How I can Save my Insurance Firm During Disaster?
Natural disasters are unpredictable that has the ability to destruct the
globe entirely. It has so much force that even giant construction can
get into the ground in seconds, imagine where humans would go. In
such scenarios, one should stay full secure but preparedness is the
only way to combat a natural disaster.
That’s the reason people take their insurance to cover up major risks during catastrophe as it can be quite devastating, which depends on the austere of the natural disaster. Therefore, insurance companies should be all set for any disaster that can happen.
And the year 2018 has witnessed a lot of natural disasters, especially in
the United States of America right from the ruinous wildfire in
California to the terrible hurricane in the East coast. Some of the
major disaster that took place last year is as follows:
- Montecito Mudslides
- Maryland Flooding
- Hurricane Florence
- California Wildfire
- Michael Hurricane
As per a research report by Munich Re
, the California wildfires and hurricane Michael were the costliest disaster in the entire history of the federal government, leading to $16.5 billion and insured losses over
$12.5 billion. On the other hand, Michael Hurricane is close to this
number, which is $16 billion and insured losses over $10 billion.
Subsequently, people who faced damage during this period, claims for the causes. In this particular time frame, insurance companies often overflow with thousands of claims requests, which need to be processed with great
accuracy and speed.
However, insurance could commit mistakes when coming across so many claims. If you want to prepare your insurance business for any natural calamity, then here are a few steps you should follow to stay abreast:
1. Shift to modern tools to access real-time data
This may sound a bit weird to you, but making your claims management
process seamless and efficient, it turns out to be a great source. Social media channels have become a great way to stay connected with customers. Insurers can build personal relationships on such platforms and during catastrophe they can at least stay with updated with a chronic condition in that particular area.
In this way, insurers will have access to real-time and publicly available data as they’ll get the appropriate number of people suffering from disaster. Insurance carriers can accordingly evaluate risk associated with an event and more data will help in better catastrophe modeling.
2. Opt for Re-insurance
When the claims requests exceed the ability of an insurance company, they
can opt for reinsurance
. Reinsurance companies assist insurers with their claims handling process as insurers just have to transfer a part of their portfolio. These both companies have great knowledge and awareness concerning claims and policies, which becomes quite easier for processing claims.
According to research, the cost required for repairing after Harvey is expected to be approx. $180 billion, enabling you to stay afloat. More so,
insurers also opt for insurance outsourcing
as these service providers are out of the disaster area, but mindful about the disastrous occurrence. So they eventually handle all the non-core activities and enable insurers to stay focused on what is important.
3. Policies sit on the fence
Every insurance carrier has to make policies, keeping their financial position in limelight. In the 60s, insurance companies in the US have said goodbye to flood coverage as they were unable to make profits, leading to bankruptcy. That’s the reason only the federal government provide this coverage to individuals. Insurers should make sure while writing policies you’re not targeting only Florida, you’re targeting the whole country.
Providing a blank check vaguely and sharing profit with reinsurance companies as well, insurers may face financial crises during disasters. Therefore, set some boundaries and discuss with your underwriting team about the consequences.
4. Government programs
Terrorism Risk Insurance Act
(TRIA) is another disaster that cost the lives of people or their well-being. Terrorist not only kill people but does the damage to their property as well. And the US government is very supportive for the people residing in their country. They run different programs to safeguard the lives and property of humans, from which TRIA is one.
Bearing such large risks is not a cup of tea for insurers including the repayment of dangerous floods. That’s the reason federal government come into play! The government of US has been mindful about the fact that if the ratio of insurers starts dropping, they might face huge losses in the near future.
5. Some bonus steps to make your business more resilient
- Insurers should check their office building as well
- Hire an employee who will report you on weather conditions
- Review and update your business continuity plan
- Remind your employees about key elements that include your plan, post- event communication and a lot more
- Test all safety equipment available in your office
Not only natural disaster hurt your business but internal tornadoes
can also lead you to bankruptcy like:
Transit Causality: In 1985, US motor insurer transit entered liquidation, due to management incompetence, excessive reinsurance, and reckless expansion through the general agents to write business on its behalf.
Independent Insurance: In 2001, UK p/c insurer entered into liquidation, in which, the reason for failure is not cleared. But it seems to include underpricing, rapid expansion, false reporting, and potential frauds.
HIH Insurance: Australian based, one of the largest business collapsed due to which the Liberal Federal Government established the Royal Commission for investigation. Reasons for the collapse are the inability of paying the claims of the debts, policy holder that fell due and poor cash flow management. According to the reports of the Royal Commission in the year, 1997 HIH made an underwriting loss of $73 million against the premium that it earned about $1550 million
I hope these above-mentioned emergency tips can help insures to stay afloat during natural disasters and serve their customers in a better way.
Disclosure - Mika Edword is associated with Cogneesol
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