How to Take a One-Two Punch
Claims professionals tackle unique challenges from Harvey and Irma
By Phil Gusman
The claims landscape is challenging enough when one major hurricane makes U.S. landfall. But two striking separate areas in the U.S. in under three weeks creates unique hurdles for the industry to clear. Claims professionals are answering the call, though, with new tools and lessons learned from difficult storm years of the recent past.
Hurricane Harvey struck Rockport, Texas, on Aug. 25 as a Category Four storm and dumped unprecedented amounts of rain on Houston and the surrounding area. Hurricane Irma, a massive storm, hit Cudjoe Key, Florida, on Sept. 10 as a Category Four and tore a path through the entire Florida peninsula before impacting states further north. While Irma spared major cities like Miami and Tampa from direct hits, these areas were well within the storm’s damaging wind field.
A Devastating Combo
Each event on its own created difficulties for claims professionals. For example, Cunningham Lindsey’s David Repinski, chief executive officer-Americas, says that, with Harvey, massive flooding in and around Houston complicated access to the area after the storm. With Irma, clogged highways following the evacuation slowed claims personnel from getting to some damaged areas.
Dealing with claims from both storms at the same time has compounded the challenges. Repinski says the overall draw on the industry’s claims handling capacity is one significant example of that, especially at a time when there is already “a general shortfall of claims professionals of all types due to changing demographics and fewer recent major catastrophe losses.” Furthermore, he adds, this draw on adjusting capacity drives supply and demand issues for independent catastrophe claims professionals, leading to higher fees in order to secure necessary resources and expertise.
With the storms hitting two separate areas, Ken Tolson, chief executive officer, U.S. property & casualty at Crawford & Company, outlines another obstacle: “You have the obvious challenges just around the logistics of moving people from one area to the other.” He points out, “Just think about the distance between Houston and Miami. That was a challenge for the entire industry.”
Of course, the claims world has dealt with successive storms hitting the U.S. over a short period of time before. As Repinski says, “We are accustomed to multiple events, such as the ‘four in 2004’ or Katrina, Rita, and Wilma in 2005.” The difference now, he notes is that “Harvey and Irma are materially different events impacting very different areas. This can drive adjuster preference in terms of where they want to work and what they want to handle at a time when capacity is strained.”
Illustrating that point, Tolson says that after Harvey, claims personnel were deployed from Florida to Texas. Once Irma struck, many of them wanted to work on Irma claims so they could take care of their own properties. “We tried to accommodate that so people could get back to their homes and make sure everything was okay, and then go back to work in Florida while making sure we’re still providing adequate coverage in both markets.”
Regarding the differences in the storms themselves, Repinski notes that while Harvey was certainly a wind event for Rockport, Corpus Christi, and surrounding areas in Texas, it was far more of a flooding event in the more populated Houston area. Irma, meanwhile, was “a classic wind event.”
The different types of damage from the two storms mean some claims organizations may be better suited for one area or the other. As Tolson notes, “Some people’s strength is wind; some flood.”
One silver lining is that there is unlikely to be prolonged wind-versus-water disputes for the vast majority of impacted properties. While the damage itself creates challenges, the causes—at least as of now—appear to be clearer than in a storm like Hurricane Katrina.
Float Like a Butterfly
When navigating this unique claims landscape, says Repinski, “The key is to only take as much work as you can properly handle and have very open lines of communication with your clients and their policyholders. Everyone expects and deserves a suitably quick process, but they also deserve one that is accurate and fair.”
While acknowledging the challenges, the industry remains confident in its abilities. Lessons learned from past storms helped claims professionals prepare for the current ones. Patrick Gee, senior vice president, property claims, Travelers Insurance, says Travelers enhanced and expanded its catastrophe response capabilities after Katrina. “Generally speaking, we believe the whole industry learned a lot from the storms” of last decade. He went on to say, “We think the federal government learned a lot from a FEMA perspective, as well.”
Gee stresses the importance of having “a very flexible, multi-faceted response capability.” Travelers, he says, deployed initial catastrophe responders supported by response teams of property claims professionals who can be called on from around the country, as needed. Additional personnel throughout the company are trained to assist with lower-severity property claims, and Travelers also has its mobile claims centers that can provide generators and internet connections when the power is out.
Repinski says the industry also is making more strategic use of experts such as engineers, building consultants, forensic accountants, contractors, and others to augment traditional claims professionals.
The Silent Cornerman
Perhaps the biggest advantage claims professionals have today over previous active storm years is better technology. “We believe technology has been the underpinning of our response capabilities, maybe since Katrina,” says Gee. “It starts at the very beginning,” he adds, with vast improvements in global forecasting models, which allow claims professionals to better prepare for the appropriate damage scenarios in the right areas.
Tolson says the migration of estimating platforms to the cloud is also speeding up the claims process. “We’re able to use our estimating platform in the field and upload directly to the cloud,” he says, allowing for information to be accessed instantaneously. “Then our centers can process the claim and we can force multiply the [claims professionals] themselves.”
Newer forms of contact methods, such as interactive voice response systems, allow information to be captured more quickly from policyholders so the industry can better triage claims, he adds.
Of course, we can’t exclude drones, which are playing a significant role in assessing damage quickly. “Before the water had receded in Houston, particularly around Humble, Texas, we had a commercial customer of ours that could not access its facilities,” says Tolson. “We brought one of our network drone operators in, they flew to the site from where the edge of the water was, and they were able to do an inspection of the building and assess it.” The client was then able to begin its mitigation plan instead of waiting for the water to recede, says Tolson.
Apart from getting to hard-to-access properties, Tolson says drone footage can be shared with carriers that want to assess damage on a wide-scale basis.
Gee notes that drones’ ability to fly up and assess damage to high roofs speeds the process by potentially eliminating the need for claims professionals to make a second trip to the property with specialists and ladders.
Tolson adds, “It’s really a much safer way to measure the condition of a roof and the measurements of a roof than the days of bringing a ladder and putting somebody up there.”
Preparing for the Next Match
Moving forward, once damage is assessed and claims are paid, rebuilding efforts will restore the damage done by Hurricanes Harvey and Irma. That brings a new set of challenges and concerns for claims professionals, as the strong demand for labor and resources will strain supply chains and a contractor workforce that is already suffering a shortage of skilled laborers.
There is also Hurricane Maria to contend with and the emerging crisis it has left behind in Puerto Rico. “The images coming out of there are bad,” says Tolson. “I’m concerned about the devastation to Puerto Rico, which already, from a financial stability standpoint, wasn’t in the best shape. This could be devastating blow.”
In all of the storm-impacted U.S. states and territories, Tolson says he thinks about the overall economic impact this wave of hurricanes will have—the financial toll on Puerto Rico, the potentially high number of properties not insured for flood damage in Texas, and more. After all, Crawford & Company and others in the claims industry are a part of these communities.
“We’re there for the long haul,” Tolson says. “Not just catastrophe season.”