Get Ready For the Cat Around the Corner
Mark Twain once said “everyone complains about the weather but no one ever does anything about it.” Well, that’s almost true about the insurance industry. While there is nothing carriers can do to prevent extreme weather events like hurricanes or tornadoes - they can have an effective catastrophe plan in place for when they do happen.
Perhaps surprisingly, while 95% of carriers do have a written Cat plan (according to our informal research) only half of them have plans that outline response criteria in sufficient detail. It means that after an event many carriers could find that there’s insufficient policyholder retention or inefficient loss handling, for example. Worse still, lack of an effective plan could lead to very costly litigation, as experienced by many carriers after Katrina.
Of course not all carriers have experienced a major Cat event like Katrina and their plan will be untested as a result. That’s all the more reason to make sure that any plan incorporates three essential elements: anticipation, communication and flexibility.
“Prepare for the worst and hope for the best”. Anticipation of what is possible means making sure the data derived from mapping and modelling tools that is used for underwriting is shared with the claims department as part of the Cat planning process. Communicate with policyholders and other stakeholders in advance on how to report a claim. And be careful to communicate internally as well, to avoid hold-ups.
Finally, be flexible. If something can go wrong, it will. So have a back-up plan and prepare to have to make quick decisions.
Above all, remember that a well-handled catastrophe - turning a tragic event into a positive experience - is also a marketing opportunity.