Canadian Underwriter

Taking Care of Business

September 30, 2013   by Craig Harris

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There is mounting evidence that business continuity (BC) planning has become firmly entrenched at a wide range of independent adjusting firms, from small to larger companies. Given the increased demands of clients in the Request for Proposal (RFP) process and the ever-rising number of significant weather events, it is little wonder that a sound, well-tested BC plan has become a key part of operations for many adjusters.

“Our business continuity and disaster recovery plan is important not just for the RFP process but for our work with Lloyd’s, third party administrators (TPAs) and even larger self-insured clients,” says David Riddell, president of Calgary-based regional adjusting firm Canadian Claims Services. “Increasingly, people are asking to see details of our BC plan. We went through a very involved audit process with a TPA recently, where I would say about 25-30% of the time was spent on our BC planning.”

“Our clients quite often require that we show we have done due diligence in preparing for situations where our operations are impacted by local or regional disasters,” Blair McGregor, British Columbia regional manager for Kernaghan Adjusters, concurs. “We are routinely asked to provide a copy of our BC plan to potential clients.”

“All our clients, be they insurers, corporations, municipalities, have a keen eye to all forms of risk,” notes Michael Holden, president and CEO of Granite Claims Solutions. “This includes their own BC plan to ensure they keep delivering their product or service to their customers. As part of their service offering, independent adjusters need to be prepared in the very same way. Thus, BC plans are a very important part of the procurement and contract development process.”

In fact, BC planning is a double-edged sword for adjusters, who have to look after their own affairs at a time when clients are expecting them to ramp up and handle high claims volumes.

“BC planning is especially important because of the fact that in many circumstances the independent adjuster is the cornerstone of the client’s internal plan,” says Greg Smith, senior vice president, key account management, Crawford & Company (Canada) Inc. “This role means that within minutes of an adverse event occurring, our call centres may see a dramatic influx of incoming calls, followed by an increase in the new claims associated with those calls.”

Riddell, who was on the front lines of the historic flooding that took place in Southern Alberta in late June, says adjusters have to be prepared for more of these kinds of extreme events. “We are seeing more frequent severe weather,” he says. “Whether or not you believe in climate change models, the fact is we, as adjusters, have to be ready to handle claims. That is what we are supposed to do; that is what our clients rely on us for.”

“With the seeming increasing severity of weather-related disasters, it’s going to press our BC plans to become more resilient going forward,” Holden notes. “Technology will help, but it’s really about building a flexible solution that works and developing the right skills and attitudes in your people.”

In Canada, natural disasters have come in the form of recent flooding in Alberta and Ontario and, the Lac-Mégantic train explosion. Going back, the Slave Lake wildfire in Alberta in 2011, the SARS crisis in Toronto in 2002-2003, wildfires in Kelowna, B.C. in 2003 and the power blackout in northeastern Canada and the United States in 2003 are other examples of business interruption. Many say these events have sharpened awareness in the independent adjuster community, with larger firms refining plans that have been in place for decades, while smaller to mid-sized firms increasingly realize the need for preparedness.

Smith notes that a massive power shutdown, such as that experienced in 2003, demonstrates why adjusters “require a high level” of readiness.

“In the (summer of 2003), the massive loss of hydro impacted all parties at the same time,” Smith recalls. “However, the BC plan that was in place at that time worked flawlessly with no disruption of service including a spike in call volume to Crawford’s Claims Alert Call Center when clients redirected large portions of their inbound claims call to Crawford. The centre was able to remain operational on emergency generator power for a number of days until power in the area was restored.”

The embrace of BC planning by adjusters is backed up by the findings of recent surveys. A 2012 AT&T study indicates that a vast majority (85%) of Toronto-area companies have developed business continuity plans to help identify, prevent and respond to adverse conditions, a third of whom are saying it has become a priority in recent years due to natural disasters and security issues. This number is close to AT&T’s 2013 national survey, which showed that 87% of executives indicate their organizations have a business continuity plan in place in case of a disaster or threat – a slight increase from last year (86%).

The results also mirror a 2006 KPMG poll of 254 senior executives involved in Canadian business or IT management. That survey discovered that 83% of respondents had a business continuity plan in place. The results led KPMG to conclude in a report called Building a Continuity Culture that “the awareness of the need for effective business continuity planning is well entrenched in Canadian companies.”

Still there are lingering concerns that some small to medium-sized adjusters don’t have the time, money or resources to create anything more than a rudimentary working plan. Surveys have also shown that small-to-medium sized enterprises (SMEs) often don’t have a functioning plan in place and face a harder time recovering from disasters.

Sorry We're ClosedInsurer Aviva, in a recent SME Pulse survey, says that smaller companies that don’t take the time to prepare disaster recovery and business continuity plans (BCPs) are more likely to close in the first two years of business. In addition, a recent report from Small Business Majority (SBM) and the American Sustainable Business Council (ASBC) found that 57% of small businesses have no disaster recovery plan, and for those small businesses that do have continuity, or risk management plans, 90% spend less than one day a month preparing and maintaining them.

