Finding Room at the Inn
Claims professionals seek resources to handle temp housing needs during disasters.
Lately, it seems that nearly every week there are news reports of another major natural disaster. For example, on May 10, 2015, snow, flooding, a tornado, and a tropical storm produced major damage in the central U.S. and along the Carolina coast, causing injuries, evacuations, and destroying many homes and businesses.
Strong evidence indicates that major weather events and natural disasters of this type are dramatically on the rise. The Centre for Research on the Epidemiology of Disasters (CRED) in Belgium reports that from 1983 to 1992, the world averaged 147 climate, water, and weather disasters each year. Over the past 10 years, though, CRED says that number now averages at 306 annually. But it’s not just an increase in frequency; severity also is rising. The National Oceanic and Atmospheric Administration (NOAA) reports that, in the U.S. alone, there have been 136 weather and climate disasters since 1992 that reached or exceeded $1 billion each in damages.
This escalating number of catastrophic events means that the number of displaced homeowners is growing, too, putting pressure on insurance companies and their claims professionals. Growing caseloads and a diverse mix of policyholders with varying degrees of coverage motivate claims professionals to find the best strategies and resources to better manage claims. Support often comes from temporary housing providers that can help insurance companies and claims professionals handle total catastrophic home losses, whether it’s for hundreds of homeowners in a localized situation or tens of thousands in a national disaster.
Risks Versus Coverage—and the Potential for Rising Costs
To prepare for the future, insurance carriers, claims professionals, and policyholders would do well to look at the past. Evidence shows that there is greater potential for the volume of claims and their associated costs to rise for certain catastrophes, such as floods and earthquakes.
Consider floods, for example, which rank as the number one disaster in the U.S., according to the National Flood Insurance Program (NFIP). The NFIP reports that, from 2008 to 2012, the average flood claim totaled nearly $42,000, and from 2003 to 2012, total flood insurance claims averaged nearly $4 billion per year. In 2012, the average flood insurance policy premium was about $650 per year.
Incidents of flooding and claims payouts are growing as more people living outside of flood plains file claims. According to the NFIP, people living outside of high-risk flood areas file nearly 25 percent of all NFIP flood insurance claims and receive one-third of federal disaster assistance for flooding. In 2012, the NFIP paid more than $7.7 billion in flood insurance claims to all policyholders.
In addition, the potential cost of earthquakes likely could rise, as supported by information shared by the Insurance Information Institute (I.I.I.) in an Aug. 18, 2014, press release. The release stated that in some areas of the country, risks of earthquake damage are higher because of development in seismically active areas where many older buildings do not adhere to current building codes. Further evidence from U.S. Geological Survey maps shows that 42 states are at risk, with 16 of them at even higher risk. Earthquake risk is particularly high in the Pacific, Pacific Northwest, Intermountain West, Central, and Eastern U.S regions. In addition, the newest maps show the eastern coast has the potential for larger and more damaging earthquakes than had been previously considered.
While the risks and costs are escalating, however, insurance coverage is lacking in some of the highest risk states. The I.I.I. said that in California, where nine of the most costly earthquakes in the last century occurred, only 12 percent of residents have coverage. This is down from 30 percent in 1996, two years after the 1994 Northridge, Calif., earthquake—the costliest in U.S. history. It caused an estimated $44 billion in total property damage, including $15.3 billion in insured losses.
Ready at a Moment’s Notice
As the volume of claims increases for these multiplying catastrophic events, claims professionals need to be prepared and ready at all times with the necessary skills to manage claims. Since catastrophic losses often place a heavy emotional toll on policyholders, well-trained claims professionals equipped with outstanding tools also bring peace of mind and confidence to those whom they serve.
Catastrophe training for claims professionals can vary, depending on their specialty areas and the particular requirements of the insurers for which they work.
“I focus on the specific needs of each client, so training becomes very specialized,” says Elise Farnham, a CLM fellow who serves as president of Illumine Consulting, a firm providing professional development and training for catastrophe claims professionals. Working with large catastrophe firms, she trains claims professionals on evaluating a loss, interpreting coverage, and developing strong interpersonal skills like time management and negotiation.
CAT training usually involves learning how to use estimating systems, such as Xactimate, to write detailed estimates, including sketches of structures and costs that are calculated using local pricing for building materials. Claims professionals share these estimates with policyholders, who appreciate understanding all of the costs involved in their claims.
Most claims professionals with whom we spoke agree that a strong catastrophe claims process starts with good communication. They offered the following communications tips for easing policyholders’ minds:
- Review policy/coverage allowances with them. Policyholders often don’t understand or aren’t aware of exactly what is covered.
