By Bill Langley
It's not nice to fool Mother Nature. It seems everyone has heard the saying, but coming off back-to-back record years of catastrophe losses, it seems the proverbial "joke" is on the insurance industry.
Climate events, tornadoes, wildfires, drought, and most significantly, hurricanes, are all part of Mother Nature's grand scheme. And, considering the losses from Hurricane Sandy, it appears likely that 2012 will be listed as the third costliest year in U.S. history, according to the Insurance Information Institute.
It can likely be agreed that while it is impossible to predict catastrophic events with 100 percent accuracy, catastrophe management that would improve an insurer's strategic and operational preparedness for such cat events is absolutely critical. When catastrophes occur, the need for precision, responsiveness, service and speed can help insurers meet policyholder needs, demands and expectations in a cost effective manner. Further, it is an opportunity to reinforce the value of the company to the policyholder, and to prove the company truly future-ready.
As the economy has worsened and catastrophic events have increased in frequency, a heightened level of importance has been placed on improving the customer experience as policyholders demand better access and responsiveness coupled with level prices. For insurers, a focus on service excellence across the value chain can drive market differentiation in the United States, particularly for cat events. To meet, let alone exceed, these expectations during the most stressful time for policyholders, insurers must have internal and external resources standing by 24x7x365 for that first notice of loss (FNOL) call.
It's understandable that insurers cannot be "all things to all people," and working with partners to plan and provide for the inevitable product and service gaps that occur during cat events is part of being future-ready. Looking at 2012, the first six months were relatively quiet. However, from July onward, cat events began to increase, putting strong demand on insurers to ramp up in terms of scalability and flexibility.
The challenge posed to insurers and policyholders by the Colorado wildfires is a perfect example of why being future-ready has to be a significant part of any insurer's catastrophe management strategy. AAA Northern California, Nevada, Utah is one of the insurers that had to adapt and react as the wildfires raged and expanded, eventually reaching Colorado Springs, where homes and businesses were required to evacuate. With offices and policyholders in the evacuation zone, AAA NCNU needed to have 24/7 hours and overflow support for policyholders, even as they faced the potential need to abandon and temporarily relocate their call center until the threat of fire had passed.
The Colorado wildfires, in comparison to Hurricane Sandy, presented a relatively small challenge, but as AAA NCNU quickly determined, knowing your business, your capabilities, your options, and having a cat management plan in place are critical for business continuity.
And then there was Sandy. The storm's impact was much more severe than the Colorado wildfires, which occurred in a relatively sparsely populated area of the country. Sandy exponentially increased FNOL claims and call center volume, including calls, faxes, emails and social media posts, almost immediately as policyholders regained power and communications capabilities. Some insurers estimate the volume exceeded two times the normal daily average from 2,400 transactions to over 5,500 per day over an intensive 21-day period.
Needless to say, most insurers are not equipped to double their FNOL claims volume in less than a day, so many turned to partners to help fill the service gap.
Even in the face of uncertainty about future catastrophic events, planning, preparation and scalability are critical elements for handling increases such as those seen during the Colorado wildfires and Hurricane Sandy. Insurers must be able to react immediately and scale quickly over a short period of time. As insurers begin 2013, it is important to prepare for the unexpected catastrophic events with a cat management plan and recovery strategy that leverages the expertise, knowledge and skills of a partner who can help them meet Mother Nature's challenges with knowledge, skill, responsiveness and compassion, making them truly future-ready.
Bill Langley is the CEO of Innovation Group's North America BPO group
April 16, 2013
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