Practical Preparation Tips
Planning for a catastrophe must begin long before the event occurs. One important part of the planning is insurance coverage but that cannot be the only part. Insurance agents can be a valuable source to their clients and the public at large in detailing practical preparation tips.
The contributors to this month's cybercast explain the catastrophe coverage that is available. They also offer a number of tips and resources agents can use in their own preparation and share with their clients.
No Time for "Cat" Complacency
Agents, brokers can ensure proper coverage, preparedness and response
By Dave Willis
While insured losses caused by natural disasters in the United States in 2015 topped $16 billion, the strong El Niño suppressed hurricane activity in the Atlantic Basin, resulting in just $60 million in insured losses-a fraction of the 10-year average of $6.5 billion-and earthquake losses were minor. Relatively modest CAT activity in the past few years may have led some to be complacent, but that's not a good idea.
"Much like death and taxes, catastrophes aren't something people like to think about," explains Craig Poulton, CEO of Poulton Associates, which operates the National Catastrophe Insurance Program. "Unfortunately, just as Ben Franklin viewed the first two as 'certain,' so must we view catastrophes-at least from an insurance perspective. The right preparation, including comprehensive coverage, can help businesses and home owners survive catastrophes and come out as unscathed as possible."
Steve Rotay, president of Paul Davis Restoration-Mid-Atlantic Region, says agents and brokers play an important role in this effort. "In every case, the local independent agent is a trusted and interested partner to the policyholder," he explains. "Policyholders trust their agents to recommend proper protection, and they expect their agents to be there to help them if a disaster strikes."
Addressing protection is most important."Agents should review customer loss exposures and explain that they can be avoided, transferred, or retained," says Michael Brown, CPCU, CCRA, vice president and commercial property department manager at Golden Bear Insurance Company. "Make sure the exposures customers retain are retained deliberately, not accidentally, and make sure the risk transfer mechanisms don't contain gaps that result in unintentional exposure retention."
Paul Lalande, claims manager at American Modern Insurance Group, concurs. "Customers need to understand their entire insurance package to assure proper coverage and/or be financially prepared to participate in the loss through deductibles and coverage limitations. Independent agents are critical in this process." Poulton stresses the need for agents to understand their clients' exposures to catastrophic perils. "Then explain which are covered and which remain uncovered, such as earthquake or flood," he advises.
Annual policy reviews can play an important role in this effort. "Agents should regularly review coverage with customers to ensure it keeps pace with any changes to the value of the insured's risk and avoids gaps in coverage," Lalande notes. "This should be as routine as going to the dentist."
"Policy reviews benefit both clients and producers," Poulton asserts. "Producers reduce their exposure to E&O claims based on incomplete coverage following a catastrophe, and clients have the comprehensive coverage they need to weather that catastrophe."
Lalande recommends that agents "ask catastrophe-specific questions, such as, 'Is the property located in a catastrophe-prone area, such as a low-lying area subject to flooding, or in an area prone to frequent wind, hail, or tornadic activity?' Address earthquakes, which are occurring more frequently in areas not normally thought of as earthquake-exposed. And of course, property in coastal areas should reflect potential hurricane activity and how the policy would respond."
"A clear grasp of what customers have to lose is critical to planning for potential loss scenarios," Brown says. "In earthquake-prone areas, for instance, how close is the property to known faults? How well will the building and contents stand up to a quake? How vulnerable is the insured to supply chain or infrastructure interruption? And think about redundancies, like off-site data storage and replication, availability of generators and alternative business locations."
Agents also need to correct policyholder misconceptions. "Most home owners policies don't provide flood insurance, but many home owners are unaware of this," Lalande says. "Also, address peril-specific deductibles that may apply, such as hurricane or named-storm deductibles, wind and hail deductibles, and earthquake deductibles."
Poulton adds, "Many consumers-and even some insurance professionals-aren't aware of alternatives to the National Flood Insurance Program's standard flood insurance policy. Private flood insurers offer policies that include broader definitions of 'flood,' additional living expense and business income coverage, and numerous other enhancements."
Agents can help customers with more than just proper coverage. "Take time up front to make sure customers are as ready as possible to respond following a disaster," advises Brown. "When did Noah build the ark? Before the rain."
Various tools and resources are available. "For instance, the U.S. Geological Survey website, (USGS.gov), has a lot of good information on earthquake hazards across the country," Brown says. "Smartphone apps and email subscription services can keep customers up to date on CAT activity anywhere in the world.
"Utility companies will often perform free inspections of gas meters and appliances to make sure that they're properly braced or strapped," he adds. "FEMA's Ready.gov website has useful preparedness tips for a variety of disaster scenarios, and the American Red Cross has brochures and smartphone apps to help people learn how to prepare for a disaster of any kind."
Consider bringing third-party resources into the mix. "One way agents can help customers is by vetting restoration companies in the area before a disaster hits," Rotay points out. "Go visit the organizations and know who will be showing up after an event takes place."
He says restoration firms can help with emergency preparedness planning. "The agent may or may not have experience in this," he notes. "They can introduce the topic and facilitate a meeting with us, for instance, and can take part at whatever level they're comfortable." Rotay adds that some restoration firms offer information sessions and/or CE-qualified classes on restoration procedures and advances.
"As part of the preparedness plan, make sure customers think about people first," Brown says. "They need to protect themselves, their employees and their customers. With earthquakes, for example, employees should be trained to stop, drop, and hold on-and stay out of doorways; they aren't as safe as we once thought.
