The insurance industry is taking a page from the Boy Scout Handbook - Be Prepared. Fortunately, many insurers did not need Katrina to reinforce the lesson. "About 70 percent of companies have disaster recovery plans in place," says Ed Blomquist, a New York-based analyst with Datamonitor. "Most large carriers have invested in it."
Although the Gulf Coast is not a major insurance hub, "There are many regional offices and agents in that area," Blomquist continues. "While most large carriers are covered, many smaller offices may not have invested in disaster recovery."
Northwestern Mutual (Milwaukee; $124 billion in assets) is among the large carriers with offices in Hurricane Katrina's wake. The company reacted quickly to the devastation, traveling to affected areas with satellite communications and backup power generators. "We have 10 offices in that region," says Northwestern Mutual VP and CIO Barbara Piehler. "We assess what's going on there daily and are committed to do what it takes to keep those businesses open in the region."
A Helping Hand
For small insurance entities, though, recovering from a disaster often depends on a third-party provider. On Aug. 25, as Katrina threatened the Gulf Coast, SunGard Availability Services (Wayne, Pa.), a division of SunGard Data Systems, was contacted by 140 customers to arrange for systems backup and recovery sites.
"We had a lot of businesses call ahead of time so we could replicate their data center in one of our centers," says Dave Palermo, SunGard Availability Service's VP of marketing. "Right after the hurricane hit, we had 43 companies in open disaster, so we provided in our centers backup and workspace to keep business uninterrupted."
One of those companies was Gilsbar, a third-party administrator located in Covington, La., on the north shore of Lake Ponchartrain, 35 miles north of New Orleans. After Katrina hit, Neal Hennegan, Gilsbar's director of technology, contacted SunGard. "The office wasn't flooded, but there would not be power for a long time," he explains.
"In a situation like this, we are able to provide backup data and copies of applications," describes SunGard's Palermo. "We can relocate their workspace and call centers, and we can even recreate their running production applications with tapes."
On Aug. 31, just days after Katrina ravaged New Orleans, 40 members of Gilsbar's staff were relocated to a worksite in Chicago. With Gilsbar's data tapes in hand, SunGard restored the main claims system, the customer service system and the Internet service in the temporary Chicago office.
Three weeks later, Gilsbar had a backlog of 25,000 claims. But, "We are functioning split out of Chicago and our home office," Gilsbar's Hennegan relates. "Our customer service is being handled out of Chicago and all transactions are being completed in both locations," he explains. "Without disaster recovery, the company would have gone under."