Industry Sees Minimal Impact On Operations

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The blackout of 2003 had little effect on insurance broker andinsurance company service operations despite the massive extent ofthe power outage.

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Most insurance company offices in the affected areas, whichextended through Ohio, Michigan, New York, portions of Canada, andparts of New Jersey and Connecticut, had to close, but back-upsystems rerouted claims and customer service operations.

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Brokers in the affected areas said their offices were closedFriday, Aug. 15.

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Chicago-based Aon said a total of 32 offices were affected.Client services were moved to back-up locations and client calls toAon Risk Services call center in New York were rerouted to theGlenview, Ill., center within 15 minutes.

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Stephen P. Ban, senior vice president of marketing andcommunications, said all operations were up and running normally byMonday. He said one of the lessons from Sept. 11 was that itsback-up facilities had to be upgraded to handle emergencies. Thesystems worked successfully during the blackout, he said.

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Executives with Chicago-based Hub International Ltd., whereoffices closed Friday, had operations running by Monday, but notwithout some complications.

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Bruce D. Guthart, president, U.S. operations for Hub, said thatthe biggest problem on Monday was when it found that a Verizonphone switch in the building was damaged by a power surge–somethingthat he said occurred in a few New York office buildings. Phone andInternet service were unavailable for the day. Employees, he said,worked at home or used their cell phones to contact clients.

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In Ontario, Phil Cornies, chief financial officer of Hub Group“Ontario” Inc., said 17 offices across the province were affected.By Monday, the main office in Brampton was at half its usualstaffing level, and by Tuesday it was business as usual. Despitethe outage, he said service was “pretty quiet” with more callsabout new business coming in than claims.

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Linda Collins, communication manager for Arthur J. Gallagher,based in Itasca, Ill., said offices in Cleveland and New York wereclosed for one day, but there was no major effect onoperations.

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For carriers, the same was true.

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Sue Honeyman, spokesperson for The Hartford in Connecticut, saidoffices in Cleveland, Detroit, Toronto, as well as New York stateoffices in Troy, Garden City, Lake Success, Hauppauge, Riverheadand Manhattan were closed Friday, affecting 575 employees. All wereup and running by Monday.

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Hartford, Conn.-based Travelers saw nine offices affected by theblackout at its worst, said Laura Bradshaw, a company spokesperson.Business was re-routed to back-up locations and there was littleimpact on operations. For New York City employees, the biggestproblem was transportation, she said, since much of the citys masstransit system was at a standstill.

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A spokesperson at American International Group in New York Citysaid the carriers contingency plans were put into effect during theblackout and claims services were up and running the next day. TheNew York office was open on Friday, he said.

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Mayfield Village, Ohio-based Progressive said its main officewas hit by the blackout and that its emergency back-up systemssuccessfully kept service going. Calls to its Cleveland center weresent elsewhere and data continued to flow uninterrupted. By Friday,all Cleveland phone centers were open for business after power wasrestored.

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Brokers said that as heavy as losses may turn out to be formerchants, they expect this to be a minor event in terms ofinsurance claims. Reporting light claims activity so far, somespeculated that clients are well aware of the extent of theircoverage and are not bothering to report losses because they knowthey wont meet their deductibles.

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When asked if he thought clients would rethink coverage, Mr.Guthart said clients have purchased what they feel they can affordin a hard market and he doubted they would pay more premiums.


Reproduced from National Underwriter Property &Casualty/Risk & Benefits Management Edition, August 25, 2003.Copyright 2003 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.


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