Claims management and natural disasters

Claims management can be overwhelming in the event of a natural disaster.  This blog will discuss exactly what constitutes a natural disaster, and how that can impact claims management.

What is a natural disaster?

It might seem obvious, but to be specific we will define a natural disaster as,

…an event of nature, which overwhelms local resources and threatens the function and safety of the community.  Generally, disasters are the ultimate test of a community’s emergency response capability.

And examples are hurricanes, earthquakes, floods, wildfires, and tornadoes.

What is the impact of a natural disaster on claims management?

When a natural disaster strikes, it can result in widespread property damage, injuries, and even fatalities. This can lead to a surge in insurance claims, which can put a strain on claims management resources and processes.

Here are some of the ways that natural disasters can impact claims management:

1. Surge in Claims: Natural disasters can result in a surge in insurance claims, which can be overwhelming for claims management teams. The sheer volume of claims can result in long wait times for policyholders and delays in the claims process.
2. Limited Access: During a natural disaster, access to affected areas may be limited due to safety concerns or damage to infrastructure. This can make it difficult for claims adjusters to access the impacted areas to assess damage and gather information. This can result in delays in the claims process and an increase in the time it takes to settle claims.
3. Complex Claims: Natural disasters can result in complex claims, as policyholders may have multiple types of coverage or claims related to different types of damage. For example, a policyholder may have a claim for property damage, as well as a claim for business interruption. This can make it more difficult to assess claims and may require additional expertise from claims adjusters.
4. Fraud: Unfortunately, natural disasters can also lead to an increase in fraudulent claims. Dishonest policyholders may try to take advantage of the chaos and confusion following a natural disaster to file false or inflated claims. Claims management teams must be vigilant in detecting and investigating potentially fraudulent claims to protect the integrity of the claims process.
5. Capacity Challenges: Insurance companies may have limited capacity to handle the surge of claims following a natural disaster. This may result in a delay in the claims process as insurance companies prioritize the most urgent and severe claims. In some cases, insurance companies may need to bring in additional resources, such as claims adjusters from other regions, to help manage the workload.
6. Regulatory Requirements: Insurance companies must comply with regulatory requirements related to claims management. However, during a natural disaster, these requirements may be more difficult to meet. For example, insurance companies may have difficulty meeting timeframes for claim resolution or may be unable to provide required notices to policyholders due to limited access to impacted areas.

Key steps to better manage insurance claims in the event of a natural disaster.

Depending on where in the world you are located, the likelihood of natural disasters will differ.  For example, in the UK common natural disasters are flooding and severe storms, whereas in the southern hemisphere there are earthquakes, wildfires and floods, and in the United States more tornadoes.  Wherever you are, in the world, it is important to be one step ahead, so should a natural disaster occur you are equipped to deal with it.

Here are some suggestions which you have likely already thought of, but perhaps it’s been a while since you revisited them?

1. Plan: Insurance companies should have a disaster plan in place that outlines how they will manage claims in the event of a natural disaster. This plan should include procedures for responding to claims, allocating resources, and communicating with policyholders.
2. Establish Communication Channels: Communication is critical during a natural disaster. Insurance companies should establish clear communication channels with policyholders and claims adjusters to ensure that everyone is informed and up to date on the status of claims. This can include setting up a dedicated hotline or website where policyholders can report claims, as well as providing regular updates on claim processing times.
3. Prioritise Claims: Insurance companies should prioritize claims based on severity and urgency. This means focusing first on claims related to life-threatening injuries, followed by claims related to property damage and business interruption. Claims adjusters should be deployed to the most affected areas first, and insurance companies should work to quickly process claims that will have the most significant impact on policyholders.
4. Use Technology: Technology can be a valuable tool in managing insurance claims during a natural disaster. For example, claims adjusters can use drones or satellite imagery to assess damage in hard-to-reach areas. Insurance companies can also use online platforms to manage claims, which can help speed up the claims process and reduce paperwork.
5. Allocate Resources: Insurance companies may need to bring in additional resources, such as claims adjusters from other regions, to help manage the surge in claims. It is important to allocate resources strategically, focusing on the areas that have been most affected by the natural disaster.
6. Train Claims Adjusters: Claims adjusters should be trained to handle the unique challenges that arise during a natural disaster. This includes understanding the types of claims that may arise, as well as the specific requirements and regulations related to claims management in the affected area.
7. Detect and Prevent Fraud: Insurance companies should be vigilant in detecting and preventing fraudulent claims. This may involve implementing fraud detection software or working with law enforcement to investigate potentially fraudulent claims.

How can Alphatec’s ClaimControl software help?

Alphatec’s ClaimControl revolutionises the claims process.  Providing everything an organisation needs to streamline processes, improve efficiency, and provide better customer service.  In the event of a natural disaster when claims handlers receive a surge in claims, good claims management technology is key to success.  For example, your software setup can be configured to include a bespoke First Notification of Loss (e-FNOL) so that the client can log a claim directly with you via a portal, freeing up time for claim handlers to assess and prioritise claims, provide support and assistance to those most in need and offer empathy at a very difficult time.  Furthermore, routine tasks and workflows can be automated and pre-set to trigger notifications and reminders and this can all be configured and tailored to the specific claim type.

One of our customers who is currently facing the biggest claim event in New Zealand in 10 years says, “there’s no question that ClaimControl is a pivotal part of our successful claims response to support our clients through their flood claims.”

To find out more about how ClaimControl can support your claims management function please contact us for a demo.