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Gustav, Other Storms Challenge Claims Responders

Starting with Tropical Storm Fay and proceeding with Hurricane Gustav, peak hurricane season has arrived with a flurry of storms that are putting insurers' storm tracking and resource deployment capabilities to the test.

Any major storm challenges insurers' ability to respond to policyholders needs in the affected territory but the past two have required insurers to allocate resources to two major storms, Fay and Gustav. As the latter has scaled back to be a tropical rainstorm, three more tropical storms — Hanna, Ike and Josefine — threaten the need for further allocation of resources as peak Atlantic hurricane season continues.

Threatening to reprise the devastation of Katrina, Hurricane Gustav focused the attention of the entire nation, not excepting that of insurers anxious to make a good public impression. That focus blunted appreciation that Gustav came fast upon the heels of Tropical Storm Fay, which made four landfalls, spawned at least two destructive tornadoes, caused flooding in four states and resulted in 14 deaths in the United States, 36 including the Caribbean nations affected. From a public relations standpoint, Fay provided a warm-up to insurers' response to Gustav, as the failure of Fay to reach hurricane status muted insurers' external communications.

While Fay's claims impact is yet to be estimated, the storm directly affected one major insurer's claims operation. State Farm (Bloomington, Ill.) elected to close its central claims catastrophe (CAT) operation in Jacksonville, Fla., owing to the storm. That decision was eased by the carrier's ability to redirect activity to a second center in Dallas.

"Once we shut down the Jacksonville office, the entire operation was transferred seamlessly to Dallas without causing any interruption to services to our policyholders," says State Farm spokesman Fraser Engerman. "Additionally, we brought on 15 adjusters in Bloomington to handle any overflow as a result of calls going to the Dallas operation."

Farmers Insurance Group (Los Angeles) reported apportioning resources to policyholders affected by both Fay and Gustav, aided by its technology capabilities at its CAT claims facility in Olathe, Kansas. "Technology gives us the ability to rapidly deploy or re-deploy," comments Jerry Davies, a Farmers spokesperson. "In the Olathe facility we have a complete CAT core operation that does a number of critical jobs when it comes to tracking, monitoring updating and deploying claims personnel from anywhere in the United States." Farmers began deploying claims adjusters to Florida as Fay arrived at the Florida Keys, and the carrier has deployed its two mobile claims center buses to assist policyholders affected by Gustav.

The carrier has 35 smaller mobile claims centers referred to as Customer Care Vehicles (CCVs) in the form of trailers pulled by SUVs. Davies did not have specific information about the deployment of these in response to Fay but said that the units are strategically located in several states, including Florida, on an ongoing basis and were likely used. As of Tuesday afternoon, one of Farmer's buses had been deployed in Tyler, Texas from California, and the other was stationed in Baton Rouge, having been dispatched from Olathe.

The effects of Gustav are yet to be gauged, as the storm continues to dump rain in the Arkansas-Texas-Louisiana region but damages are likely to be less than anticipated. Oakland, Calif.-based risk modeling vendor EQECAT scaled back its onshore insured losses estimate from a range of $6 billion to $10 billion on Monday to $3 billion to $7 billion yesterday. As Gustav dwindles, insurers are poised to react to the parade of Atlantic storms making their way toward the United States. Hanna, currently reduced to tropical storm status, hovers over the Bahamas, threatening to regain hurricane strength. Behind Hanna lurk Tropical Storm Ike, which is strengthening in the mid-Atlantic, and more easterly Josephine which was upgraded yesterday from tropical depression to tropical storm status.

Farmers' Davies says that the carrier is watching Hanna carefully with an eye to activating resources in key states and deploying others as the storm's track becomes clearer. "Hanna may go to South Carolina, and we have CCVs there and in other core states that can be deployed at a moment's notice," he says.

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio

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