Heeding the Lessons of Katrina, Insurance Companies — and Other Institutions — Improve Catastrophe Response

The responses to Hurricanes Fay and Gustav not only of insurers, but also of the media and political establishments, shows that much has been learned in the three years since Hurricane Katrina. But are carriers as insightful about the symbolic implications of these storms?

Storms and other natural catastrophes are real-world events that can cause massive destruction, change lives, and transform communities and cultures. They also can serve as useful metaphors for comparably disruptive developments in the business, political and social arenas for insurance executives. Such has been the case in recent weeks as the media, politicians and, of course, insurance executives have marked the third anniversary of Hurricane Katrina, the strikes of Hurricanes Fay and Gustav, and (at press time) the pending possible landfalls of Hurricanes Hanna, Ike and Josephine.

In terms of preparation for and response to actual catastrophes, one can see that much has been learned and improved in the three years since Hurricanes Katrina and Rita. Local governments, FEMA and businesses all appear to have done a much better job of anticipating risks and problems, communicating with the public, and dealing with the effects of the nonetheless devastating recent storms (catastrophe risk management firm Risk Management Solutions estimates that insured losses from Gustav could range between $4 billion and $10 billion). Property/casualty insurers — equipped with sophisticated mapping and forecasting systems, state-of-the-art mobile catastrophe response vehicles, and high-tech contact centers — are even more proficient at identifying locations and policyholders at risk, and responding quickly to damage assessment and claims needs. Similarly, as evidenced by the reworked agenda of the Republican national convention and the presence of most of the television network anchors in New Orleans the week that Gustav hit, politicians and talking heads also have learned much about preparedness and response since August 2005.

So what about the metaphoric aspects? You don't have to be an English major to find symbolism for the insurance industry in looming storms, close calls and transformed operating environments. The domestic economy continues to struggle, the consequences of the global credit crisis still are unfolding, climate change is accelerating, and a new president and Congress are on the way -- all of which will mean new and different business challenges, risks and opportunities, regardless of one's political persuasion or social views. Success for insurance executives will require not just preparedness (largely through strategic IT investment), but also a commitment to organizational transformation. The forecast is for a very different kind of financial services industry.

Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio