Duke Ellington is known more for his great music, such as Take the ‘A’ Train (alas, it’s flooded right now) than for his inspirational quotes, but in thinking about what has gone with the weather on over the last two days—and where the recovery is headed over the next few months—I thought his words were prophetic.
“A problem is a chance for you to do your best,” is a quote attributed to Ellington and boy, is the insurance industry facing some problems.
Disaster recovery is a challenge for any business, but when your business is helping others recover from their own disasters and your own business is located in the midst of that same disaster, well, that’s what you call a double-edged sword.
It’s too early to assess the damages that insurance carriers located along the Eastern seaboard are facing within their own four walls. With roads still flooded and mass transit at a standstill it could be a few days before IT workers are able to get back to the office and assess the damages.
When adversity strikes others, it is wise to look at your own circumstances and try to gauge what would happen if a phenomenon such as Sandy strikes your area. None of us are immune from these natural disasters. We’ve seen too much evidence of it in the last decade, whether it is a hurricane, a tornado, an earthquake, or even a blizzard.
There used to be plenty of examples of companies going out of business if they suffered a major data loss. Twenty years ago, business continuity plans were rare and when Hurricane Andrew struck Florida in 1992, 80 percent of companies that did not have such a plan went out of business, according to the Information Technology Association of America.
Most companies today are smart enough to have a plan. Their data resides either in multiple locations—hopefully not in the same or an adjoining ZIP Code—or, as we have seen more recently, in the cloud. Having data available is the only way for an insurer to get the business running quickly and insurers are always judged by policyholders on how quickly they react to their claims.
Of course, having a connection to your customers is vital. As Rob McIsaac, a principal with Novarica points out, disaster plans almost always focus on getting the back-end systems running, but too often ignore the front end. People want to communicate with their insurer. Having back-end systems running doesn’t mean much if the front end is closed.
Practicing for a disaster is helpful, but all the practice in the world can’t prepare businesses to react as well as they—and their customers—would like. For one thing, you can’t replicate the personal pressure employees are going through as they have to deal with their own disaster recovery plans.
The insurance world will be watching how companies react to one of the most expensive storms in history. There will be lessons for all of us to learn from Sandy.
