The Impact of Storms on Claims

Insurers spend a great deal of time and money attempting to predict the severity and frequency of hurricane activity. Hurricanes cost the insurance industry billions of dollars when they hit. Fortunately, they do not hit every year, and in fact, it has been quite some time since a significant hurricane has hit. The worst in recent memory was Hurricane Andrew in 1992. This was rated as a category 5 hurricane, which is the highest rating under the Saffir–Simpson Hurricane Wind Scale. This accounted for damage across the southern United States, in Florida, Texas, and Louisiana.

Hurricanes form in a warm climate, and in the eastern United States, they have the highest impact on the southeastern shores of the country. Texas, Louisiana, Florida, North Carolina, and even as far north as New York are all affected by hurricane activity. Hurricane risk applies to a huge territory, and the risk is not just for residential properties. This risk includes office buildings, manufacturing facilities, farms, and government buildings. The need for adjusters after a hurricane is overwhelming in most cases. It is not unusual for Insurance companies to not have the staff to be able to handle all the claims that come in when a hurricane hits. Independent adjusting firms are called in to help, but even they can be stressed to their limitations after a hurricane.

Many different industries can profit from hurricane losses. For example, restoration companies, roofing contractors, and auto repair facilities all profit from repairs. Public adjusters, attorneys, and independent adjusting firms also profit from claim activity. When a hurricane hits, P&C insurance companies take a significant financial hit. Often the losses can be in the billions of dollars. As mentioned, one of the worst hurricanes in the past 30 years was Hurricane Andrew in 1992. That storm resulted in $26.5 billion in losses as well as 44 deaths. Oddly, this hurricane was not considered a large storm system from a geographic standpoint. In 2005, the world watched as reports came in from Hurricane Katrina. This event killed 1,577 people and cost the insurance industry an estimated $66 billion.

Insurers pay all their claims from funds that are maintained as policyholder’s surplus. Regulators require that insurers carry a certain amount of surplus based on the amount of premiums they write. If the surplus gets too low, an insurer will be at risk of insolvency when a major storm like a hurricane hits.

These storms cost the insurance industry a significant amount of their surplus. A hurricane makes the property claim adjuster’s role valuable to both insurers and policyholders. When Property adjusters are in high demand and this means job security for the industry. While the role of technology in claims handling is ever increasing, there will always be a significant need for real people. A property adjuster’s job is difficult to outsource to another country, to a computer, or to an app on your cell phone. For this reason, the job market will always exist for professional property adjusters. New advances in technology can make storm adjusters’ handling more efficient. Insurers are aware of these new efficiencies and look for cost savings because of technology.

Hurricanes are not the only storms that can wreak havoc with an insurance company. These types of storms can put significant stress on an insurance company’s financials:

• Hailstorms
• Windstorms
• Snowstorms
• Ice storms
• Wildfires

These storms also create vast opportunities for property claims adjusters to find work. This bodes well for both independent insurance adjusters and company adjusters. Independent adjusters can flourish during times of storms because the need is so great for their services. Adjusters can maintain job security and get special benefits for participating in catastrophe duty. This is also called CAT duty in the industry. Insurers will cover the costs of travel and lodging for adjusters who go out of town to handle storm claims for an extended period. They usually provide them with a per diem and possibly a bonus for their efforts.

Storm claims need specialized handling from experienced adjusters. Insurance carriers sometimes prefer that their own staff adjusters handle claims during a catastrophe. This is so they can ensure that there policyholders are being treated in the way that their corporate policy dictates. When they outsource claims, they must be specific with file handling instructions. Claim-handling guidelines vary from one insurance carrier to another. It can be a challenge for independent adjusters to stay compliant. An independent adjuster might work for 50, 60, or even 100 different companies. It is difficult to know what each company demands as work product. Most carriers will dictate what they need for work product at the outset of each assignment. An independent adjuster’s job can be more challenging because they must know all the rules. They must report under these rules and regulations. This can be especially challenging during storm events. In practice, insurance carriers will often change their handling standards for storm events. This further complicates the issues for independent adjusters. That being said, there is a significant market for independent adjusters during times of storm claims.

As mentioned earlier, technology is changing the face of the claims adjustment industry. Whether you work for an insurance carrier or an independent adjuster, storm activity will become an important part of your life. Most property adjusters keep a keen watch on weather activity as it could have a significant impact on their job.

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