- Ask the policyholder to point out all damages. This can help them feel like they are contributing to the process and, thus, are more in control.
- Provide a copy of your project scope and damage estimate as soon as possible.
- When a report from an expert is required regarding damage, also provide a copy of that report to the policyholder.
- Answer all questions as quickly as possible. If you don’t know the answer, give policyholders a time when you’ll follow up with an answer.
- Connect them with state, federal, and nonprofit resources that can help. Have a list ready of phone numbers and addresses for groups such as the Red Cross, the Federal Emergency Management Agency (FEMA), local churches, and food pantries. Also, you can encourage policyholders who need further financial help to contact the Small Business Administration (SBA) for low-interest loans or FEMA for grants.
In addition, there are handy tools that claims professionals can use and recommend to their policyholders to help prepare for all phases of a disaster. The American Red Cross offers several helpful weather and aid apps for earthquakes, tornados, wildfires, hurricanes, floods, first aid, and finding shelters. The shelter finder app maps locations and shelter details across the U.S., allowing users to zoom in on their local area and view shelter details, including addresses and capacity. The FEMA mobile app provides alerts from the National Weather Service, tips to survive natural disasters, and disaster resources to help find shelters and apply for assistance.
Claims professionals can use other tools to track and prepare for catastrophes. For example, the California Integrated Seismic Network offers quake maps and “ShakeMaps” to monitor earthquake activity.
Setting Housing Expectations
Temporary housing companies can help claims professionals plan before a catastrophe by reviewing their catastrophe plans, identifying a communication plan, and setting expectations to ensure both the insurance company and housing provider are aligned.
Experienced temporary housing providers develop strong relationships both locally and nationally with hotel chains and property managers, supply chain vendors, and furniture and other service suppliers, focusing on cities and regions that have a history of weather events and disasters. Since response time is critically important to insurance carriers and their policyholders, these relationships are key to being prepared when a catastrophe hits.
It’s a good idea to find a housing provider that has an established “duty of care” program, which combines strategically aligned, proactive processes and crisis response tactics to manage against a broad range of catastrophic events and natural disasters. In addition, look for a provider with a dedicated crisis team that can be deployed on the ground quickly to help claims professionals find housing inventory.
Leading housing providers also can offer creative solutions, such as tapping local colleges, retirement homes, and even medical facilities to accommodate both displaced homeowners and claims professionals working in the area. They can partner with an insurance carrier to set up unique housing options, as needed. For example, a housing provider may be able to offer policyholders rooms in a local hotel minimally affected by a natural disaster. The property may be in good condition but is without power, so the housing provider may be able to work with the insurance carrier and FEMA to obtain generators that make the property usable.
One claims professional from a large national insurance company said she works with temporary housing providers that handle all the details and paperwork for policyholders’ total loss claims. Doing so streamlines her workload and removes some of the stress. During Hurricane Katrina in 2005, policyholders were dealing with some of the most horrendous circumstances, including the death of family members. “It’s our job to reassure them and let them know we’ll take care of them immediately, including placing them in the hands of a reputable temporary housing company,” says the claims professional.
Housing providers also can help claims professionals with policyholder requests by offering accommodations located within close proximity to their work locations, schools, and daycare. In turn, claims professionals are pleased when providers can find apartments with kitchens so policyholders don’t need to eat out as often, which can quickly drive up costs.
“It’s very helpful to use a temporary housing provider because they find the housing you need quickly, find a comparable housing option, and can get better pricing on temporary accommodations,” says Farnham, who also serves as a board member for the Society of Registered Professional Adjusters. “Policyholders need to understand that, if they find housing on their own, it can often be too expensive and not covered under their policies, which would only add to their already stressful situations.”
Temporary housing providers can help insurance carriers manage housing costs for their claims staff, too. Experienced providers typically keep an inventory of “turnkeys”—apartments they have set up in various markets with year-long leases locked in at certain rates—that claims professionals can use as necessary. Because market rates for apartments can skyrocket during a catastrophe, turnkeys are especially beneficial for helping contain costs for insurance carriers deploying many claims professionals over longer periods.
In the end, temporary housing providers can ease the burden for both catastrophe claims professionals and their policyholders by helping manage costs, setting expectations, and communicating often to prepare as much as possible before a catastrophe hits. In addition, leading housing providers draw from years of catastrophe experience and building trusting relationships with hotel chains and property managers to anticipate a wide variety of policyholder needs, offer creative solutions, and provide reassurance that policyholders will be placed in their accommodations quickly and efficiently.