So what does an effective BC plan entail? And what are some of the lessons from those who have implemented a sound plan? A BC plan seeks to identify an organization’s current service levels. It requires a risk assessment identifying the key threats to the business, puts in place a plan to manage any incident, and includes business recovery planning, as well as tests/exercises and maintenance planning.

Organizations with effective BC plans tend to have such features as mass notification systems, “mirror” or redundant Web sites, fully outsourced data recovery and/or call centre services, clear lines of managerial accountability, staff call-tree/contact lists and identifiable employee safety procedures.

Experts tend to agree that a BC plan should have, at a minimum, six basic steps: knowing the risks, knowing the potential effects of an exposure, developing risk mitigation strategies, completing a plan, coming up with ways to secure communications in the event of an emergency and reviewing and exercising the plan.

According to adjusters, these types of BC plans were put to the test this year in a number of events. The most obvious was the flooding in Alberta and Ontario.

Riddell, who notes that his firm invested in a revamped BC plan two years ago, says he was satisfied with the results of his company’s plan. “One thing that really stood out (with the flooding) was the importance of BC planning,” he says. “As adjusters, we are on the front lines of disasters. I was pleased to see that our plan responded well.”

In fact, Riddell says he was surprised to discover that some brokers and insurance companies did not have effective BC plans in place for extreme events. “A lot of firms did not seem to have a functioning plan after the flooding – and we are not talking about small companies here,” Riddell notes.

If a workplace is inaccessible or employees cannot physically come into the office, this can throw a major loop into how adjusters (and others) respond to claims in severe situations.

“The fact is that insurance companies are handling hundreds upon hundreds of claims after these kinds of events,” Riddell says. “And they expect adjusters to acknowledge and respond with a centralized on-line or email system. If you can’t access your systems or servers, don’t expect to ask them to just fax the claims over or call you. The insurance company will turn to someone who can process those claims.”

At Crawford & Company, Smith notes that this is a balancing act his firm regularly handles. “Not only does our BC planning process need to ensure the smooth continuation of day-to-day operations, it must do so with the anticipation of a large influx of work being transferred over from our insurer, broker and corporate clients,” Smith comments.

Crawford& Company’s chief information officer in Canada Dale Avis notes that some of the events this year did have an impact on the company’s BC planning capabilities.

“While none of Crawford’s physical locations suffered direct physical damage during the most recent series of natural and man-made disasters, some surrounding infrastructure was impacted and backup power supplies and redundant network connections worked successfully in the locations where they were required,” Avis observes. “In cases where travel was difficult or access was restricted, Crawford’s workforce was able to work remotely form home based offices or on the road using mobile technology.”

Other adjusting firms indicate their physical operations were also relatively untouched from extreme weather events in Canada this year – but they nonetheless had to kick in their BC plans.

“In the flooding in southern Alberta and Ontario, our infrastructure was untouched and completely operational, though we had our two back-up sites for call centre services (which were critical at that time) on standby,” notes Granite Claims’ Holden. “The real test for these two events was the resources we had in place, due to a large influx of claims from day-to-day clients, as well as from personal situations related to the floods, were just barely keeping up with the excess assignments.”

Holden says that Granite Claims was able to ramp up quickly to meet the demand for claims capacity. “Our BC plan, along with our Catastrophe Plan, has a contingency for immediate mobilization of available resources from other areas of the country,” he notes. “In both circumstances, we had feet on the ground within 24 hours of the event and were easily able to handle the capacity.”

The same holds true for Kernaghan Adjusters, McGregor observes.

“Luckily, (we) had not been impacted directly by any recent disasters,” he notes. “We have responded to situations such as the Alberta floods by deploying teams of adjusters and we must therefore maintain a ‘Cat Team’ of identified immediately deployable personnel so we can respond quickly to needs wherever they may arise across Canada. For this purpose, our adjusting system is web-based and all of our deployable adjusters are ready to move with minimum notice (normally within 24-48 hours of a call).”

Come In, We're OpenLarger adjusting firms have the obvious advantage of mobilizing other offices across the country and deploying additional adjusters to the scene of a disaster. But smaller adjusters can also take advantage of technology to ensure their operations – and employees – are up and running in extreme conditions. In particular, several BC planning experts have remarked on the advantages of such developments as cloud computing, IT outsourcing and social media as potential tools for operations of all sizes.

“The costs of outsourcing much of this technology has come down a lot in the last few years,” notes Riddell. “We made a decision to outsource some of our technology, so we have an IT firm that is responsible for redundancy (triple redundancy for certain things) and fail safes. It was well worth the investment.”

