Recent years have witnessed a marked increase in the frequency and severity of natural disasters, especially flooding and wildfires.
Scientists and experts link these devastating events to climate change, suggesting that we can expect more extreme weather patterns to emerge, both in their occurrence and their financial ramifications.
Financial Impact of Natural Disasters
According to Aon’s 2024 Climate and Catastrophe Insight report, the global financial burden from natural disasters on the insurance industry reached an astonishing £92.9 billion ($118 billion) in 2023.
This figure represents a significant 31% rise compared to the average losses observed during the 21st century.
Moreover, the Global Risks Report released by the World Economic Forum identifies extreme weather events as the top risk likely to impact individuals over the next ten years.
The repercussions of these disasters on businesses are profound and intricately tied to the role of the insurance sector.
Companies grappling with the aftermath of severe weather must secure suitable coverage, while claims teams face the daunting task of processing property and business interruption claims efficiently.
The increasing rate of natural disasters, primarily fueled by climate change, has led to an overwhelming influx of claims that put immense pressure on insurers, particularly in areas once considered low-risk.
A case in point is the catastrophic flooding that occurred in the UAE in April 2024, where a staggering 255 mm of rain fell within just 24 hours, far surpassing the country’s average annual precipitation.
Challenges in Claims Processing
The claims process itself poses several hurdles that complicate insurers’ abilities to respond effectively.
Loss adjusters are often overwhelmed due to the sheer volume of claims, which can lead to lapses in service quality.
Challenges such as a shortage of local licenses for adjusters, limited understanding of unique business needs, and a lack of empathy—especially in situations where risk managers are grappling with personal losses—hinder timely support.
Addressing these obstacles is vital for improving service during emergencies.
At Markel, we have pinpointed three core challenges that need navigating to manage disaster-related claims effectively:
- Real-Time Monitoring is Crucial
- The Need for Accurate, Timely Information
- Streamlining the Claims Settlement Process
Quickly assessing and responding to calamities requires the presence of loss adjusters on-site, paired with cutting-edge resources like satellite imagery.
These tools are essential for conducting swift and thorough evaluations, which are critical for prompt claim settlements.
Utilizing video footage from clients can significantly enhance adjusters’ ability to prioritize their efforts.
Innovations like drone technology allow for expedited assessments, particularly important in scenarios involving wildfires and flooding.
Hurricanes present a unique challenge; their destructive power can cripple communities and disrupt critical infrastructure, such as ports and terminals vital for global trade.
In the wake of a hurricane, our focus shifts to effective communication with brokers, rapid assessment of affected clients, and strategic resource deployment to alleviate shock.
Recognizing the long-term effects hurricanes have on communities is essential, prompting a compassionate, communicative approach throughout the claims process to support clients on their path to recovery.
Having access to correct and timely data is indispensable.
Emphasizing accuracy in assessing business interruption claimed amounts enables informed decision-making, which streamlines the claims process.
While securing precise data during the underwriting phase is crucial, it’s the up-to-date values that demand immediate attention from claims handlers.
Any inaccuracies can lead to delays as teams search for the correct figures.
Moreover, keeping insurers informed about changes in business operations and interruption risks during the policy term is essential, ensuring that reported losses align with actual risks.
Discrepancies may necessitate additional assessments, further illustrating the importance of maintaining detailed performance records.
Understanding whether a business can operate partially or is completely shut down plays a key role in effective claims management.
Gathering comprehensive information about operational capabilities is critical during this evaluation phase.
Enhancing Claims Management
Lastly, refining internal operations is key to speeding up the claims process.
When adjusting teams have streamlined access to crucial information and resources, response times dramatically improve.
Many business interruption policies incorporate waiting periods; delivering pertinent information during these times can kickstart the adjustment process, making for a smoother transition as claims progress.
Ultimately, the impact of natural disasters can be devastating for employees and businesses alike.
The insurance sector is instrumental in helping organizations rebuild.
By leveraging technology, refining procedures, and fostering open communication, insurers can provide essential support to affected businesses.
This approach not only assists them in navigating the financial consequences of disasters but also prioritizes customer satisfaction throughout the recovery process.
John Doe, Head of Claims Performance in Marine & Energy at Markel
Source: Claimsjournal
