The pace of claims settlement from Florida's recent hurricane season is setting records: Insurers have closed nearly 86 percent of the record total of claims reported for the four major storms of 2004, according to William Bailey, director of the Hurricane Insurance Information Center. Bailey recently spoke with I&T Associate Editor Wendy Toth about how the increased use of electronic claims filing and settlement since 1992's Hurricane Andrew has improved the industry's ability to process claims.
William Bailey, Director, Hurricane Insurance Information Center
I&T: How did the storms of 2004 differ from Hurricane Andrew, and how were claims handled differently?
Bailey: Hurricane Andrew resulted in more than 700,000 claims with a value in current dollars of $21 billion. The industry had an average of 17,000 adjusters on the ground (a total of 25,000, including rotations) and settled 90 percent of those claims in six months. By comparison, the four hurricanes of 2004 produced an estimated 1.7 million claims in Florida alone, (more than 2.15 million overall) with an estimated value of $21.5 billion. Approximately 8,000 total claims adjusters have resolved more than 1.3 million of those claims in Florida.
The storm with the most claims was Hurricane Charley. A little more than three months later, the industry had resolved nearly 90 percent of Charley-related claims. The settlements from the other three hurricanes were proceeding at the same pace. Twice as many claims were settled in half the time, by half the complement of adjusters. How? By using the latest technology to open claim files, gather the information necessary to resolve the claim, settle the claim with the customer and send out the settlement checks. Today's catastrophe field adjuster is equipped with a laptop computer with a wireless modem card to access the Internet and to send and receive e-mail; a digital camera to take and transmit pictures to the electronic files; and cell phones to make appointments and transmit claims data.
I&T: How did HIIC encourage electronic claims filing and increase speed in filing after the recent hurricanes?
Bailey: The HIIC, working with the companies and with the media, worked diligently to educate consumers about calling in their claims to a company's special 800 number, filing their claims with supporting documentation to the company's designated e-mail address using their own computer and digital camera, or by sending the claim form and supporting information by fax. Many companies established mobile claim centers by bringing in specially built "claims offices on wheels" (mobile homes/R.V.s), equipped with the latest hardware and software to open claim files. Customers could meet with claims adjusters and fill out and file their claims.
I&T: Why were insurers so well prepared in 2004 compared to the aftermath of Andrew in 1992?
Bailey: There are two factors that significantly impacted the extraordinary claims performance in the aftermath of the four '04 hurricanes. During the two to three years preceding Y2K, the industry, like many others, invested heavily in acquiring new technology - both hardware and software - specifically aimed at overriding the possibility of total systems collapse. During the latter half of the 1990s, insurance companies' claims departments experienced a quasi "musical chairs brain drain." Senior claims executives and experienced adjusters were lured to join other companies, thus creating gaps at their present employers. At the lower echelons, relatively new and young adjusters were lured away by better-paying, more interesting jobs in the technology field. One respected consulting firm has estimated that there was a net loss of 50,000 employees in claims departments throughout the industry over a five-year period. One event fostered the significant enhancement of the industry's technology; the other made it increasingly imperative to be capable of settling more claims with fewer adjusters. Both of these factors played a significant role in [preparing the industry for] the outstanding performance of its claims adjusters following "The Big Four in '04."