If there is one thing that is continually stressed in any discussion about catastrophe management for insurance agencies, it is having a plan in place and knowing what it is. While that might sound obvious, you would be surprised how few heed such simple advice, disaster recovery experts say.
In a webinar sponsored by Zurich, put on in July by National Underwriter and its sister publication, American Agent & Broker, virtual attendees were asked how many had a catastrophe plan in place. More than half affirmed that they did, but 60 percent said they had not revised it or conducted drills to assure its effective execution within the past 12 months.
Calvin “Cal” Beyer, vice president and head of manufacturing for Zurich North America Commercial, said it was a mistake for organizations not to practice and continually revise their disaster scenarios, warning such plans should be treated as “a living document.”
A survey sponsored by Trusted Choice and the Independent Insurance Agents and Brokers of America back in May found that in the general population, fewer than 22 percent feel they are fully prepared for a disaster, while 51 percent said they are somewhat prepared. Slightly less than 23 percent said they were not prepared at all.
(Of special note to agents, 36 percent of those surveyed said they do not know if they have adequate insurance coverage, and 62 percent said they had never discussed a complete disaster preparedness plan with an insurance agent.)
With the experience of Hurricane Katrina five years ago and a series of debilitating weather events in the ensuing time, independent agents have become increasingly aware of the need for disaster preparation, especially in such a technology-driven world, contends Angelyn Treutel, chair of the Agents Council for Technology and principal of Treutel Insurance Agency Inc. in Bay St. Louis, Miss.
“Fortunately, or unfortunately, the large number of catastrophes related to extreme weather in the past few years have made agents much more prepared to face a disaster,” she said by e-mail. “With available technology, agents can operate their agencies remotely and provide superior client service, despite the loss of their office.”
“Following our own disaster, which caused the loss of our office, home and community”–Bay St. Louis was severely damaged, and the Treutel’s office was wiped out by Katrina–”our advice to other agents has been to become highly automated, using such available tools as Internet database access, off-site digital storage and a robust website to provide client access capability and communication.”
She noted that her agency has added “CSR 24/7 service, live-chat functionality and an iPhone [application] to provide better service to consumers.”
“Agents sell ‘a promise to pay’ in the event of a claim or disaster, and we take our responsibility very seriously,” she continued. “We are constantly high-grading available tools, which we can use to make ourselves available to our clients when they need us.”
A good resource for risk management, she noted, is the “Disaster Preparedness Guide” available on the ACT website at www.independentagent.com/act.
Brady Polansky, chief executive officer of NetVu, the Vertafore users group, noted that there are three parts to any disaster plan–preparation, responding quickly and recovery. He said most agents don’t look at all three parts and many only concentrate on recovery.
At NetVu, the association has thought about all three elements and is prepared to be up and running quickly after a catastrophe.
Preparation includes large pipes for Internet wiring, eight-hour battery back-up and multiple sites for data storage so the association can be up and running elsewhere “pretty quickly.”
“We think this is the kind of thing agencies need to consider,” said Mr. Polansky. “You want to make sure your system is ready if there is a disaster.”
He said most agents should have the resources available to create a disaster plan. The major investment is in planning and preparation, and the actual expense in execution is covered by business interruption insurance.
“There is nothing worse than when a customer calls and they only get a busy signal,” he said.
One thing he did advise was that preparation and practice are important in any disaster plan, warning that “the time to test your back-up is not when there is a disaster.”
When Katrina struck, both agents and clients were unable to conduct business because infrastructure was so heavily damaged. However, policyholders with collectables and collector vehicles insured through the managing general underwriter American Collectors Insurance in Cherry Hill, N.J., were able to manage policies, submit claims or make payments through the company’s website portal, noted Melissa Romagnoli, vice president of operations.
Agents did not require an office to do business, and clients who were unable to contact their agent during the disaster could go direct to the website for their insurance needs.
Realizing the “nightmare down there” that people were going through, Ms. Romagnoli said American Collectors Insurance extended the window of payment on insurance policies for a reasonable amount to time. “We bent over backward as legally possible to accommodate their situation,” she said.
As part of its own disaster preparedness, American Collectors Insurance has installed several systems for back-up and protection of its electronic data, Ms. Romagnoli explained. The firm replicates electronic data offsite in Pennsylvania every 15-to-20 minutes. Should a server go down, staff can connect with the Pennsylvania site within 20 minutes. The ability to connect to that data through co-location is not limited to the 105-member staff in Cherry Hill but also allows American Collectors Insurance agents to log into the system.
To deal with the possibility of fire, the server room of about 50 pieces has an air sampler that sniffs the environment periodically. An alarm is sent out to the tech staff should the air quality change.
If there is smoke, an alarm is sent not only to the staff but also emergency responders. A fire suppression system–a FM200 agent–will spray a chemical that puts the fire out but does not damage the equipment.
“It gives me peace of mind to sleep easier at night,” she remarked.
Another piece of its disaster preparedness plan is power back-up for the firm’s servers. Ms. Romagnoli explained that there is an uninterruptable power system to keep the servers powered when there is outage. Typically, this might be for 10 minutes or less, and the back-up system can last for up to 30 minutes. The 30 minutes of back-up power gives technicians enough time to safely shut down the servers until power is restored.
Creating a disaster preparedness plan paid off for independent agent Roy Riley, owner of Peel & Holland Financial Group, based in Benton, Ky. As he tells it, the region was hit with a crippling ice storm in 2009, shutting down west Kentucky for a week and leaving some people without power for over a month-and-a-half.
The storm knocked out power and phone service in all four of the firm’s offices. But the phones never went unanswered, he said, because all calls were redirected to a remote customer service representative through CSR24, the inauguration of the first piece of the firm’s preparedness plan.
A small generator got the office going in one day, and under a plan with Agility Recovery Solutions, all four offices were up and running within 48 hours.
Because of its planning, Mr. Riley said the agency had settled all the critical issues of getting the office running, allowing the agency time to work out the smaller details as they arose.
For an “affordable monthly fee of less than $300 a month,” the agency had access to the equipment it needed to get up and running, he said, noting that the cost of that equipment was picked up under the firm’s business interruption policy.
“We found it to be very affordable and it allowed us the ability to meet our clients’ expectations when they needed us the most,” said Mr. Riley.
He also cited a few lessons from the experience. While the agency did not practice its preparedness plan, it did periodically review it, and they felt comfortable with it. What they learned was that they needed more cohesive communication in executing it.
Also, “cash is king,” he advised, suggesting that agents make sure they can get their hands on some money should the banks or ATM network be shut down.
Thanks to the disaster plan, clients never saw an interruption in service, according to Mr. Riley, who noted that the day after the storm the agency had 1,000 outbound calls to clients checking on them and arranging for claims adjusters, adding the agency got a lot of good media attention out of that.
“One of the other lessons we learned is that your clients are pretty patient when everybody is affected, but they are not very patient if you are the only organization affected,” he observed. “That’s when you can’t afford not to have a plan and get back in business.”