Natural Disasters: Ensuring Continuity of Service

Over the last few years, we have seen a dramatic increase in the frequency and severity of natural disasters, notably flood and wildfire loss events. The majority of research findings to date indicate that weather-related natural disasters are already being influenced by climate change.

The facts suggest that these extreme weather events will only become more frequent, more severe, and more costly.

According to Aon’s 2024 Climate and Catastrophe Insight report, the cost of global natural disasters to the world’s insurance industry reached £92.9 billion ($118 billion) in 2023—31% over the average for the 21st century. Looking ahead, according to the World Economic Forum Global Risks Report extreme weather events rank number one in terms of the likely severity of impact on individuals in the next 10 years.

The impact that these events have on businesses and the role that the insurance industry has to play are intricately linked and both equally as significant as each other. On the one hand, organisations that are affected by these extreme weather conditions will need to take steps to ensure they have sufficient cover where possible. And on the other hand, claims teams are the primary function responsible for managing and ensuring that the property and business interruption (BI) claims get paid quickly and efficiently for customers.

However, with the rates of natural disasters on the rise—expedited by factors such as climate change—it is no surprise that insurers are facing a surge in claims, in which the sheer volume alone can be overwhelming. Furthermore, we are seeing increases in natural disasters in areas previously not considered high risk. For example, the devastating UAE floods in April 2024 saw 255 mm of rain fall in just 24 hours. According to Gallagher’s Natural Catastrophe and Climate report, this is more than 3 times the annual rainfall of for the country.

Moreover, there are several factors that tend to be overlooked when it comes to the claims process, such as loss adjusters being often over instructed and stretched too thin due to the number of losses, which can in turn lead to poor service and quality of work. Other factors that create problems include historic issues where adjusters have not been licensed in the area they are adjusting, not having the requisite knowledge of the business insured and lack of empathy where risk managers may also have suffered personal loss. Understanding these issues and working to mitigate them as much as possible is crucial to improving the service that’s provided.

What’s clear is that for the insurance industry, natural catastrophe losses are particularly challenging especially when it comes to assessing and resolving the claims in a timely fashion. From our perspective at Markel, there are three key hurdles to overcome when trying to establish and resolve these matters as a claims function.

1. Eyes and Ears

Having eyes and ears readily available to monitor and respond to developments swiftly is crucial—whether this is via loss adjusters who can travel to the site of a natural disaster promptly, or through satellite imagery—having access to resources to conduct a robust and speedy assessment of the disaster is of paramount importance if claims are to be settled in an efficient manner.

The use of video footage from the insured who will likely be able to get to the site quicker, is hugely effective too. This can help adjusters know how long they will need and where to focus their attention. Moreover, drone footage allows insurers to survey over a quicker period of time and satellite imagery allows us to rule out where it doesn’t appear any major damage has occurred. It can also help us assess where wildfires have spread, and water levels in floods to work out the likely extent of damage.

Hurricanes can present additional challenges. Not only do they have a profound impact on the communities in their path, as was seen by the devastation left by Hurricane’s Helene and Milton in Florida and other Sothern Sates, but also on critical infrastructure such as ports and terminals, which are crucial for importing and exporting supplies/materials internationally. It is therefore imperative that these facilities are backed up and fully operational when a hurricane hits, especially in specific regions which heavily rely on marine shipments and transportation.

Our priority when a hurricane hits is to communicate with brokers, quickly assess the situation for any affected clients, and deploy resources where they’re needed most. It’s in this way that satellite imagery has become invaluable in rapidly evaluating potential damage and, if necessary, deploying adjusters. This approach allows the insured to focus on their immediate needs before addressing business concerns.

Hurricanes disrupt lives, leaving people to deal with the aftermath long after the storm has passed. Insurers play a vital role in helping communities rebuild, which requires empathy, clear communication, and a commitment to supporting clients throughout the entire claims process.

2. Accurate information is the key

Access to information which is timely and precise—such as ensuring the BI figures presented to insurers are accurate—means teams can make decisions which are more informed, empowered and efficient for all parties involved.

Accurate data at the underwriting stage is crucial, but for claims handlers, the first batch of information that requires attention is the scheduled values. If these are inaccurate, then it could lead to delays whilst handlers try to work out what the actual figures are. Keeping insurers up to date with key capacity and likely business interruption changes throughout the lifespan of the policy will help ensure that any business interruption losses will match what has been declared. Claim aspects will include any mitigation measures that insureds can do, what the cost of these are, and what this then means from an overall interruption impact.

If there are discrepancies with data—whether that’s too low or too high—then there may need to be additional assessments done at the time of a loss. Generally, a lot of policies allow insureds to update their figures on a quarterly basis especially if they’re experiencing a change in market conditions or there is a material change to their business.

Having detailed, accurate records as to how the business has performed over the past six to 12 months will also help. Often, insures and their accountants will use past performance to assess the impact on the business arising out of an event. Business interruption usually requires a Physical Damage trigger. Whilst the amount of cover will depend on the reasonable length of repairs, adjusting teams can help to estimate likely timeframes if provided with quick access and details—including photos—of the extent of damage, which allows insurers to be prompt in confirming whether this trigger has been met.

Acquiring and understanding of the extent of damage in the early stages allows insurers to ensure that the correct team is there to help adjust the claims. Larger more complex losses might require forensic accountants and technical consultants, where a more straightforward physical damage loss might be able to be handled without these teams. Clear communication will help to mitigate any confusion in the adjusting process, meaning that insurers can turn their attention to agreeing payments quicker.

Understanding whether insureds are faced with a total shutdown of a business or if they can partially operate, is also key. Scenarios where a business is faced with total shutdown might require details as to why they can’t continue to run on a reduced basis. However, if a business can operate albeit partially, then further information will be needed regarding the amount of business they can continue to carry out.

3. Speeding up The Settlement Process

Finally, ensuring and implementing pragmatic ways of working internally is important. For example, enabling easy access to information for the adjusting team as well as to the relevant personnel who have knowledge of the business impact along with relevant accounting systems, will help to speed up the claims process.

A lot of BI policies have waiting periods; if the information is provided during this then the adjustment process can start in advance, so that when the insured is entitled to indemnity the adjusting team are not playing catch up.

Ultimately, natural disasters can have devastating consequences on both employees and businesses, and the role that insurance companies play in helping these organisations recover is crucial. By harnessing the power of technology, streamlining processes and prioritising effective communication and transparency insurers can ensure continuity of service and help businesses affected weather the consequential financial storm to maintain customer satisfaction when disaster strikes.

Upton is head of claims performance, Marine & Energy at Markel