Insurers can ease confusion and help customers pick up the pieces after a wildfire. (Photo: ALM Media archives) Insurers can ease confusion and helpcustomers pick up the pieces after a wildfire. (Photo: ALM Mediaarchives)

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For many California residents affected by the state'sdeadliest and most destructive wildfire season in a century,the start of 2019 brought more confusion and frustration as theyworked to put their lives back together.

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The November 2018 fires claimed the lives of more than 100people and consumed nearly 2 million acres, resulting in more than$11.4 billion in insured losses, according to the California Department of Insurance. Of the46,000-plus claims filed, more than 13,000 insured homes andbusinesses suffered a total loss.

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The department also estimated a 25% increase in projections fromthe end of last year. The rising costs already overwhelmed oneinsurer, which was forced out of business after facing more than$64 million in claims. Meanwhile, PG&E, California's largestutility, recently declared bankruptcy as its liabilities from thefires could total $30 billion.

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To make matters worse, communities scorched by wildfires laterexperienced heavy rains. The lasting devastation from the wildfiresincreased the risks of flooding and mudslides,prompting additional evacuations and emergency operations.

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These developments, coupled with lengthy delays to settlementsand rebuilding, created uncertainty and anxiety for policyholders.To that end, here are four tactics insurers can use to easeconfusion and help customers pick up the pieces.

No. 1: Expedite the process whereverpossible.

The sheer volume of policyholders with emergency needs is, ofcourse, the first big challenge. In many cases, claims andsettlements from the 2017 wildfires are still being processed,creating additional delays in sorting out 2018 claims. Under normalcircumstances, claims can take weeks. In this environment, theycould take months. What's more, settlements may also be delayed asa result of a limited building material inventory and contractoravailability.

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However, many insurers now expedite catastrophe claims by immediatelydeploying catastrophe teams and leveraging new technologies tostreamline information gathering. Drones and mobile apps aremaking it easier — and safer — for claims professionals to quicklyassess damage and share data. Once the settlement process isunderway, claims pros should check if their companies have madearrangements with suppliers to streamline access preferred accessto required materials. It also pays to become familiar with thetechnology that can help expedite claim payments, such as SIUs,updated claims systems, chatbots and others.

No. 2: Educate policyholders.

Policyholders will be more calm and confident in the claimsprocess if they have a better understanding of how their coverageworks and a realistic timeline for when they can start puttingtheir lives back together. Provide policyholders with details onwhat will be expected from them in the claims process, includingwhat to do with damaged items, necessary repair estimates, andclaim time limits.

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Another key education opportunity exists around the specifics oftheir policy, including out-of-pocket costs like deductibles andadditional costs for older homes that may not meet current buildingcodes. Make sure policyholders understand the difference betweenreplacement cost and actual cash value. Most policies are writtenon a replacement cost basis, but in some cases, the policy will bewritten to provide coverage on the actual cash value, which deductsfor depreciation. This can come as a shock to homeowners when theyreceive a lower payout because their policy is based on thepre-damage age and condition of their property and contents, andnot the cost to rebuild and replace with materials of like kind andquality.

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Moving forward, insurers can help policyholders by providingadditional context and assistance around updating estimatedreplacement value of the home and belongings. This can avoidsurprises in the event of a loss. A renewal questionnaire canuncover the need for endorsements or special coverage, such as forhigh-value jewelry or other valuable property or collections.

No. 3: Connect policyholders toresources.

Several resources exist to help policyholders affected by theCalifornia wildfires. In the case of losses exceeding coveragelimits, there are government disaster programs which may providelow-interest loans or other types of relief funds to offset somecosts. The Federal Emergency Management Agency (FEMA) offereddisaster assistance for residents in Butte, Los Angeles and Venturacounties. The agency continues to provide other resources onrepairing and rebuilding after the fires, as well as details aboutflood insurance and other precautions to take after wildfires. Taxrelief is also available for homeowners and business owners inButte, Lake, Mendocino, Napa, Nevada, Sonoma and Yuba counties.While such programs cannot entirely replace inadequate policylimits, they do provide some relief for customers who wouldotherwise pay additional costs out of pocket.

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It's also crucial to stay up to date with any state-specificregulations that may affect policyholders' coverage. For example,the Loss of Use provision, which covers living expenses such ashotel stays and transportation, generally applies for up to 24months after a loss occurs. For 2019, the period will extend to 36months in California.

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Insurers can locate resources to pass on to customers throughthe California Department of Insurance and theCalifornia Wildfires Statewide Recovery Resourceswebsite.

No. 4: Be a sounding board.

One of the most important things you can do today to helpcustomers and ease their stress is to make time to communicate.Check in often to offer assistance. Provide a checklist of thingsthey should do, such as saving any receipts related to the loss andrerouting their mail. Ensure that policyholders know what to expectnext at every step in the process.

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It's also a good idea to help homeowners set realisticexpectations. For example, homeowners may think 36 months is plentyof time to rebuild to homeowners. But insurers can lay out for themhow the high demand for limited resources in a catastrophe zone maydelay the rebuilding process.

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This rebuilding will take time, and it may not always be aseamless process. It's critical to show customers how their insurercan be a key partner and where you're using ever tool at yourdisposal to help expedite and improve the process.

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Ann E. Myhr (Myhr@theinstitutes.org), CPCU,ARM, AIM, ASLI, AU, is senior director of KnowledgeResources at The Institutes in Malvern, Pa. These opinions are theauthor's own.

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See also:

 

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