The Insurance Professional’s Role in Emergency Preparedness

October 2016    |    By Ingrid Sapona

Abstract: The increasing number and severity of storms, tinder-dry forests that are a lightning strike away from becoming a raging fire, not to mention the ever-present threat of the big earthquake seismologists anticipate for the Pacific coast, are all risks that the insurance industry and insurance professionals are poised to respond to. But, the role of the insurance professional in engaging customers in emergency preparedness is also very important to the industry. After all, working with customers to persuade them to take steps to prepare for emergencies can help prevent claims, or reduce the amount of a claim.

This Trends Paper will focus on ways insurance professionals can help customers be better prepared for emergencies.

Why Prepare for Emergencies?

The first question a customer might ask when an insurance professional raises the subject of emergency preparedness is: “Why should I bother?” The customer may feel that either it’s too difficult to ‘prepare’ for the unknown, like an emergency; or it’s unlikely to happen to them.

The answer, of course, is that planning and preparation for emergencies can help to:

- minimize potential damage,
- lessen the stress of the situation before and during the emergency, and
- make recovery easier, including reducing the chance and length of disruption.

Interestingly, though the reason to engage in emergency preparedness seems straightforward to people in the insurance industry, the idea can be abstract to people who have not been through a disaster. So, emphasizing the importance and benefits of emergency preparedness is an important step in getting customers to take-up the cause.

Of course, images of thousands of people fleeing the wildfires in Fort McMurray on short notice brought home to many Canadians just how quickly disaster can strike, disrupting lives and livelihoods and causing billions of dollars in damage.

Here’s just one example of how fast people had to act during the fire emergency in Fort McMurray: On May 1, 2016, residents of Gregoire, a neighborhood south-east of Wood Buffalo, received a warning at 7 p.m. to be prepared to evacuate on short notice and at 10:30 p.m. they were under a mandatory evacuation order. Imagine trying to pull together a few of your most valued possessions – much less important family documents – in such a short time.

Another factor that can further complicate such situations is the shear stress of the emergency. As Robin Cox, head of the Disaster and Emergency Management program at Royal Roads University in Victoria noted, “The high level of stress in an emergency situation can also impair an individual’s decision-making process.”

With forethought prior to an emergency, it would seem obvious that having things like medicine, copies of birth and marriage certificates, passports, licenses, and a few days’ worth of food and water already together in an emergency kit, would free up time to gather other belongings and mementos and still get away quickly.

Beyond the scenes of fleeing residents, the Fort McMurray wildfires took an immense toll on local businesses too. How does a business owner determine what necessities – ownership or rental agreements, insurance policy, inventory lists, bank account information, etc. – will be needed after a short or long-term shut down due to an emergency? And how quickly can this type of information be gathered or how readily available will it be when needed? The Insurance Bureau of Canada (IBC) estimates that $1.25 billion (of the estimated $3.58 billion in insurable damage) are related to commercial claims.

Misconceptions about Emergencies

Some people think that emergency preparedness is something the government looks after. And while all levels of governments do have some capacity for emergency preparedness and recovery after an emergency, it is more likely that government coverage will support infrastructure recovery and emergency aid, but not the recovery of individual residences and businesses.

Take earthquake coverage for example; there are a lot of people who don’t feel it’s necessary to get earthquake coverage, even if they live in an earthquake prone area, because they believe that the government will step in when a quake happens. Historically, governments do not step in when coverage is readily available in the market.

Fortunately, we live in a society where people will pull together to donate money, food, supplies, and time to ensure displaced people have necessities like food, clothes and shelter – there were many great examples related to Fort McMurray. To date, $178 million has already been spent to directly assist those impacted by the fires. However, there are limitations to when and where funding is available in the event of an emergency. 

For example, some Fort McMurray residents who fled during evacuation to other provinces experienced confusion and delay in government support, which is why the safety nets of government and humanitarian programs like the Red Cross cannot and should not be the only protection for individuals and businesses. 

The private sector must focus on emergency preparedness as well, so that individuals, business owners and the communities they live and work in are more resilient, making the rebound smoother and faster.

How can you help your customers prepare?

The types of steps a customer should take to prepare for disaster depends on the potential dangers and risks they may be facing. The most likely causes of natural disasters in Canada are flood, wildfire, wind, winter storm, and earthquake.

Helping customers assess their level of risk with respect to each of these disasters is key. 

The Aviva Plan & Protect app, which was created by Aviva and the Institute for Catastrophic Loss Reduction (ICLR), is a good example of a tool that can help customers manage the risks they face based on their location.

The app, which is free and available for anyone to download, produces a customized risk profile based on simple questions the user is asked to answer. It also offers useful information from sources like the ICLR, IBC, and the Government of Canada about practical steps the user can take to help minimize damage from potential risk in their location. For example, users in areas at risk for high winds have access to information about tornadoes and severe wind protection plans; a tool that helps measure the risk of severe wind damage; and suggestions for reinforcing roofs, doors, windows, and other parts of the home and property.

Another digital tool to recommend to customers is the use of social media during an emergency. Some customers may not realize what a lifeline it can be; the Calgary Chamber of Commerce noted in the aftermath of the Calgary Floods that the use of social media as a communications channel during a natural disaster can’t be understated.

Helping customers determine the type and scope of insurance coverage they need is critical. 

The 2013 flooding in Toronto and the GTA drove home that damage due to overland water is not covered by a standard homeowner’s policy. Therefore, as an example, an explanation of the need for – and benefits of – overland water coverage should be part of the conversation with customers who live in areas prone to such flooding.

Earthquake coverage is another special coverage that some customers should consider since earthquakes are not typically covered by most residential policies. Though most people know that the risk of earthquake is high in BC, it certainly isn’t the only place in Canada where there’s a very real risk. For example, earthquakes related to fracking and wastewater injection are becoming more common – and stronger in Alberta, which means the pool of customers extends beyond those in the Pacific Ring-of-Fire region.

