Bonnie, Charley, Frances, Ivan, and Jeanne are names that property and casualty carriers will not soon forget. Uninvited guests, these hurricanes pounded Florida and the Southeast this season, catching many personal line carriers off guard and ill prepared for the ensuing onslaught of claims. Making matters worse, these natural catastrophes arrived with such force, and in such close succession, that many insurance carriers were tested in terms of fulfilling policyholders' customer service expectations.

The extent to which a cat adversely affects a carrier depends upon a number of factors, including the number of policies in force in the area that has been hit. Some factors, such as the severity of the storm or catastrophic event, are beyond the control of the carrier. Others, however, such as the organization of the carrier's claim department and the claim-handling processes, can be managed to mitigate a disaster's impact, from both a customer service and claim-handling cost standpoint.

Claim reporting plays, perhaps, the most vital role in the handling of catastrophe claims. It is a chance for carriers not only to reach out and help their policyholders in a time of great need, but to control the flow of claims to their adjusters. Well orchestrated claim intake soothes customers, dampens the chaos, and speeds the settlement of claims; thereby mitigating overall claim costs. Additionally, superior service during these stressful times can lead to higher customer satisfaction index ratings, which correlate directly with the customer retention goals of all carriers.

Most carriers have established procedures for handling incoming claim reports during catastrophes, ranging from redeploying employees to help support the temporary spike in claim volume, to working with outside entities that focus specifically on staff augmentation and disaster recovery planning. Few, however, have made adequate preparations for worst-case scenarios such as those experienced during this past hurricane season. Fewer still are employing the full complement of strategies for minimizing the strain of receiving a high volume of cat-related losses in a short period of time. The majority of carriers, therefore, pay a steep price when severe catastrophes do occur.

Common Goals

During a hurricane or other catastrophic event, claim professionals share some common objectives, including being readily accessible and available to receive loss reports from insureds, assigning claims quickly to the right offices and adjusters, and communicating with insureds to let them know the status of their claims. Achieving these objectives might best be accomplished by drawing upon years of lessons learned to establish battle-tested claim-handling practices.

A crucial first step in effective cat claim handling is to segment callers in the affected area from those in other parts of the country. Segmentation can be accomplished automatically by programming area codes into the telecom switch or at the telecommunication provider level. Another segmentation alternative is to add instructions at the top of the voice-prompt tree heard by callers on the claim reporting hotline (e.g., “Press 1 to report a claim related to Hurricane Frances”).

Segmentation offers two benefits: protecting policyholders who have not been hit by the storm and who have normal expectations for how their claims will be handled, and allowing those who are affected to have their calls routed to a group of handlers trained to deal with the emergency.

Although the disaster-affected policyholders will expect delays on the phone, they also willexpect special treatment once their calls are picked up. Ideally, the carrier will designate a national cat-handling office or multiple regional offices, or allocate a designated team in each of the contact centers to evenly distribute the incoming traffic.

To handle more calls, simple arithmetic dictates that the call center either needs to have more people responding to incoming calls or to shorten the length of each call. The former is virtually impossible when all hands are already on deck.

Strategies to abbreviate inbound cat calls include asking triage questions early in conversations to gauge the severity of the loss; expediting the processing of heavy damages, while moving minimal losses down in the queue. Unnecessary questions should be eliminated from the normal call flow. Questions regarding background information on the property, for instance, or details about witnesses usually are extraneous in emergency situations. In addition, referrals to vendor networks can be disabled temporarily, as all the local contractors are already beyond capacity after catastrophic events.

Using all three of these techniques can reduce call times by as much as 20 to 25 percent, precious time in high-stress, high-volume situations.

An obvious, yet often overlooked method to limit the volume of incoming phone calls is to offer alternate channels for reporting claims and encouraging callers to use them. Policyholders need be educated (repeatedly) about the alternative channels via newsletters, direct mail inserts, and wallet cards mailed throughout the year so that they are prepared in advance of any catastrophes.

Many carriers already have web sites with some ability to submit loss information over the Internet. To be most effective during disasters, however, these sites also should offer SOS links on their home pages and special streamlined claim reporting screens.

Of course, every carrier can accept faxes. Agents, in particular, should be targeted for faxing in claims, as many historically have faxed first reports directly to the carrier for data entry into the claim system.

Often, during a catastrophic event, announcements are recorded on the telecommunication switch to educate all callers on the various reporting options. Some carriers have considered using interactive voice response systems to allow insureds to report the most simple of catastrophe claims. Although still in their infancy, these speech recognition technologies eventually may become a common tool to provide insureds with another simple and reliable method to report claims.

Define Plan B

What happens if one of the main contact centers is located in the affected area and must be evacuated? Hopefully the carrier has a backup plan. Many carriers have multiple contact centers or buffer space in facilities that can be used during spikes in volume. Other companies rely on staff in branch offices filling in as customer service representatives when a center goes down.

An alternative strategy is to out source overflow traffic to third-party providers. In the best case, a carrier would send a percentage of calls throughout the year to outside vendors to ensure that phone agents remain proficient and comfortable with the carrier's call flows and business rules. Only with this ongoing concerted effort can the outside vendor be truly and fully ready when a catastrophe hits. When using third-party providers to manage overflow, adding capacity to handle the surge in calls becomes the vendors' problem rather than the carrier's.

Of course, there is no substitute for planning, which includes using third-party weather services (computer forecast model information, combined with historical data and current storm movement data), and workforce management software for staffing and scheduling purposes.

As with all claim handling, automating routine procedures and basic decision making during catastrophes can greatly increase capacity. An ideal candidate for such automation is branch office and adjuster assignment. Unique routing rules can be written directly into the claim intake software such that certain high-severity claims from Florida, for example, get sent to a special Minneapolis branch office for expedited handling.

These triage rules can be in place throughout the year or can be triggered in disaster situations only. Additionally, some carriers tailor their processes based upon the size of the insured's relationship with the carrier. However, programming the desired rule changes requires an intake engine flexible enough to accommodate immediate changes when necessary.

Let's face it, despite all the best laid plans, preparations, and efforts, no catastrophe plan can possibly cover every emergency situation. By learning from experience, however, and applying some of the lessons learned by others, every carrier stands a much better chance of weathering the storm when Cindy, Dennis, Emily, and Franklin come to call in 2005.

Jay Guden is the vice president of call center operations with First Notice Systems. He can be reached at jay_guden@firstnotice.com.

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