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The power of the plan: with a strategy in place, insurers, third-party administrators and independent adjusters can generate a rapid response to disasters.

Catastrophes occur with little or no warning and ruin thousands of homes and businesses every year. Individuals never truly can prepare for the loss of their homes or livelihoods, but every day insurance companies, third-party insurance administrators and independent claim-adjusting firms are taking steps to identify and plan for catastrophes, developing teams of skilled adjusters to handle a range of claims and adapting technology and support systems to respond to disasters more quickly and effectively.

Planning is vital. TPAs, independent adjusting firms and insurance companies have trained professionals who are constantly monitoring the weather to determine when and where a natural disaster may strike. With state-of-the-art technology and constant communication with weather bureaus and researchers, these trained national catastrophe monitors are continuously developing contingency plans to deal with any and all foreseeable disasters.

The three most important pieces of any catastrophe contingency plan are personnel, facilities and vendors. In the case of an independent adjusting firm the selection of vendors often is made by the insured or insurance company.

Specializing Is Key--Adjusting losses is a science, and as with any science, specializations exist. With dozens of professional development centers and hundreds of published case studies and white papers, adjusters can continue to learn and advance their careers. Adjusters can specialize in properties ranging from agricultural farms to billion-dollar hotels and possess training specific to the type of disaster of region of the country. While trained and skilled adjusters area must, and are arguably the most critical piece to the puzzle, personnel encompasses more than the adjusters. Empathetic support people are critical, as they are often some of the first ones to speak with the insureds, who may have been through one of the most traumatic events of their lives--the loss of their homes or businesses. These support personnel need to be able to calmly and effectively work with affected individuals and the adjusters to make this difficult experience as seamless and easy as possible.

Setting Up Home Base--While personnel are critical, they must have a home base to meet and file reports. Following a disaster, a catastrophe command center needs to be established immediately. The ideal location for a cat center is as close to the affected area as possible, without putting adjusters in harm's way. If an insurer, TPA or independent adjusting firm has offices close to the affected area with established power, phone and Internet, those locations may be ideal. Another option for remote service, however, would be mobile cat units, hotel rooms or short-term rented office space, which also can serve as command centers. In fact, in recent years, due to the evolution of technology, including improvements to cell phones, Internet connections and laptop computers, the physical need for space has diminished significantly. Now, with the proper equipment, adjusters can easily work with far less space and even can work out of hotels or cars if need be.

Checking Vendors--Vendors are the final but important piece to any catastrophe contingency plan. Agreements need to be established before a catastrophe hits in order to secure the most dependable and competent vendors in a given area. Construction companies, salvage buyers, rental companies and plumbers all will be in high demand if a catastrophe hits, and in order to guarantee that repairs are made quickly and correctly, arrangements need to be established prior to an event, establishing the insurer of outside team as a preferred and primary customer.

Assembling a Cat Team--A number of considerations go into selecting the right cat team for a given disaster. First and foremost, an initial assessment needs to be made to determine the number and type of adjusters necessary to quickly respond to all of the claims expected to be filed. While this may seem like a complicated task, an experienced insurer, TPA or independent adjusting firm can look at the area expected to be affected, the strength of the storm of significance of the anticipated disaster, the population of the area, and potential number of affected insureds, and easily determine the ideal number of adjusters needed. In addition to determining the number, as discussed above, the types and skill sets of the adjusters should be analyzed to best match experienced and specialized adjusters with specific types of anticipated claims.

Assessing Damage--Once a catastrophe team is in place and given assignments by the insurance company and TPA's regional manager, adjusters will begin the long and arduous task of assessing damage. Adjusters first will prioritize their claims and triage the affected buildings, and then will begin examining properties from top to bottom to identify all physical damage resulting from the disaster. They will need to work with the property manager and risk manager to determine the scope of damage and priority of repairs necessary. Once a scope of work, time line and budget are agreed upon, adjusters coordinate with the insured's and insurance companies' choice of contractors to begin the task of repairing and cleaning the property. This process can take anywhere from days to years depending on the extent of damage, but all attempts are made to expedite repairs whenever possible.

Nonphysical damage, such as business interruption, can be a significant loss for businesses as well. Businesses such as hotels and restaurants, which depend on visitors to generate income, can be affected greatly by the loss of income caused by a disaster devastating a popular destination. Business interruption loss is determined through the analysis of financial records with the help of trained accountants, and its assessment begins almost as quickly as that for physical damage.

Every Minute Counts: What to Do When a Catastrophe Hits

1. Make arrangements to locate adjusters as close to the scene as possible without being in harm's way.

2. Publicize a toll-free number to local residents for claims to be reported.

3. Set up a catastrophe center that includes power, phones and Internet access.

4. Contact insureds as soon as possible to inspect their properties and prioritize repairs.

5. Determine the scope of damage and a time line for repair.

6. Create a generalized agreement about the number of people needed to repair, etc., and work with insureds and insurance companies to select vendors.

7. Request that the insureds gather paperwork that can be used to determine nonphysical losses, such as business interruption.

8. Begin the loss audit while making sure the repairs are being done within the agreed-upon scope.

RELATED ARTICLE: Defining the problem.

Natural disasters, such as earthquakes, hurricanes, tornadoes, tires and flooding, have their own unique characteristics and challenges.

According to the U.S. Geological Survey, more than 3 million earthquakes occur worldwide each year, with nearly 5,000 registered in the United States. Fortunately, far fewer are felt and even fewer cause significant damage--though areas on the West Coast, specifically California, have been bit hard in the past. A decade ago, an earthquake devastated Northridge, Calif., an area near Los Angeles. According to the Insurance Services Office, insured losses were estimated at more than $12.5 billion, making the Northridge earthquake the most expensive earthquake in U.S. history.

Fires are another natural disaster and can result from extremely dry conditions, or on occasion, arson, but no matter the cause, they can spread rapidly and become unmanageable. In May 2000, a tire called the Cerro Grande was set intentionally by the National Park Service to minimize the potential for greater tire damage. It quickly grew in size and caused evacuations in and around Los Alamos, N.M., and required immediate action from the Federal Emergency Management Agency and trained adjusters to deal with the tens of thousands of losses being reported. While the tire was intended to help residents of the Southwest during peak tire season, it resulted in losses to federal, state, local, tribal and private property, caused claims exceeding $1 billion, and involved more than 400 homes, 100 laboratory structures and 47,000 acres of land.

Moisture, light winds and warm oceans can result in another disaster--hurricanes--nicknamed "Nature's Greatest Storms." On average, six hurricanes bit the Atlantic Coast each year, and according to the National Weather Center, with the right conditions, these severe tropical storms can create violent winds and waves, torrential rains and flooding. Hurricane Isabel, which hit the East Coast last fall, resulted in more than $1 billion in claims, far less than the Northridge Earthquake, but also devastating to those affected. While weather reports did give some advance warning to the areas most likely to be affected, and plans were put into effect, there was little expectation that it would turn into as significant an event as it did.

Rob Meyers is executive vice president of GAB Robins Group of Companies. Meyers currently oversees GAB Robins' loss adjusting services in North America.
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Title Annotation:Commercial and Homeowners
Comment:The power of the plan: with a strategy in place, insurers, third-party administrators and independent adjusters can generate a rapid response to disasters.(Commercial and Homeowners)
Author:Meyers, Rob
Publication:Best's Review
Geographic Code:1USA
Date:Apr 1, 2004
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