Agency Operations After A Catastrophe

Transcription

1 Agency Operations After A Catastrophe After a catastrophe, you will be doing business, but it will be anything but business as usual. You will be operating under conditions of extreme emergency for the foreseeable future. It will require that you and your employees have a different perspective on what you do. A catastrophe is not something that will be over in a few days or weeks. If you are an agency principal or manager, and if you have hired competent people, your agency will run well in your absence during normal times. But in the wake of a catastrophe, your presence is essential especially if you have problems delegating responsibility. There are many aspects of running your business that only you know about. Even with proper planning, critical decisions will have to be made quickly decisions which will determine whether your business will survive the disaster or become another of its victims. Check on the welfare and availability of all employees. Check on the condition of your office and make a 19

2 decision if operations need to be moved to another location. Determine if additional help is going to be needed. Bring all employees to the office as soon as possible and again review their areas of responsibility. For the first few days (and perhaps weeks), almost all of your efforts will be directed toward taking and processing claims. Client Relations in Post-Disaster Conditions As if coping with the effects of a disaster while trying to operate your business weren t difficult enough, you will find that a number of your customers have suddenly become more demanding. Remember, you will be dealing with people who are trying to cope with varying degrees of disruption in their lives. For some the luckier ones their only loss may be minor damage to a car. But others may have lost their homes, suffered physical injury or face the loss of a job. Some may behave in ways that might be considered irrational under normal circumstances. Remember that above all, they will be seeking stability. Employees taking initial claim reports need to be properly prepared to deal with customers under stress. Your employees must present a calm and patient demeanor. They should be prepared to deal with customers who are confused, scared, angry and/or irrational. Your employees need to know what information is necessary to report a claim. They must be able to answer an insured s questions about coverage. They need to properly inform the insured of their duties to minimize the loss. You will need to complete separate ACORD loss forms for each applicable policy property, flood, automobile, etc. Be sure to obtain the following information: Current location of the insured. The loss may have caused their relocation. Phone number(s) where the insured can be reached. Names of all mortgagees and/or lenders. A complete description of the type and extent of damage. This is essential in allowing claims to be serviced in order of priority. Many claims will involve genuine hardships. Such emergencies should be prominently noted on the claim report to provide for expeditious handling. Most carriers will provide you with special reporting procedures for severe losses. You have a special responsibility in deciding which claims get serviced before others. Genuine hardship is not necessarily defined by the size of the loss. Some clients who have suffered millions of dollars in losses may be better positioned to 20

3 sustain themselves until their claims are processed. But other clients may have lost homes or cars which represent the bulk of their net worth. When faced with such choices, the best guidelines are compassion and decency, not necessarily the size of the account. Your clients will have a lot of questions about what to expect and what is or is not covered under their policy. Remind your clients that your office and their insurance company are operating under disaster conditions and limitations. Explain to the insured that, because of widespread damage and thousands of claims, adjusters understandably will give priority to claims involving the most severe damage. Policies require that insureds take all reasonable steps to protect their property from additional damage. This could include boarding up all exposed areas of the building, protecting damaged property from further damage, removing excess water from carpeting and furniture, and drying out clothing and bedding. The insured may need to turn off power, gas and water supplies to their property. The cost of these activities will be included in the adjustment of a covered loss. Advise the insured to keep all receipts and a record of all expenses related to the loss. Advise the insured that their claim will be sent to the company the same day and that the company will then assign an adjuster who will contact the insured directly as soon as possible. Reassure your clients that they will not be forgotten, even though it may be some days before an adjuster contacts them. Insureds should be sure to notify you if there are changes in their addresses or telephonenumbers, so that contact is not unnecessarily delayed. Advise your clients to gather together all supporting loss information (pictures, receipts, etc.) on property that has been damaged. Suggest that they contact their mortgagees to find out what procedures will be required when the insureds receive claim drafts, which will probably be made payable to the insured and the mortgagee. Your clients should attempt to obtain repair estimates for damaged property. If 21