Changes in the IT world hold a great deal of promise for adjusting firms, according to McGregor. “With increasing reliance on technology and increasing use of smart phones and light mobile computing devices, BC plans should become more robust and flexible,” McGregor observes. “Cloud computing and other transformation of data sharing and storage will allow for greater dispersion and therefore less risk to the overall organization.”

Technology, particularly in the form of mobile devices, is a key part of any BC plan, but the irony is that the more reliant we become on networks and servers, the more challenging it is to operate when “systems” are down.

“There is no doubt technology has helped our organization connect its employees more easily than ever before – our network and telephony systems allow employees to have complete access to their work environment from virtually anywhere with a computer connection,” notes Avis. “However, the daily reliance on that technology increases the risks associated with the failure of that technology. Ten years ago, if an office completely lost its network connection for a few hours the impact would have been relatively modest. Today, the same situation would have a significant impact that needs to be mitigated through careful BC plan.”

Others agree that technology can cut both ways when it comes to BC planning.

“Interestingly, some of the same devices that have made us dependent on mobile technology (smartphones, laptops) have also allowed business to continue uninterrupted in the wake of disasters,” says Evan Morgan, IT director, Granite Claims Solutions. “Mobile technology allows people to work from anywhere, so if a physical location is unavailable due to a flood, windstorm, or fire, our adjusters can continue receiving assignments and handling claims. Of course, these types of technology are more at risk when there are cyber attacks or other technology-crippling events, but we have processes in place for those as well.”

While technology is vital in BC planning, it has to be integrated into the nature of the organization, in terms of its employees, communication practices and its structure, according to adjuster sources.

“An overarching theme we have learned is (that) good BC planning is not about technology; It’s about people,” Holden says. “Disasters require the mobilization of people, messages to be sent, and plans to be executed. Unfortunately, these circumstances often prevent the conveniences of technology, and there needs to be a plan for that as well.”

A similarly consistent theme of BC planning is that any plan has to be flexible and easy to deploy according to the situation at hand. For BC plans in general, the idea of a 200-page, three-ring binder gathering dust on the shelf may be of comfort to a company, but it is not necessarily effective when disaster strikes. A serious business interruption is no time to be flipping through manuals or adding more layers to the response process, according to sources.

“A BC plan should not be overly complex or convoluted, but instead contain some basic steps for senior managers and employees to take in a defined event,” Riddell says. “The last thing you want to be doing is adding more confusion at a time like this.”

“When a disaster occurs, one of our key objectives is to minimize confusion and enhance communication among the Disaster Recover Team Members,” Avis notes. “The communication tools available today have made a huge differen
ce in our ability to keep the information flowing between Disaster Recovery Team members as well as other stakeholders during an actual disaster.”

One way to limit confusion and execute proper business planning is through regular testing. Avis also observes that Crawford has a third party that audits and tests its BC plan a least once per year, as well as asking its customers to be included in their internal plans. “

“There is no benefit to having a BCP in place unless it is updated and tested regularly,” Avis says. “The BCP is not a static document. Rather it is constantly changing due to staffing changes, or changes to environments such as the introduction of new technology.”

Other adjusters concur that auditing and testing are crucial components of the BC planning process. Holden notes that Granite Claims’ BC plan is tested on a regular basis to “reaffirm the plan, ensure it’s ready when needed and prove compliance to some of our clients (and vendors). It is largely an exercise to ensure the base processes are there, and that they are flexible.”

This flexibility is a critical part of any planning, according to Holden. “What worked during the floods in Toronto this past summer would not work for the same situation in Quebec, let alone a different event, like an earthquake,” he says. “This is why our team has developed, with the help of our regional VPs, Catastrophe Team, and Large Loss Leaders, a long list of scenarios for each region of Canada.”

McGregor also notes that regular testing is crucial for BC planning. “You must ensure the plan will work and this can only be tested via a rehearsal type exercise,” he says. “Key staff can ‘war game’ eventualities via conference calls or video calls. Various scenarios should be considered and the sessions should allow for each key player to freely ‘brain-storm’ outcomes.”

Those adjusters who have put the time and money into a thorough, comprehensive BC plan say the investment has paid off in the ability to stay up and running in real-life extreme events and disasters. Moving forward, they are keen to test the strength for their planning and prepare for different scenarios. The less robust alternative for adjusters who fail to plan is a hope for “business as usual” after a disaster.

“The question for smaller adjusters, and all adjusters in general, is not whether you can afford a BCP, but whether you can afford not to,” Riddell says. “Can you afford to be left behind as one of those firms that couldn’t process claims at a time of disaster? This is what our clients expect of us and this is what customers need us to do at a time of disaster. It really is where the rubber hits the road.”

“Independent adjusters should be prepared to answer more questions about their BCP process and be transparent with the results of audits and tests that are completed,” Smith concludes. “It has become such a vital component of our service delivery we can no longer expect our clients to just assume we have it in place and trust it will work. We have an even larger opportunity to work with our customers on joint planning and integrated testing to ensure we all perform well when called upon.”