A look at natural disaster claims

Globally, the climate continues to change, and the impact of these changes are becoming more frequent.

With storms, floods and heavy rains increasing in their frequency and intensity, it is well worth companies investing time and effort to prepare their business for a natural disaster or natural catastrophe (NatCat) scenario. Today, storm and flood monitoring, as well as weather tracking, is commonplace and easily available, and having access to earthquake related data, for example, further helps support preparedness.   

Many companies benefit from utilising real-time risk maps, including those companies provided by If Login, for example. Through the digital portal, If Insurance clients have access to a global risk map. This is accessed through a single view and features layers that cover earthquakes, tornadoes, floods and more. With quick access and the capabilities to view all insured locations, clients can assess risks on the world map, and see which business locations, assets and employees might be impacted by a natural disaster or NatCat event.    

When it comes to independent manufacturing or production facilities, companies have significant control over their own preparedness. Early warning of potentially disruptive scenarios is essential, and this helps people on-site to prepare for the incoming weather event. For example, with a flood warning, preparations can be made to protect structures, move people out of harm’s way and help to minimise the impact of the event.   

Before the event  

Physical flood protection may help shield the most exposed and critical areas of your facility. By setting concrete blocks under major appliances, and keeping all downspouts, gutters and any drainage ditches or storm drains free of debris will also help water flow away from the facility. During a winter storm, removing snow and ice from the impacted infrastructure plays an important role. Temporary flood barriers, such as portable flood gates or shields, sandbags, inflatable floodwalls, and flood skirts will also help keep the water away, helping to prevent damage and minimise losses.  

If Insurance clients have also mitigated the risks of a changing climate by establishing permanent physical protection on their site. This can be a significant investment; but it may prove to be the best option, as the effects of major damage can severely impact business operations. Increasingly, with global supply chains, raw material costs and availability, it makes financial sense to commit to managing these risks in advance, through effective risk management assessment and subsequent investments to improve preparedness and resilience.   

Keep sandbags, temporary barriers, and the necessary machinery available. Even though the possibility of government and local authority assistance is expected, with these undertakings in an actual situation, self-preparedness is generally far more beneficial.  

Claims prevention tips 

From time to time, during claims handling, it is recognised that critical equipment has been located in areas that are more prone to damage by natural hazards. The reason may simply be that the risks have not been properly considered. Working together with our clients, our risk engineers will help to identify such high risk 'hotspots' and assist in finding more suitable alternative locations. 

In a situation where critical IT servers, for any number of perfectly good reasons, such as fire hazard or safety risk prevention, are stored in the basement of a client facility, it is worth assessing (especially if the facility is situated by a river, or in a zone that has seen increased flooding over the past years) whether or not the risk of flooding in the basement needs to be assessed. 

With regards to personnel, planning ahead on how to best utilise your staff in an emergency situation is an always useful exercise, as is ensuring that local management has both the mandate to initiate a pre-arranged plan and that it is actually prepared to do so. Conducting drills and crisis exercises will help to execute the needed activities more smoothly in the event of an actual emergency.  

In our experience, it is worthwhile to also pre-nominate a project task force for such situations, as the managerial organisation setup may not necessarily be optimal for dealing with an emergency situation. 

Clients should store their critical machinery, equipment, inventory stock, spare parts and importantly, IT servers, in locations that have been thoroughly assessed and reviewed for potential risks.

Preparing for the worst  

When establishing operations, or expanding your site, it is advisable to focus on risk management as a priority. It is generally far more costly and troublesome to modify and alter your production site when vulnerabilities are either not taken into consideration or have been uncovered later in the facility’s lifetime.   

This essential planning process, along with the ever-increasing risk of being exposed to natural hazards, indicates a need to include risk management in the planning phase. To be prudent, clients may benefit from considering doing more than what is stated in the general governmental regulations, particularly if the implications on business operations are deemed to be severe. 

There will always be different variables and risks to consider and the measures to deal with them may point in different directions; but natural hazards, such as flooding, heavy rain, windstorms and more should, nevertheless, be amongst the risks companies should evaluate and prepare for.  

As always, it is worthwhile to have a Business Contingency Plan in place, where you have evaluated and included the consequences of others, and not just yourself, being impacted by a major natural disaster incident.  

Handling the claim  

How does If manage claims handling when our customers are affected by a significant natural disaster? There is no doubt that dealing with a claim, even from a purely insurance-centric point of view, may prove more challenging following a natural disaster than in a more normal claims situation.  

A pre-defined Claims Program(s) will include pre-nominated loss adjusters and Claims Program head(s) within If, to safeguard the knowledge regarding the client’s needs, prior to any claim. This Claims Program should also identify our client’s key personnel and their roles.   

When an incident has occurred or threatens to occur, we map all our clients in the affected area by the geographical site coordinates stored on If’s systems. By doing this, we aim to pro-actively know which clients might be affected.  

Moreover, this may enable us to initiate early cooperation, which is always a good start in a claims settlement process and allows us to assist when needed. Our aim is to offer advice to help prepare our clients for the special conditions a natural hazard situation creates, and of course, to offer first class claims services if the claim occurs.  

Lessons from losses  

During a major flood in Thailand, a number of If Insurance clients had facilities located in an area that proved hard to access. Fortunately, in this instance, the If local loss adjuster contact, who is part of a major international network, made significant efforts and managed to visit sites others had deemed, more or less, inaccessible. 

This provided us with valuable information and gave us the opportunity to further assist our clients. We have an extensive and robust worldwide network of local insurance providers who have significant resources at their disposal locally. In any claims situation, and especially following severe incidents, we cooperate closely with the local providers.  

When a major claim happens, we will normally aim to be physically present and on-site as soon as practically possible, with claim experts from If brought in from the Nordic countries. Solving the claim, in close cooperation with our client locally, and liaising with the client’s Nordic headquarters, is an essential part of the work that we do at If Insurance. 

Written by

Kristian Orispää, If