4 the estimates are in line, the adjuster may be able to authorize payment immediately. Advise the insured that they will have to fill out a proof of loss, listing all items that have been damaged or destroyed. In the case of personal property, this should include a description of each item damaged, the original cost and an estimated replacement cost. The sooner this is documented, the sooner the claim will be settled. Advise your clients that they should not dispose of any damaged property before an adjuster has had a chance to inspect it, nor should they undertake any permanent repairs to the property. Although this may be inconvenient, they may not be reimbursed for property if the adjuster cannot verify actual damages and values. Carrier Relations in Post Disaster Conditions Get in touch with your carriers immediately following a disaster. If they don t call you, you will need to call them to determine how much authority you will be able to exercise on their behalf when dealing with your customers. Some basic information can be obtained in advance for your planning purposes, but remember that companies can and do make spot decisions and changes in their procedures in the aftermath of catastrophes. These decisions can be made at a moment s notice. An agency has a responsibility to follow up on the claims process and to advise insureds on the progress of the claims the agency has submitted to companies on their behalf. It is a good idea to develop a procedure find out how and when your carriers will advise you of their progress on claims, so you can keep your clients informed. Determine which of your employees live near insurance company offices. This may allow you to have someone go to an insurance company office on a scheduled basis, instead of relying on mail and FAXes. Some Insurance Companies Cope Better Than Others In February 1994, a tornado cut a swath of destruction through downtown Monroe, Georgia. In the first minutes after the disaster, confusion seemed to reign. But Steve Merritt knew immediately what he had to do. Merritt, an agency management specialist with Selective Insurance Group of Buford, Georgia, grabbed his cellular phone and drove to the disaster area. After getting as close as he could, Merritt abandoned his car and walked the rest of the way to the Williamson Insurance Agency. He found the agency undamaged, but without electricity or phone service. Along with agency principal Bruce Williamson, he began calling carriers. Later, Merritt walked through Monroe personally contacting the agency s customers and writing claims on the spot. In recognition of his dedication and professionalism, PIA honored Steve Merritt as its Company Representative of the Year for

5 Unfortunately, every insurance company doesn t have a Steve Merritt. There is a great disparity in the service various insurers provide in a catastrophe. PIA of Florida compiled a list of best and not so good things insurers did after Hurricane Andrew: Some of the Best Things Insurers Did After Hurricane Andrew... Contacted their agents immediately to review the claims reporting process, including changes in any pre-storm plans. Published claim-reporting procedures in the newspaper, including local and 800 numbers for direct contact with the company. Provided agents with agent-only telephone and FAX lines (many insureds called the company directly, completely overwhelming regular phone lines and making it impossible for agents to get through). Visited agencies as soon as possible to assess damage and the agency s ability to handle claims. In some cases, provided company personnel to assist agencies where there were a large number of losses. Provided agencies with pre-printed loss forms so that the agent only had to fill in a description of the loss, classify it by severity and add any address or telephone number changes. Provided agencies with draft authority for their insureds emergency repairs and additional living expenses. Kept agents informed about procedural changes as the weeks went by. Kept agents advised about timetables how long it should take for the customer to be contacted by an adjuster and how long after that contact the customer should be able to expect payment. Advised the agency how adjusters were being assigned. For example, some companies had two sets of adjusters one group to handle severe claims only, others to handle more routine claims. Other companies handled claims by ZIP code. If the agency had an idea of what system the carrier was using, he or she could give the insured a better idea of when he or she would be contacted. Provided agencies with weekly printouts showing claims reported and settled, along with adjusters names and phone numbers. Some of the Not So Good Things Insurers Did After Andrew... Had little or no contact with agencies, didn t contact agencies, didn t return 23

6 phone calls. Hired additional personnel to handle phone calls who had no insurance knowledge and no authority to solve problems. Refused to speak directly with insureds. Were completely overwhelmed by the size of the catastrophe and never seemed to catch up. Suffered serious financial problems which were well publicized in the press, but gave no information to agents. Delayed claims payments. Were unable or unwilling to give status reports on claims settlements. The Overworked Adjuster Still, no insurance company has the resources to respond immediately to thousands of claims which are all reported in a short period of time. Disaster claims teams will be brought into the disaster area to expedite claims, but they usually do not have immediate access to policy forms. Claims may be paid which are not covered, and similar claims properly denied. Many of these adjusters will be working in unfamiliar areas under adverse conditions. Out-of-state adjusters are usually not familiar with local building codes and 24

7 rebuilding costs. This often results in underpayment of claims or great disparities in allowances from one adjuster or company to another. Remember that adjusters work long hours, often under hardship conditions. They, too, are subject to burnout, which may result in their occasionally being less than friendly. Clients may ask you to have another adjuster assigned to them. You may want to advise the client that, while this may alleviate a particular problem, it may also slow down processing of the claim settlement. Adjusters are often rotated out of the disaster area, and new adjusters brought in every few months. The insured is often frustrated by having to deal with two or three adjusters during the course of the claim. Plan on being able to contact adjusters only early in the morning and/or late in the evening. Often, the adjuster will fail to provide a breakdown of how the claim is being paid. This will result in the insured calling the agency and the agency having to follow up for detailed information. Overburdened with the number of claims they must handle, adjusters often fall behind in their paperwork. There may be a delay of several weeks from the time an adjuster visits the insured to the time forms are submitted to the company for review and check issuance. Just as insureds may vent their frustrations with the claims process on agents, there will be a temptation for agents to vent their frustrations about delays in claims processing on the adjuster. This is not productive, because all it does is attempt to fix blame, not fix the problem. The agency can contact the carrier to request the assignment of more adjusters to the disaster area. 25

