High-tech prep: disaster planning tools keep agents open for business even after catastrophes strike.

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The trail of broken lines of communications--no telephone service, a lack of electricity, the unavailability of computers and no access to the Internet--that followed the 2005 hurricane season, especially in the Gulf Coast region, demonstrates just what can go wrong in disaster planning, the experts say.

That's why so many in the industry are developing software-based planning tools that address the particular needs of independent agents and brokers.

"There are lots of types of disaster planning software," said Domenico del Re, a senior model manager at modeling firm RMS in London. "There's so much you can do to effectively be back on your feet quicker when the disaster actually takes place." That includes managing claims and stochastic modeling to prepare financially for a disaster, he said.

RMS believes retail brokers and independent insurers are the foundation of the risk pyramid. "They are the people who first underwrite the risk. As a consequence, they have crossover access to insureds and better understanding of how insureds are thinking because of their hazards," del Re said.

This opens opportunities for modelers to get key information from these frontline players, who are perhaps best-positioned to open dialogue with homeowners about reducing vulnerability and risk. That reduces the burden of loss that the small insurer would experience after an event, as well as the rates or premium the homeowner would have to pay and the impact on society overall.

"If everybody can get back to their houses soon, it lessens the effect, and the toll on the economy is less," del Re said. "We really think they are key players in mitigating the impact of catastrophes."

The products RMS designs for smaller and independent insurance firms use the same parameters as those for large carriers, del Re said. "Just the tools that they use will be slightly different from the tools that larger insurance companies and reinsurance companies use. The underlying science is saying it's the tools that need to be designed specifically for the small players in the market," he said.

Tool Set

RMS provides four basic tools and services for the agent and broker market: data manipulation, underwriting forms, new models and mitigation consultant service. The use of these tools for mitigation is "gaining more and more attention from within the industry," he said.

The company's yearly software release in August included four products with new modeling capabilities, including an upgrade and enhancement of the tornado/hail model for the United States, called a Severe Convective Storm Model. It includes a third subperil for straight-line winds, he said.

The Independent Insurance Agents and Brokers of America offers its members a disaster planning tool on CD via its Best Practices of Crisis Management program, developed in conjunction with Canadian firm The Crisis Tool, said Madelyn H. Flannagan, vice president of education and research for the Big I. The disaster planning kit works in Microsoft Word and Excel on any personal computer with a CD drive.

"You just pop it in, fill in all the blanks and you have a disaster plan--a really good one," Flannagan said. The plan works with the agent or broker's office and building, the surrounding community, the agency's insureds and even vendors, she said.

"It really forces you to put together a very precise plan if you follow all the instructions," she said. The software not only tells the users how to back up their own data, but also how to ensure that third-party data centers are in tune with the same plan, she said. "It tells them how to make arrangements with off-site vendors to back up data. It lists instructions on how to do those things."

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The Big I launched the software program in 2003 and did a complete update in 2007 (updates are available online). Agents and brokers have been asking for a personalized disaster planning tool, especially since Sept. 11. "They wanted someplace to start," Flannagan said.

"After [Hurricane] Katrina, a lot of agents were like, 'We're not ready for something like that, we don't know how we would handle our claims.' That was a big worry for them. 'How are my clients going to contact me? How is my service staff going to get to work? What are we going to do? How are we going to access our records?'" she said.

"If you're expecting a terrible storm and everybody has a copy [of the plan] in their hand, they know what's going to happen tomorrow if everything changes," she said.

The IIABA's software is set up to handle any major catastrophe, ranging from hurricanes to terrorism to even a flu pandemic, said Flannagan, who is staff liaison to the trade group's Council for Best Practices. "We talk about anything that could affect your operations, from a localized fire to a widespread panic," she said.

The Inspiration

Gail McGiffin, global lead for Accenture's underwriting services practice in Florham Park, N.J., says three "catastrophic wake-up calls" really pushed the growth of disaster planning technology.

The first was Hurricane Andrew in 1992, which made insurers and others see the need for better natural catastrophe planning. Then the Sept. 11 attacks brought terrorism into the equation. Third, Katrina triggered the cross-perils debate between wind and flood liability. "How do the modeling tools respond with cross-peril modeling? We have more to learn," McGiffin said.

"Definitely the insurance industry needs to continue to step up with education and tools and a greater precision in underwriting and claims," McGiffin said. "At the same time it has social and governmental implications as well. It's unfortunate but I do believe that the major disasters are going to be part of our lives. But they're always necessary reminders of the focus of investment in planning."

There are literally millions of small businesses in the United States, and they're the ones that are most likely to be greatly impacted by a disaster, she said. They also may not be able to afford a full-time engineer or IT department.

"To the extent that tools and information can get to them so they can self-serve, I think that's an important step that the insurance companies are stepping up to more and more," McGiffin said.

Virtual Trend

The trend is toward virtual services, she said. large carriers are putting their disaster planning tools online so smaller companies--and their captive field force or independent agents--can benefit from the same planning tools without having to have an engineer on site, McGiffin said.

Many also offer online assistance to help small businesses complete business income worksheets. "What we've found is the insurance companies have made many of these services and software packages available to midmarket and smaller companies, because they have been able to virtualize these offerings and bring value through education and tools. That's a fairly new phenomenon."

Most of the progress in virtualized services probably started five or six years ago, she said. "Now that we're in a growth market for property/casualty, we're finding more and more companies are investing in these virtual services," she said.

"Software as a service" is another angle to assist independent agents and brokers in disaster planning, said Donald Light, senior analyst for Celent. It's an ideal solution for the data recovery and technology parts of business continuity because those programs and the data don't physically reside in the agent or broker's office, he said. The provider of the disaster planning software keeps it in-house, providing client access via the Internet.

Agents and brokers still would need access to the Internet, but that's relatively simple as opposed to giving insureds an answer such as, "Gee, my agency management system lives on my hard drive and my hard drive is now buried under rubble," Light said.

With software as a service, the application or program itself is running on a server or mainframe that is not owned or operated by the insurance company or the agency; it's run by the owner/operator software vendor, or perhaps a third party.

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"It certainly replaces a chunk of your IT department and all of your IT costs because all you need is an Internet connection," Light said.

Although there is growing interest in disaster modeling among agents and brokers in some disaster-prone regions of the United States, it's not as widespread as one would think, he said.

The current state of disaster planning software technology for the independent agent or broker is impressive, said Andy Boyd, a regional director in the San Francisco office for Agility Recovery Services of Charlotte, N.C.

Once-elusive online planning tools are so popular nowadays that even Internet search engines such as Google and Amazon are getting into it as well, he said.

Agility brings four basic resources to its independent agent and broker clients after a cataclysmic event: a mobile office trailer; generators; connectivity for phone lines and the Internet; and each client's own IT infrastructure.

The company's disaster response package also includes access to My Agility, an online planning portal available only to members. "It's where we're going to discover together how to recover your business," Boyd said. The tool includes information plug-ins for an agency's primary stakeholders--the people who can actually declare a disaster--as well as current technology on hand.

Agility has already responded to two major catastrophes this year: the San Diego fires and the Iowa floods.

"The average interruption lasts three weeks. Most businesses go out of business in that time. They don't survive the interruption," Boyd said.

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* What's the Story: Independent agencies and small brokers have been asking for risk modeling tools since Sept. 11.

* What's the News: Modeling companies have responded with affordable yet powerful versions of software that was once available only to large insurers.

* What's the Payoff: Smaller insurers can develop impressive regional and even local models that help clients survive calamities.