As the summer heats up each year, so does disaster season. In 2020 and 2021, property/casualty insurers in the United States paid approximately $176 billion in natural catastrophe claims. It’s not getting any better; losses have steadily increased over the past four years. Whether the damage comes from flooding, wildfires, tornadoes, or earthquakes, many people wonder whether they should get disaster insurance.
Disaster Insurance: What to Consider This Summer
During the summertime, various natural disasters can pose risks, making it important for policyholders to understand their insurance coverage. For example, does homeowners’ insurance cover flooding? Here are some things insurers should consider regarding disaster insurance this time of year.
Increased Summertime Risks
Summertime brings specific risks such as hurricanes, wildfires, floods, and severe storms. Insurers should prepare for an uptick in claims related to these events. They should especially work to ensure they have the resources and capacity to handle any surges in customer inquiries and claims processing.
Policy Coverage
Be sure to review policy documents with policyholders to clearly communicate their coverage for any potential summertime disasters. Many homeowners assume their homeowners’ insurance covers damage from these disasters, as they are aware of hail or lightning coverage. They may be in for a shock if their home floods after a storm. In 2018, Hurricane Florence caused over $20 billion in total residential and commercial damage, yet approximately 85% of the residential loss was uninsured.
Insurance policies can be tailored to address the specific risks associated with natural disasters. Ensure all policyholders understand the risks covered, exclusions, deductibles, and any additional endorsements or riders available to them if they should want to enhance their coverage. Endorsements or riders can provide additional coverage for floods, earthquakes, hurricanes, or wildfires.
By customizing the coverage options, insurers ensure policyholders have adequate financial protection against the risks they’re most likely to encounter. Clear communication and transparency are crucial to managing customer expectations.
Risk Assessment and Underwriting
Work to improve risk assessment and underwriting processes to identify and avoid potential summertime disasters. Use the most recent data and models to assess the likelihood and severity of disaster-level events in different areas of the country. This information can help determine the most appropriate pricing, coverage limits, and risk mitigation strategies.
Share this data with policyholders and give them resources for assessing their specific risks. These may include educational materials, online tools, or consultations with risk management experts. If they understand the potential hazards they face, policyholders can take appropriate preventive measures and make informed choices about their insurance coverage.
Catastrophe Modeling
Use the latest catastrophe tools and technologies to assess potential losses and manage risk aggregation. These advanced models can provide insights into the probable impact of disasters, enabling insurers to refine their underwriting practices, set appropriate premiums, and use resources effectively.
Reinsurance Arrangements
Reinsurance plays a critical role in managing catastrophe risk for insurers. Evaluate current reinsurance arrangements and strengthen them to ensure sufficient coverage and appropriate risk sharing for potential summertime disasters. Reinsurers can provide financial stability and expertise in managing catastrophes, helping insurers handle larger claims effectively.
Claims Management
Enhance claims management processes to handle potential increases in claims over the summer. Work to streamline claims filing and processing procedures, use digital platforms for efficient communication, and establish clear and robust catastrophe response plans. It’s essential for insurers to be both prompt and empathetic in handling claims handling during stressful times.
Customer Education and Support
Educate policyholders about their coverage, policy terms, and claims procedures related to summertime disasters. Provide clear guidance on ways they may be able to mitigate risk or prevent the disaster from occurring in the first place. This guidance can help policyholders minimize potential damages and lower their overall risk.
Being proactive about this topic can strengthen customer relationships and reduce uncertainty during catastrophic events.
Emergency Planning Support
Insurers can provide resources and information to help policyholders develop emergency plans for natural disasters. These might include guidelines on creating evacuation plans, assembling emergency supply kits, or establishing communications protocols. By assisting policyholders in their emergency planning, insurers contribute to their overall preparedness and resilience in difficult times.
Loss Prevention Strategies
Insurers can conduct property inspections and risk assessments to identify potential vulnerabilities on the property. Insurers can also provide feedback on necessary improvements, such as reinforcing structures, installing protective measures, or updating safety systems. These proactive measures can help policyholders mitigate risks and reduce the likelihood of experiencing significant damage.
Claims Assistance
Insurers play a vital role in handling the claims process during and after natural disasters. By providing efficient claims handling and faster processing, insurers help policyholders access funds quickly to initiate the recovery process. Clear communication, digital claims filing options, and dedicated claims support teams contribute to a smoother and more efficient claims experience.
Collaboration with Government & Other Agencies
Create and encourage partnerships and collaboration with government entities, emergency management agencies, and others involved in disaster response and recovery. Engage in discussions and share knowledge with these entities to contribute to risk reduction efforts and enhance the preparedness of communities.
Final Thoughts
Insurance companies have a vested interest in helping policyholders prepare for natural disasters as it benefits both the policyholders and the insurers themselves. By staying informed about the risks associated with summertime disasters, insurers can proactively manage their exposure, strengthen their operations, and effectively support policyholders. Continuous evaluation of underwriting practices, claims management, and customer communication is essential for navigating the challenges and opportunities summertime disasters present.