8 Considerations Regarding Lenders Banks in particular have a vested interest in the claims process, either as mortgagees on buildings or lenders on vehicles. Your commercial clients may have lenders on their business or personal property. Plan on considerable resources being spent in verifying coverage to lenders for temporary or replacement property. You may also need to verify that a claim amount has been settled upon, while the claims draft is being processed. Insurance companies are often required by policy conditions to make claims checks payable to both the insured and the mortgagee. This will greatly upset many of your customers. When the claim is originally reported, it is important to remind the insured of this procedure and to encourage them to contact their mortgagee. Obviously, the insured wants access to the money as soon as possible in order to pay a contractor. Although this does not involve the agency, you may expect it to become the agency s role to explain the system to the insured. If the amount of the check is small (i.e., under $5,000), the bank may endorse the check back over to the insured immediately. If the check is for a larger amount, most banks require that the entire check be deposited with them, with the proceeds paid out to the insured in installments, as work is completed. A bank will usually provide the insured with an advance of about $5,000 (or 1/3 of the total, whichever is greater) to get repairs under way. Additional funds will be released as work is completed and the insured provides the bank with proof of completion. Many lenders will require an inspection each time partial funds are to be disbursed. If the insured has an FHA loan, 10 percent of the total claim payment is withheld until after all the repairs have been completed and an FHA appraiser has inspected the property. Loans through a large, out-of-state mortgage company may present a problem with the delay between the time a draw is requested, inspections are performed and funds are actually released. Out-of-state financial institutions are not operating under disaster conditions and may not understand or care about the urgency of the situation. Most insureds will understand that this is not the fault of the agency, nor is it a situation the agency can do anything about. Still, this tends to intensify the frustration the insured may have with the entire claims process. Always request that the claim be paid in two separate checks. One check should be for damage to the building only (payable to both parties), and a separate check for damages to personal property (which should be payable only to the insured). Your insureds will also be dealing with other frustrations. Auto repair shops will be burdened beyond normal volume. Repair times will be extended, not only because of increased volume, but because of delays in receiving deliveries of parts. 26

9 Auto rental agencies will experience shortages of inventory. Bank branch offices will be closed or will operate on limited schedules. Dealing With Your Clients Frustrations Unfortunately, the insurance industry often portrays itself in advertising and through the media as being at the scene of a disaster the same day it occurs, issuing claims payments. Although this is often the case in an isolated disaster, it is NEVER the case in a widespread catastrophe. Insureds become frustrated and irate when claim settlements take months, rather than days. The agency is typically the recipient of their dissatisfaction. A catastrophe brings out the best and the worst in people. The best are those who report claims promptly and accurately, understand and follow instructions, are patient and understanding during a time of great disruption and attempt to negotiate a fair settlement for their damages. Some victims of a natural disaster will feel martyred by government and betrayed by the insurance industry. Some people will be so genuinely affected by the disaster that they will undergo extreme personality changes. Still others will purposefully and immorally take advantage of the situation. Be prepared to deal with a small but vocal minority of clients, who: When reporting a claim, demand to know exactly when an adjuster will get there or demand that their claim be settled immediately. Will call your office daily until an adjuster finally arrives. Are unwilling to comply with loss requirements to protect property from further damage or expect you to make such arrangements for them. Despite your instructions, immediately repair real property and/or replace personal property before an adjuster sees it. Are rude, adversarial or uncooperative from the original contact. (One agent reports an insured s first words to him after a catastrophe were, I just want you to know if everything s not completely covered, I m going to sue you ). Accuse the agency, the adjuster and the insurance company of conspiring against them to cheat them out of what they feel they deserve. Seem incapable of doing anything for themselves; insist that the agency do all their paperwork and make all their phone calls, including calls to individual contractors. Call or come by your office often, complaining incessantly that they are being ignored and nothing is being done on their claim. These people are complete- 27

10 ly self-focused and can be oblivious to the fact that their neighbors may have also suffered great losses. Hire a public adjuster even before they report the claim. Threaten bodily harm to agency employees. Threaten to file lawsuits. Lie about possessions, purposely cause additional damage or inflate values. As one cog in the disaster response apparatus, an insurance agency may be seen by the public as a source of general information, not just information about insurance coverage. This can be an advantage for the agency. Often, it will be necessary to tell clients of delays in the processing of their claims. If, at the same time, you can give your clients helpful information such as the location of emergency shelters and the availability of assistance from charities, you will be able to help your clients even before their claims are paid. Remember that as people attempt to cope with personal tragedy, they often become self-focused. Many are trying to deal with a situation they have never experienced before and don t know how to handle. Remember, too, that many people view insurance not so much as a product they purchase but as a part of an unwritten sacred covenant with society that says civilized people help their neighbors in times of tragedy. Despite attempts by some since the 1980 s to promote selfishness as a virtue, many Americans still believe that helping others in times of need is part of being a good citizen. 28