We were warned. For many years, scientists, urban planners and others predicted the inevitability of a monster storm hitting the Northeast and causing unimaginable damage to New York City and other communities along the coast. But denial and wishful thinking were the common reactions, even as increasingly sophisticated technology gave insurers, builders and government officials the ability to better identify vulnerable areas and better predict the potential severity and impact of natural catastrophes such as hurricanes. The worst would not happen in our lifetimes, or it would happen somewhere else.
As the unthinkable actually appeared, as the storm that became known as Sandy but was flippantly being called the Frankenstorm bore down on New York, New Jersey and Connecticut, it was still hard to get one's head around just what the impact of a once-in-a-lifetime event might be, other than that it would be very bad. It also was clear that the insurance industry would be a central part of the story. As I wrote one year ago today: "The so-called Frankenstorm" -- yes, guilty as charged, I was still making jokes -- "will put to the test everything the industry has learned about catastrophe response, and will put their use of technologies such as mobile response units, social media, geo-location, and remote communications in the spotlight."
[I don't often have the chance to live the stories we cover at Insurance & Technology: Sandy's Aftermath: Dispatches from Hoboken, New Jersey]
So, did the industry pass the test? Well, it appears insured losses will cost the industry as much as $20 billion. It's a huge hit, but at least so far it seems that property/casualty insurers were prepared financially. There have been satisfied customers (consumers and businesses) who received reasonably prompt and comprehensive reimbursement for their losses and who have been able to rebuild, relocate or restart. And there have been unsatisfied customers whose claims were denied, were less than expected, or are in some kind of unresolved limbo. That is inevitable in any kind of disaster.
From a technology standpoint, the industry's response to Sandy showed just how integral one-time bleeding edge technologies such as mobile, analytics, risk modeling, geolocation tools and social media have become to the ways insurers operate.
In terms of lessons learned – no doubt insurance companies understand they need to double down on investments in these kinds of capabilities, along with customer communications and outreach, staff training, and disaster response. As to the lessons the public has learned? A recent MetLife Auto & Home survey suggests that despite the ongoing suffering that Sandy caused, people have very short memories. Among those who said they were unprepared for a natural disaster, 62% said they felt immunity to looming danger and did not think one would happen to them. Twenty percent of consumers in high-risk areas admitted taking no precautions in the past year to prepare for a disaster. Even in high risk areas, the MetLife Auto & Home study revealed, many people who said they are concerned about a natural disaster still did not take action to prepare. And in high-risk states for hurricanes, 55% said they are concerned about a storm, and 49% said they are prepared.
This does not bode well for anyone, including insurers, for the next time the unthinkable and impossible occurs.
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