"When it's safe to do so," he adds, "they should evacuate the building to a designated gathering point off premises. They should have designated counters with current rosters of employees, and keep track of who was not at work each day, so they don't endanger someone going back to look for an employee who did not report to work that day."
Make sure that insureds plan how they'll prevent further damage. "Once people are safe, they should determine how best to protect their property," Brown says. "For instance, if the structure is intact, lock it up before leaving. If it's less than intact, they should contact the pre-identified fencing rental service. Because local vendors may be recovering from the same event, it may make sense to plan using vendors from some distance away."
Philip Ambrose, senior executive general adjuster in the Tampa office of Engle Martin & Associates, encourages agents to instruct insureds-both personal and commercial-to document their property and its contents up front. "With hurricanes, you have advance notice, so perhaps you can do something at the last minute," he says. "But it makes more sense to document ahead of time and then update if necessary.
Today's digital photography offers a virtually unlimited ability to take photos." He points out that most people don't realize the extent of property they own.
"Photos let the adjuster see what existed before the storm hit and the condition of the items," Ambrose adds. "I worked Hurricane Andrew, and some people had everything blown away. Using a digital camera or, better yet, a video recorder-even the one on your smartphone-is easy to do. And the files are easy to store."
Poulton concurs, and stresses the importance of regular updates. "This provides a clear and inclusive inventory before a catastrophic loss occurs," he says. "For business clients, agents also should emphasize the importance of archiving and creating off-site backups of data such as year-end inventories, monthly financial statements and other important information."
"It may make sense to introduce the adjuster ahead of time, if possible," Ambrose says. "Some adjusters are pre-assigned to accounts-commercial ones especially. Connecting customers and adjusters before a storm hits lets customers get to know the adjuster and have an added comfort level that the adjuster is there to get them back up and operational."
He adds, "The more a customer can know ahead of time-even if it's a worst-case scenario, like the fact that their facility may not be usable after a catastrophe-the better things go afterward. Of course, making sure customers have adjuster contact information so they can engage in regular communications after the storm hits is key, as well."
Brown recommends working with clients ahead of time to create a list of the most likely information that the claims adjuster will be asking for. "Make sure they'll be ready to provide it," he says. Ambrose concurs, adding, "When a catastrophe hits, adjusters will be spread thin. Agents should prepare customers to expect this." Brown says agents also should offer customers a list of vendors they can use in case of emergency.
After a disaster occurs, the rubber hits the road. "The most important thing is to be open for business to support customers in their time of need," says Lalande. "That requires independent agents to have a disaster continuity plan of their own that addresses document and data security and continued operations, in case their offices are damaged."
He also suggests planning to have extra staff on hand to handle customer inquiries, where possible.
Poulton agrees. "In the event a catastrophe does occur, the first thing an agent can do to help his or her customers is to be immediately accessible. Agents aren't immune from catastrophic occurrences, so they should follow the same advice they give clients and be able to operate remotely to help customers when they need them most."
Lalande points out that agents need a good working knowledge of products they're selling in order to respond to customers' questions regarding specific coverage issues. "Also, they must be familiar with their carriers' catastrophe plans regarding how to file claims, authority agents may have responding to a catastrophe, and expectations to communicate to customers regarding the claims process."
"Have customers make contact with their insurance carrier as soon as possible, and make sure they're available to meet with the claims adjuster at their business location," Brown advises. "Make sure they have records and files available, as needed -for example, off-site backup of accounting records, inventory records, etc."
"Agents can also be of help by suggesting post-catastrophe safety tips, assisting customers in accounting for their losses, and assisting them in reviewing coverage for alternative living arrangements," Poulton adds.
Ambrose says agents should make sure clients photograph and document their damages even before the adjuster shows up. "Write down what the damage is, and share that with the adjuster when he or she arrives," he says. "The more quickly we can identify and agree on the scope and extent of the damages, the easier it is to get a settlement agreement. Remember, we're all interested in getting things back to normal and getting people back in business."
Remember disasters deliver more than physical harm. "Coach customers that there will be emotional peaks and valleys," Rotay advises. "There will be issues-with policies, municipalities, basic construction, or even just working within an emergency environment."
He adds, "Things always seem to cost more than expected, so expenses pile up quickly. Add to that the concern that cash may stop coming into the business, and you have a stressful situation. Coming alongside the policyholder and facilitating a recovery plan among the carrier, policyholder and restoration contractor will ease the tensions."
Rotay stresses the importance of staying in touch with customers frequently throughout the claim process. "Your customer needs you the most after experiencing a loss," he says. "Be a confidant, a supporter in this process.
"Most people never experience this kind of loss or stress," he adds. "They need someone to listen, to help them determine what is important and what is realistic. They may need help understanding that the system works, but that it may not move as fast as they expect."
"Beyond being available to advise and comfort after a loss," Poulton adds, "perhaps the best thing a producer can provide for a client after an event is the assurance that the agency arranged the most responsive and comprehensive coverage available prior to a catastrophe."
Brown concludes, "Reassure customers that their insurance carrier is there to help them through this. It's what we do for a living, and we're pretty good at it. Let them focus on their family or business. And let them know we've got their back."
For more information:
American Modern Insurance Group: AMIG.com
Engle Martin & Associates: EngleMartin.com
Golden Bear Insurance Company: GoldenBear.com
Poulton Associates: Poulton.com and CatCoverage.com
Paul Davis Restoration: PaulDavis.com