U.S. insurers’ catastrophe management preparation sound, with opportunities for improvement: PCS

Most insurers in the United States have numerous pieces in place to launch effectively into action when catastrophes strike, most notably the near universal use of a catastrophe plan manual, according to a new report from Property Claims Services (PCS), a Verisk Analytics business.

The PCS Personal Lines Catastrophe Claims Planning and Response Report, a new benchmarking study published on Wednesday, involved a survey of 53 property and casualty companies across the U.S., with the overwhelming majority writing personal lines of business, PCS said in a press release. The survey asked about home office cat management, cat event management, vendor management, settlement authority, equipment and technology, and post-event assessment.

Despite the finding of the near universal use of a cat plan manual, “in many other respects, execution of catastrophe claims management varied widely, and the industry needs to strengthen several areas,” PCS said.

The catastrophe management and response-related findings included the following:

Proactive approach – A majority of the companies surveyed have developed catastrophe plan manuals that they review annually. These organizations take a proactive approach to catastrophe preparedness, which can include the identification of catastrophe coordinators and permanent field teams;

On-site management: Most companies set up a remote catastrophe site selected by a regional or catastrophe site manager and staffed by deployed employees who make their own travel arrangements;

Reliance on outside services and staff: More than 70% of companies use agents for both the catastrophe process and client outreach. The majority of companies rely on multiple vendors, including property and auto vendors and independent adjusting firms; and

Role of independent adjusters: Independent adjusters are relied on for both field adjusting and inside adjusting, and many companies assure quality by requiring them to be certified. [click image below to enlarge]

The report also found that insurers overwhelmingly demonstrate concern for cat preparedness by using a cat plan manual; developing predetermined personnel lists, call center scripts, and pre-existing vendor contracts; and establishing catastrophe coordinator positions.

But there were opportunities for catastrophe claims management improvement, as noted in the following areas:

• Currently, about 50% of companies deploy IT personnel to some catastrophes. “Insurers may wish to increase that number because future technology applications in the claims-handling practices will likely make IT personnel a necessary part of the catastrophe team,” the release said;

• Companies overwhelmingly do not have SIU field support, even though fraudulent claims have the potential to be widespread after a catastrophe;

• Many companies should consider additional follow-up after catastrophes, both in terms of making adjustments to cat plans and manuals and improving individual staff performance; and

• The role of independent adjusters and the use of automated payments can be expanded to reduce cycle times and lessen overtime costs.

The PCS Personal Lines Catastrophe Claims Planning and Response Report is the second report in the PCS Benchmarking Series. The first report was the PCS Catastrophe Compensation Report, published in August.