important that once that inspection takes place, the adjuster is able to make that decision right away versus waiting on a coverage position from the carrier after they’ve already made the inspection,” he said.
Despite carriers’ preparedness after Sandy, Louwagie thinks that continual education is key and that the industry needs to increase consumer and company personnel education about floods and flood insurance.