Presented by: Lynne McChristian, Insurance Information Institute

Transcription

1 Presented by: Lynne McChristian, Insurance Information Institute October 15, 2009

2 AGENDA Pre-event activities Planning, tools and training As the storm approaches An inside look at how insurers prepare and deploy Hurricane responders All hands on deck Post-event actions and activities Putting what we learn to work

3 It is, obviously, useful to have plans. But the reality is that events rarely unfold according to plan. There are no plans any more only events. George E. Woodberry

4 ** 20?? $7.5 $2.7 $4.7 $5.5 $22.9 $16.9 $8.3 $7.4 $2.6 $10.1 $8.3 $4.6 $5.9 $12.9 $9.2 $6.7 $26.5 $27.5 $26.0 $61.9 $100.0 U.S. Insured Catastrophe Losses $120 $100 $80 $60 $ CAT losses exceeded 2006/07 combined. By far, 2005 was the worst year ever for insured catastrophe losses, but the worst has yet to come. $100 Billion CAT year is coming. $20 $0 *Excludes $4B-$6b offshore energy losses from Hurricanes Katrina & Rita. **Based on PCS data through Dec. 31. PCS $2.1B loss of for Gustav. $10.655B for Ike of 12/05/08. Note: 2001 figure includes $20.3B for 9/11 losses reported through 12/31/01. Includes only business and personal property claims, business interruption and auto claims. Non-prop/BI losses = $12.2B. Source: Property Claims Service/ISO; Insurance Information Institute

5 Catastrophe Facts The $26 billion in insured losses was the 4 th highest ever, behind only 2005, 2004 and There were 37 designated catastrophes in 2008, the highest since 1998 (also 37). Commercial losses accounted for 27% of insured losses, but just 9% of claims Commercial, $340, 9% Vehicle**, $876, 22% Personal*, $2,700, 69% *Includes homeowers, condominium and rental policies. **Includes commercial and private passenger vehicles Source: PCS; Insurance Information Institute research.

6 $ Billions *PCS estimate as of 12/15/08. Sources: ISO/PCS; AIR Worldwide, RMS, Eqecat; Insurance Information Institute inflation adjustments. $50 $45 $40 $35 $30 $25 $20 $15 $10 $5 $0 $4.0 $5.0 $6.0 $7.0 $7.8 $8.2 Jeanne (2004) Frances (2004) Rita (2005) Hugo (1989) Nine of the 12 most expensive disasters occurred since In 2008, Ike became the 6 th most expensive insurance event and 4 th most expensive hurricane. Ivan (2004) Charley (2004) $10.7 $10.9 $10.9 Ike (2008)* Wilma (2005) Northridge (2004) $22.0 $22.9 9/11 Attacks (2001) Andrew (1992) $43.6 Katrina (2005)

7 Insurers earned a record underwriting profit of $31.7B in 2006 and $19.3B in 2007, the largest ever but only the 2 nd and 3 rd since Cumulative underwriting deficit from 1975 through 2008 is $442B. $ B underwriting loss in 2008, incl. mort. & FG insurers Source: A.M. Best, ISO; Insurance Information Institute * Includes mortgage & finl. guarantee insurers

8 $2 $0 Rates do not reflect this risk. $0.5 ($2) ($4) ($6) ($8) ($10) ($12) ($14) -$1.3 -$2.7 -$3.8 -$5.2 -$5.9 -$6.5 -$7.7 It took 11 years to erase -$8.8 losses from Andrew. Then, $10.6-$10.8 -$10.1-$9.7-$8.8 -$9.6 hurricanes erased 7 years profits; 2005 deepened the hole. -$ E Homeowners Insurance, **Does not include Citizens Property Insurance Corporation results.

9 Strategic planning is about designing desired outcomes and effective ways of bringing them about. Needs analysis/internal situation audit. Assumptions. Strategic summary. Contingency plans.

10 Insurance is a business that must set prices before the true cost is known. Hurricane predicting is an inexact science. Insurers use their own loss history and anticipated future losses to manage risk. Difference between public & private insurers. Private market Prohibited from recouping past losses. Money on hand in advance. Public market Assessments for all Floridians. Borrow money to pay claims.

