Claims Departments to the Rescue

Claims departments of property/casualty insurers were essential players in the economic recovery of cities across America in 2011 following catastrophes that generated record numbers of claims. The losses, both insured and uninsured were staggering as the billion-dollar catastrophe became a new norm. The greatest dollar loss for catastrophes in the past 20 years occurred in 2011.

Insurance company claims departments helped numerous communities recover. While media attention following a disaster focuses on disaster declaration, and when Federal Emergency Management Agency will arrive on the scene, the financial reality is that most of the money to rebuild comes from property insurance policies purchased by the people affected by the disaster.

Although the media attention is scant, the policyholders are usually pleased with the rapid response of insurance company catastrophe teams. The well-trained cat adjuster who helps traumatized policyholders get back on their feet and resume their lives is frequently saluted in letters to company presidents. Disaster survivors often cite their realization that things will be OK when they arrive at a mobile catastrophe center to begin their claim, follow-up with questions, or seek expert advice. The greatest praise is often for the individual adjuster who takes the time to listen to a policyholder to learn what is most important to them and resolves those issues fast. Catastrophe adjusters are often viewed as “heroes” by policyholders for facilitating a rapid recovery from the disaster.

The catastrophes that produced the largest insured losses were primarily caused by severe thunderstorms and wildland fires. Flooding produced enormous, and mostly uninsured, losses from the Plains and Midwest to New England. Adjusters helped policyholders recover after these disasters and move on with their lives.

Severe thunderstorms in spring 2011 produced mega-tornadoes. The insured losses in April, which included the Alabama tornadoes in Birmingham and Tuscaloosa, have been estimated at about $7.3 billion by Property Claim Service (PCS). PCS estimates the insured losses in May, which included the Joplin, Mo., tornado, to be about $6.5 billion. The wildland fires in the Southwest and on the Southern Plains, mostly in Texas, have estimated insured losses of $3.6 billion.

All of these disasters and many smaller less spectacular occurrences, such as “routine” hail storms, generated thousands of claims. In every event, adjusters were on the scene immediately to help policyholders with their claims.

Hurricane Irene tracked along the East from Florida to New England. Although the wind velocity was “low,” the insured losses were about $4 billion, according to PCS. Irene proved that a hurricane does not have to be a mega-storm to produce big losses.

Following Irene, adjusters were in the field contacting insureds and settling losses. In many cases, they also helped insureds without coverage; insureds who suffered catastrophic flood damage. As Irene moved inland, it generated heavy rain in the Northeast and New England. Vermont sustained widespread catastrophic flood damage.

There was little flood coverage in place. Adjusters nevertheless responded to the policyholders’ calls for assistance, if only to deny coverage and to help provide the information necessary to complete paperwork needed during FEMA’s emergency loan and grant process.

A claims executive in New England said those inspections and claims denials increased the company’s claims expense. But, he noted, “these people are our policyholders. They need help, and we have the expertise to help them through the FEMA process.”

The flooding of 2011 once again demonstrated the value of having insurance versus seeking help from FEMA after a disaster.

On June 22, 2011, Minot, N.D., survived disastrous flooding when the Souris River flowed over the top of emergency levees. About 4,000 homes, nearly 25 percent of the city’s housing stock, were flooded with up to 12 feet of water that was polluted with agricultural chemicals and sewage. Close to 12,000 people were displaced.

There was little coverage in place from the National Flood Insurance Program, despite a campaign urging people to buy the coverage. Today, many of the survivors of the Souris River flooding in Minot have little or no money to repair or replace their houses. Many people are faced with spending a harsh winter in trailers provided by FEMA. Those who did have flood coverage have had their claims settled, for the most part, and are rebuilding or relocating.

The catastrophe adjusters received scant recognition as heroes, but they were among the most crucial players in the long-term recovery of the damaged communities as they began to rebuild.