Tapping new tools for resiliency post-catastrophe

Increased frequency, severity and diversity of natural catastrophes are keeping insurers on their toes — and, unfortunately, this is the new normal as signs point to an increase in intensity due to the effects of climate change and rapid urbanization. According to Climate.gov, the total cost of disasters over the last five years was $742.1 billion — a new record.

Of course, insurers play an important role in helping people and communities rebuild. But against the backdrop of more frequent and severe events, insurers must be better prepared to bring next-level service to customers at a particularly stressful time – when they need help the most.

Insurers’ response to natural catastrophes is organized into two buckets: pre-catastrophe (pre-CAT) and post-catastrophe (post-CAT). Pre-CAT tasks involve tracking the event footprint — monitoring weather sites and news channels, for example — and then estimating the number of adjusters that will be needed and areas that will sustain the greatest impact. They also may use CAT modeling tools to help understand the full extent of the event and allocate reserves for the anticipated claims payouts.

Post-CAT, once the claims start rolling in, the focus is staying on top of the claims with an all-hands-on-deck approach. The chief claims officer will want to get a view of the event impact so they can begin to manage resources, while the head of operations will want to know which areas have been hardest hit. The claims teams will typically set up war rooms to evaluate the damage in the impacted areas and streamline the triaging, prioritization, and assignment of the claims.

While these steps may seem straightforward, in reality this is a moment of great uncertainty around the impact to the portfolio, damage from natural catastrophes is always worse than expected, and unforeseen challenges pop up that impact efficiency and add to loss adjustment expenses. The reasons can range from higher than anticipated damage from secondary perils like tornadoes to inaccessibility of impacted homes to adjusters due to damaged roads and highways. The cost of claims also increases, since the inaccessible homes might have leaking roofs or standing water which leads to loss development.

Moral hazards like fraud also contribute to claims leakage. Some people use a natural disaster to file fraudulent claims. Processing these claims (only to reject them later) takes valuable resources away from those who are truly in need, and contributes greatly to inefficiencies.

"Due to all these issues, the customer, who is already suffering in the aftermath of a disaster, is further impacted by delayed claims settlements and payouts," says Venkatesh Srinivasan, head of claims solutions and innovation at Swiss Re. "Catastrophic events become the moment of truth for customer loyalty: after all, this is why they buy insurance."

And an insurer's main objective after a natural catastrophe is to reach its customers on time when they need them the most. But if it can’t resolve its customers’ damages damage claims efficiently, an insurer could lose them to the competition.

Technology advancements such as AI, predictive analytics and machine learning have greatly enhanced insurers’ ability to address these challenges. The same is true for data sources, whether it's weather data or imagery data to assess the impact of a catastrophic event.

• Satellite imagery can provide a broad picture of event impact at about a 30- to 50-cm. resolution
• Manned aircraft imagery provides a 7- to 10-cm. resolution
• Drone imagery provides a 1- to 2-cm. resolution

Many insurers use these tools individually, and while there’s a lot of value in each technology and data source individually, the focus should be on delivering desired business outcomes for insurers by leveraging all these data sources in concert, enriching them with artificial intelligence and delivering powerful insurance dashboards with a granular and accurate view of the impact to their portfolio.

Be prepared for the next big storm. Learn more about Swiss Re Rapid Damage Assessment, our NatCat claims processing platform powered by our proprietary hazard models, aerial imagery, and AI.

This article originally appeared in PC360.