11 Coastal property exposure is $2.4 trillion. Expected to double by Property development has grown 7.3 percent a year for the past three years. Population Growth more than double the U.S. average from From 9.75 million in 1980 to in Citizens exposure, the state-run insurer, more than doubled by the first quarter of 2007, compared to year-end 2005.

12 What it is: Computer technology that helps organizations better asses their loss potential, and just one of the tools in the risk management toolbox. How it works: Combines historical disaster information with demographic, building, scientific and financial data to determine the potential costs of catastrophes based on specific geographic areas. Why it s used: To more accurately manage risk and determine pricing to make sure companies are resilient enough to withstand a major disaster.

13 By design, P/C insurance is resilient; it anticipates the dual threat of financial disasters and catastrophes in its risk management strategy. Downgraded, 55, 3.8% Upgraded, 59, 4.0% Initial, 41, 2.8% Under Review, 63, 4.3% Other, 59, 4.0% Despite financial market turmoil, high Cat losses and a soft market in 2008, 81% of ratings actions by A.M. Best were affirmations; just 3.8% were downgrades and 4% upgrades Affirm, 1,183, 81.0% Through Dec. 19, 2008 *Source: A.M. Best

14 Deficient loss reserves and inadequate pricing are the leading causes of insurer impairments. Investment Problems 7.0% Affiliate Impairment 7.9% Misc. 9.1% Sig. Change in Business 4.2% Reinsurance Failure 3.7% Deficient Loss Reserves/Inadequate Pricing 38.1% Catastrophe Losses Alleged Fraud 7.6% 8.1% Rapid Growth 14.3%

15 Citizens Property Insurance Corp million policyholders. Exposure to loss is $439 billion. Growth is flattening out, but exposure remains high. Operates at a deficit due to back-to-back storms. $1.6 billion in $2 billion in Losses are recouped by assessments on every insurer. When a storm strikes, Citizen will use its own employees to respond, plus independent claims adjusters.

16 Who Is on the disaster response team? Needs to be on? What Are roles and responsibilities? Resources are needed? Skills need updating? When Do we rehearse? Do we deploy? Where Is everything stored?

17 Most insurers have preparedness information on their Websites. Communication to policyholders includes information online, in publications, within the insurance policy, and in correspondence. Industry resources include: Florida Insurance Council Insurance Information Institute Institute for Business & Home Safety Federal Alliance for Safe Homes

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21 Note the Important Messages and the BIG TYPE. Many people do not know that: Flood insurance requires a separate policy. Homeowners insurance policies have a hurricane deductible. Sinkhole coverage provides options one for catastrophic losses or for sinkhole activity.

22 Insurers typically stop writing insurance policies when the storm is imminent. Technology and old-fashioned ways to contact employees; Helping customers know what to do and how to call. Teams deploy even if they are not sure where they are going. The goal is to safely get as close as possible to the point of landfall before the storm strikes. All hands on deck.

23 Photo courtesy of GEICO

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26 Cell phones, digital cameras and laptops enable adjusters to send information remotely. Wireless smart cards allow access to the company s database. Policyholders are sending in their own photos.

27 Many companies have invested in equipment and positioned it throughout the country to make it easy to get where they need to go.

28 Company claims adjusters gather to serve those impacted by catastrophic events. Depending on the extent of the damage, independent insurance adjusters may also be hired to assist.

29 First steps Find out if the damage is covered. Whether your claim exceeds your deductible. How long it will take to process the claim. Whether you will need estimates for repairs. Insurers see claimants based on the severity of the claim those with the most damage are a priority. Factors that determine claims settlements.

30 Insurance companies communicate to their policyholders to let them know they are in the area and how to file a claim. Florida has established Insurance Villages to have companies co-located in order to facilitate face-to-face contact.

31 In a major disaster, the volume of claims may cause insurers to make a rough estimate of damage. The first check may be an advance. Another evaluation may be needed. Plus, a claim can be reopened if additional damage is discovered. The policyholder chooses the repair firm. The claims adjuster should approve the price before permanent repairs are done.

32 It helps ensure you select the right amount of coverage and it speeds the claim process. Free home inventory software at:

33 Daily reports and conference calls. Employee educational efforts during and after. Lessons learned are captured and acted upon. Veterans of Cat response lead training to prepare for the next one.

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