Johnny Carson famously joked that California's four seasons are Fire, Flood, Mud, and Drought. Well, Fire season is here, and hardly just in California. Wildfires have already burned 2.5 million acres in the U.S. this year, including more than 1 million in Kansas, Nebraska and Oklahoma.
And we're on the verge of not only an El Niño, which makes the world much hotter and drier, but of what is classified as a "super" El Niño — in fact, one that may be the strongest in recorded history.
With summer upon us, there isn't a lot that can still be done to prepare, but there are still some to-dos for carriers, agents and others in the insurance industry.
Let's have a look.
The 2.5 million acres already burned in the U.S. this year are more than twice the average over the past decade for this time of year, and conditions should become even more dangerous as the year progresses. The developing El Niño is already strong enough that the Washington Post reports that people are going to the beach near Lima, Peru, where temperatures have been in the 80s — even though it's winter in the Southern Hemisphere. Ocean water temperatures have been measured at more than 14 degrees above normal.
There is some good news here: An El Niño typically makes it harder for hurricanes to form in the Atlantic, so forecasts are for less damage than normal. (That is hardly guaranteed, though. El Niño typically heats up the ocean waters that fuel hurricanes, and a single, exceptionally powerful storm making landfall in the U.S. can be devastating.)
But, as the Post notes, an El Niño also typically leads to "unusually high summer temperatures in the Pacific Northwest, Midwest, Mid-Atlantic and Southeast, as well as across Europe [and] unusual downpours and humidity for parts of the West, including the drought-stricken Intermountain West, which could increase the risk for flooding."
In the short term, the key is opening lines of communications with customers who are the most likely to be hit, and making sure those lines operate flawlessly. Eileen Potter, vice president of marketing, insurance, at Smart Communications, makes four key points in Carrier Management:
"Don’t wait for a disaster to explain the policy.
"One of the most important things insurers can do right now is make sure policyholders know exactly what their coverage includes—and excludes—before they need to use it.... Insurers that deliver clear, easy-to-understand policy summaries and coverage explanations as part of their overall customer communications strategy stand out and earn lasting trust.
"Fill the information gap before someone else does.
"When disaster is approaching, policyholders also need to know how to reach their insurer or agent, what the claims process looks like, and where to find reliable guidance on protecting their home and family. This is where insurers have an underused opportunity. With 41% of U.S. households relying on social media for preparedness tips, the demand for reliable guidance is clearly there—and largely unmet.
"Build integrated digital communication systems.
"When systems are disconnected, policyholders may receive conflicting information depending on the channel they use. Consider a customer who has had a significant homeowners policy claim. They call the contact center and are told their claim is under review, then check the app an hour later to find it still shows as not yet received. In a moment already defined by stress and uncertainty, that contradiction can cause the policyholder to question whether their insurer is on top of the situation at all.... Smooth integration across every touchpoint... is even more important during a weather event when people can be displaced and don’t have access to mail or phone services.
"Maintain communications during and after a claim.
"Providing consistent updates, whenever possible, makes a meaningful difference in the customer journey. Confirming the receipt of documentation, providing status updates, outlining expected timelines and clearly communicating next steps all reassure policyholders that their claims are progressing and they are being well cared for."
Underscoring what Eileen writes, I'd suggest you test the lines of communication yourself, rather than just rely on data from those in charge of communications with customers. In theory, communications are always perfect, but in practice....
If you have any sort of responsibility for communicating with customers, maybe pick 10 recent claims and call the policyholder to ask how the process went. You'll surely find that many didn't understand their policy, that they had trouble getting responses at various times in the claims process, that they didn't have a good sense of where they stood in the process, that they had to provide the same information repeatedly, that information they provided to someone via email or on the phone didn't show up in your app, or vice versa, and so on. You'll unearth all kinds of frustration that tends to be glossed over by the time statistics show up in a PowerPoint slide.
Other insurance entities, beyond carriers, agencies, call centers and TPAs, should do similar testing to make sure they're ready for the disasters likely to come this summer and fall. I'm thinking, in particular, of anyone involved in payments. Those have to be handled quickly and flawlessly in an event such as a wildfire.
If you test now, you might even have time to fix some of the problems before your customers suffer catastrophic losses — when your lines of communication and other systems will be under far more stress than they are now.
Cheers,
Paul
P.S. Dealing with wildfires in the long term isn't the subject of today's note, but I'll include links to two very smart papers that tackle the enormously complex problem of how to make homes and communities more resilient in the face of wildfire threats. One, by Veronika Torarp and five colleagues at PwC, is here. The other, by Nancy Watkins of Milliman and two colleagues, is here.
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