Canadian Underwriter

Loss adjusting innovation emerging in light of insurance claims for forest fires: Cunningham Lindsey

June 6, 2017   by Canadian Underwriter

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Greater complexity in insured losses sparked by forest fires has produced a bright spot: innovation in how loss adjusters are tackling these events, suggests a new review from Cunningham Lindsey.

Released Tuesday, the company’s 2017 Major and Complex Loss Review offers examples where increasingly complex losses have led to new and innovative ways loss adjusters are evaluating and managing claims.

This includes the use of aerial photography and thermal imagery to more accurately assess levels of damage in forest fires – for example, the age of trees affected by forest fires, notes a statement from Cunningham Lindsey, which provides claims management services to the insurance market and serves clients in 60-plus countries.

Being able to accurately assess the age of fire damaged trees enables “adjusters to calculate reforestation costs, which depend on the time taken for new trees to reach the age of the burnt ones,” the statement explains.

Other technology used with forest fires highlighted in the report included chartering a plane equipped with infrared equipment to photograph affected areas and using the imagery to create a digital elevation model based on the geographic data of the area.

With regard to environment damage caused by forest fires, “adjusting the losses requires the consideration of numerous factors, including the cost of extinguishing the fire, the age of the trees, the extent of the damage, the presence of protected species of flora and fauna, and the investment needed to replant the forest,” notes the review.

“From our experience, handling forest fire claims are usually complex and costly and result in damages being paid of around 5,000 euros per hectare of impacted forest,” it points out.

The review contains case studies, including last year’s Fort McMurray wildfire. Citing numbers from Insurance Bureau of Canada, Cunningham Lindsey reports that the event led to about 44,000 residential, commercial and motor insurance claims.

Related: Need for more collaboration between municipalities one lesson learned from Fort McMurray wildfire, CIFF conference hears

With the Alberta wildfire, loss adjusters had to work in shifts as a result of the remoteness of the affected area, the lack of local accommodation and the no-fly zone in place, the company reports.

In addition, the conditions and restrictions also prevented company adjusters from using drone technology to assess the damage.

Albert Poon, President, Canada, Cunningham Lindsey

Albert Poon, President, Canada, Cunningham Lindsey

“The scale of wildfires means that the aggregation of loss is often high, and resources to manage the quantity and scale of the claims are stretched to the limit, both in terms of helping affected home and business owners and claims handlers to manage the quantity of claims arising,” Albert Poon (pictured right), Cunningham Lindsey’s president, Canada, writes in the review.

Related: Insurance industry should look ahead to even larger losses than Fort McMurray, ICLR chair suggests

“It’s clear from our report that the role of loss adjuster is changing as the nature and complexity of insured losses facing the insurance industry evolves,” Poon notes in the company statement of the Fort McMurray wildfire.

“We are seeing more innovative approaches emerge, reflecting the changing nature of the claims being managed,” he adds.

Divid Pigot, Global Head of Major and Complex Loss, Cunningham Lindsey

The ability to deploy technology “is a vital component in adjusting today’s losses – whether it’s drone technology to get early sight of damages at inaccessible sites or video and online reporting to assist our insurer clients in undertaking quicker and more accurate loss assessments,” Divid Pigot (pictured left), global head of major and complex loss for Cunningham Lindsey, writes in the forward to the annual review.

The case studies in the report illustrate three themes – changing weather, emerging risks and hidden exposures – noticed in dealing with major and complex losses related to fire, flood, criminal activity, earthquake and error, Pigot says.

Related: University of Calgary professor using NASA satellite data to help forecast forest fires

“Sometimes you have to spend money to save money,” he points out. A number of cases included in the review “required solutions that involved additional investment up front to deliver a significant reduction in the overall cost of the loss. Persuading clients of the merits of this approach means having experts who have seen this sort of loss time and again to explain the benefits fluently,” he adds.

Other case studies in the review include flooding in the United Kingdom, fighting between pro-Russian rebels and Ukrainian forces, cyber crime, contaminated soils, earthquake and cargo.

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