Responding to catastrophic flood: The key challenges

Karl Sullivan, General Manager for the Policy, Risk and Disaster Planning at Insurance Council of Australia, shares the top challenges insurers face when responding to catastrophic overland flooding

Catastrophe & Flood

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Karl Sullivan, General Manager for the Policy, Risk and Disaster Planning at Insurance Council of Australia, shares the top challenges insurers face when responding to catastrophic overland flooding.

Misinformation and misunderstandings are the key challenges that insurers face during and after catastrophic floods. To overcome this, (in Australia) the Insurance Council of Australia (ICA) has established strict protocols for insurers’ responses once it declares an event to be a catastrophe. The ICA typically declares about four catastrophes a year based largely on the location of the event, its impact on insured and non-insured property and projected insurance losses.

When the ICA declares a catastrophe, it establishes a taskforce to liaise with governments, emergency services, community groups, charities and local politicians to ensure issues can be addressed swiftly. Insurers prioritise catastrophe claims. The ICA communicates via local media to keep communities informed, and in many cases will also conduct community forums to help answer policyholders’ questions and enable them to deal direct with their insurer. The ICA also launches a 24-hour catastrophe hotline to provide additional support.

Managing expectations is essential. The time it takes insurers to respond to flood claims is typically far longer than most other natural disasters. It can sometimes take weeks for water levels to drop sufficiently for insurance assessors to be able to access a property and inspect the damage. Even then, the flood waters may have damaged utilities, rendering the property unsafe. Flooding can also disguise pre-existing conditions, risks or damage to a property, requiring expert advisors to be brought in.

Delays caused by town planning and development approvals, site clearance, the availability of builders and tradespeople in regional and remote communities, the soaring cost of materials and underinsurance all pose challenges to insurers.

What must insurers keep in mind in order to provide effective response during flood?
When a major flood or other natural disaster strikes, the ICA and its affected member companies very quickly work to get a presence on the ground. It is important in both a practical and public relations sense for the community to see that insurers are delivering on their promises. Seeing representatives of insurance companies in their midst, answering questions and giving guidance to policyholders about the claims and recovery process is valuable.

But the process of responding to natural disasters needs to start before a catastrophe strikes. Insurance companies need to start building connections and lines of communication with federal, state and local authorities, emergency services and vulnerable communities well in advance of a flood hitting. The general insurance industry needs to be at the table with politicians and the emergency services to have its voice heard. It is very much in the interests of policyholders that insurers can raise issues surrounding recovery timetables, access to communities, demolition and rebuilding.

Local residents and business owners are upset, sometimes frightened and can be angry. Many have suddenly become temporarily homeless or lost their livelihoods. At times like this, it can be very easy for misinformation to spread, and journalists and politicians to fire shots at insurers whose resources can sometimes be strained by the extent of the losses. By staying in close contact with local officials and media, insurers can quickly identify any emerging controversies, and either address the problem or correct a potentially damaging misconception.

To learn more about overland flooding, check out the Insurance Business Flood Risk & Insurance Master Class.


RELATED LINKS:
An Australian lesson for Canadian flood insurers
 

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