Hub's Claim Director: Covid-19, Nat Cats Reshaping Claims Processes
As companies adjusted to employees working from home, and the experience of natural catastrophe striking new areas, the insurance industry is rethinking their claims processes, said Dave Chmiel, SVP, National Director of Claims North America, HUB International.
How have claims evolved in the last two years?
Claims in the industry as a whole evolved in three separate buckets. First, being in February of 2020, we had the pandemic. Covid totally turned the insurance world upside down.
From a standpoint of business interruption, workers compensation, and cyber in the first two months alone we had over 600% cyber claims increase alone — people were working from home, businesses were shutting down and they were doing remote access. And cyber criminals, they just jumped on the opportunity. So cyber became a huge issue, which now is evolved with the war overseas, it's even larger than ever. So cyber is one that heightened awareness of it, how to prevent it, and to make sure that overall your client base has what they need to prevent that from happening, both at home and at work, because a lot of the hybrid model is in full effect now throughout the US and Canada.
It's probably 50% of the market working from home. And are they protected? Are they safe? Because there's companies’ sensitive documents — not only of our own internal companies, but the ones we're working with — social security numbers, payroll figures. It's a breeding ground for cyber claims.
It's really changed not only how we underwrite it, but how we prevent and make sure that we're safe. But from the Covid standpoint, there's a couple of areas. We talked about business interruption. Unfortunately, a great deal of our insurance clients did not have pandemic type coverage. Whether it was entertainment venues, whether it was hotels, restaurants that closed because of the Covid situation, there was not a specific coverage for Covid, unless you had it in the language, some type of communicable disease.
From a workers compensation standpoint, it was clear about 30 days in that first responders, healthcare, police, fire — if you were to contract Covid, those claims were being covered from the beginning.
Workers compensation in the United States is jurisdictionally based, but for the most part, they were all being covered because they were in the frontline helping us out, so that was an easy one. But then what about people in construction or wherever, and it was a difficult transition, because if someone comes to work on a Monday and they contract Covid because they went to a grocery store over the weekend.
From a claims standpoint, it really brought the carriers, TPAs and brokers together to collaborate to decide how to manage this risk going forward. It really changed the mindset not only of underwriting a couple of years later, but pre-loss and preventative and then post loss, how do I manage these claims? From a brokerage standpoint, we are a big part of that from the beginning. That's how it's evolved and it continues to evolve, because of Covid.
Did civil unrest make an impact?
In the middle or the height of Covid, civil unrest became a major issue, especially in the larger cities. It was a combination of do these storefront owners who put their entire life savings into these businesses have enough coverage? From a coverage standpoint, from an excess and umbrella standpoint, to cover these horrific losses? They put their entire family savings into a business, and within two days, it's gone. How do you rebuild the community?
From a brokerage standpoint, it was not only finding coverages within their policies but additional coverages down the road to prevent it from happening in the future, as well as working within the community to help these businesses grow.
From a brokerage standpoint we had clients that we introduced to help them rebuild their businesses so it became a community collaborative effort, whether you're in New York City, Chicago, or Milwaukee, Wisconsin. It brought everyone together.
How have hurricanes impacted claims?
Last year was our largest year from a hurricane and tornado standpoint, it was the biggest year yet. We had damages in areas we never really thought we'd get access. New York City had flooding and subways from the water damages. Louisiana, Texas, Florida — I don’t want to say that they're used to it but it happens every year there and they prepare for it. But when you're in New York City in a subway situation or when Hurricane Harvey hit Houston, nobody thought we'd have flooding in Houston when it's 103 degrees, just about every day. And weather really doesn't go that direction.
Over the last three years our catastrophes team has worked to evolve to work with the carriers not only in our pre loss standpoint, when a loss occurs, does your client know what to do? What partners to bring in for restoration, from a mitigation standpoint, clean up, forensic accountants and so forth, then truly to manage that claim from start to finish?
If you're prepared on the front end, you can't be preparing right when the loss hits, because everyone's just trying to figure out how to take care of their families, take care of their businesses, and move forward.
If we have that plan in place on the front end, and the last couple of years have really changed the mindset. Katrina started everything. When Katrina hit, I was like we need to change our mindset. But the last three years, there are even more losses in areas we never thought possible. It's like maybe we should think about it for New York City or New Jersey, or Milwaukee. That's the big change — let's hit markets where we normally don't talk about it, just in case. So that's how it's changed. And this year, they're talking about more than 10% more [hurricanes] than last year. So I have to say get ready because the storms are coming for sure. So be prepared.
Can we talk about entertainment? What do you see in there in terms of claims?
I'm a big entertainment guy. I love concerts. I love sporting events. Unfortunately, the pandemic shut that completely down for a long time. We saw the major sports like the NBA and Major League Baseball, they would do events, with either no crowds or minimal crowds. And what had happened is you have entertainers like country singers, rock concerts, where maybe they didn't have communicable disease coverage, or Covid in the language.
So from an event cancellation standpoint, some of them didn't get covered, they canceled the entire season for their concerts. Some people had 20, 25 concerts and they couldn't do it.
So now moving forward, it's what can we do in the market, whether it's in London or local, to cover these events moving forward. And then from a claim standpoint, the challenge was, let's escalate it to a senior level with carriers and TPAs. And really see, are there any loopholes to try and get these claims covered from 2020 or 2021? Or what can we do to mitigate it going forward? So it became a real challenge.
The entertainment business now has evolved in that you may see an uptick in ticket price for your favorite country concert or a sporting event. Some of it has to do with the exposures based on the insurance going forward. It's just a natural evolution, just like we talked about the natural disasters from tornadoes and hurricanes, your auto insurance is going up because there are so many auto claims from water damage. It's a similar effect, similar analogy, if you will, so maybe a little uptick, but it's so good to see the entertainers in sport venues back to normal. It's awesome.