Helping customers prepare for emergencies is a value-added service and smart business.

For individuals and families, the best advice for emergency preparedness is to prepare a 72-hour grab-and-go kit. The idea behind the kit is that in the event of an emergency, each person should have enough supplies – food, water, medication, etc. – to cover their survival needs for at least three days. The Canadian Red Cross does a good job of promoting such kits and they even sell these ready-made kits.

When it comes to commercial clients, the following steps will help secure the customer’s business and help to mitigate physical damage through the implementation of a business continuity plan.

Business Continuity Planning

For business owners who might not be familiar with business continuity planning –or what it entails – a useful starting point is the ISO 22301 definition of business continuity management:

“A holistic management process that identifies potential threats to an organization and the impacts to business operations those threats, if realized, might cause, and which provides a framework for building organizational resilience with the capability of an effective response that safeguards the interests of its key stakeholders, reputation, brand and value-creating activities.”

The Disaster Recovery Institute International (DRII) identifies the following reasons for why businesses should have a business-wide continuity management program (BCP):

- To prevent negligence claims – a failure to plan and failure to prepare can be grounds for negligence under the common law.
- Customer demand – some customers require vendors to demonstrate that they have a business continuity management program in place.
- There is a competitive advantage to having a resilient supply chain.
- Business continuity planning that includes business impact analysis can point out the need for specialize insurance, such as business interruption insurance and supply chain insurance.
- BCP is mandated by some laws (for example BASEL III, which is a regulation applicable to banks).

Most commercial clients are probably aware of BCP and may even have undertaken some BCP measures. However, some plans may not be thorough or some clients may be wary of the cost and time it might take to put a BCP in place. Andrew Chan, CRM, ABCP, Risk Control Consultant at CNA, has found that, “Many businesses are often concerned with the time and capital that might be involved in doing BCP. What they don’t always consider, however, is the cost of inaction and being unprepared.”  

Some commercial clients feel that to protect themselves in the event of a disaster all they need is sufficient insurance. If a commercial client says that’s their approach, Chan reminds them that business insurance is great for protection against the financial impact of disaster, but some of the key impacts from a disaster are not financial. “Traditional insurance won’t help with a ruined company reputation and loss of market share as a result of damaged relations with customers from not being able to continue to provide service you have agreed to provide, and so on. All the things that impact the business long term are at risk without proper planning. Comprehensive business continuity planning can significantly help mitigate some of the non-financial impacts,” explains Chan.

When discussing what goes into a comprehensive plan, Chan points out that there are three main elements to a disaster recovery plan for businesses:

- IT Disaster Recovery Plan – how the business’s IT will keep running or can be brought back up
- Business Recovery Plan – how the business will go about resuming operations
- Crisis Management Plan – how the business will protect and communicate with company employees and facilities 

For commercial clients who have done some business continuity planning, it may be necessary to explore the extent of their plans to determine whether there are gaps or areas that can be improved. For example, sometimes businesses ensure that their IT recovery plans are in place – such as having cloud backup for their IT systems – which should be applauded – but without the business and crisis management plans in place, the day-to-day running of the business would still be in jeopardy in an emergency.

In terms of putting together a crisis management plan, Chan says it’s all about protecting employees’ health and safety and being able to communicate with employees and between facilities. It should include a process for how staff is contacted, identification of a secondary site where employees may be sent to work after the disaster, etc.

One of the surprising facts that came out after the 2013 flooding in Calgary were the number of organizations that had an emergency response plan in place before the flood (about 80% of those surveyed by Ipsos Reid had one) but of those, only about 20% of them had an emergency communication plan. The result was that they had to rely on ad hoc methods, like telephone tag, public blogs and the organization’s Facebook page.

For commercial clients who may feel they don’t have the in-house expertise to work on business continuity planning, or who may need help with particular parts of the plan, there are a variety of possible options. Customers who have CNA oneworld™ coverage, for example, can take advantage of complimentary BCP consultation. As part of this service, Chan and his team can do a one-on-one initial risk assessment aimed at helping the insured mitigate loss exposures related to emergencies, and a third party review of the customer’s existing BCP program, or recommend a third party professional BCP vendor that can help them put together a comprehensive plan. CNA even has seminars for customers on issues related to BCP. 

There are independent consultants who specialize in business continuity planning and getting to know some that you can recommend might be helpful. If you don’t know of any personally, consider tapping into your professional network within the insurance industry, which will likely have some highly regarded experts in this area. You may reference The Insurance Institute of Canada as well, as it often offers seminars on business interruption and business continuity. As well, another criterion that clients may specifically look for is certification by the Disaster Recovery Institute. Certified Business Continuity Planners (CBCP) have specifically studied BCP and have demonstrated knowledge, skill, and experience sufficient to earn their certification.

Practical ways to help customers before, during, and after an emergency

Here are some simple and practical tips insurance professionals can do to help customers and communities before, during, and after an emergency:

Before an Emergency  

- Take time to provide customers with information about the importance of preparing for an emergency.
- Help customers completely understand their coverage – for example, whether debris removal or “extra expense” is included in the policy and whether it might be limited, with any gaps in their coverage.
- Dispel myths and misunderstandings about their coverage – for example, people in Calgary and Toronto learned that coverage for overland water wasn’t included in all policies; it’s important that customers don’t assume that the government will pay if there’s a disaster.
- Provide customers with tips and tools that can help them prepare – for example, customers with basements might benefit from installing a water monitor (at the bottom of this paper you will find a list of useful, free tools you can recommend to your customers).
- Engage with customers on social media – during a disaster the use of social medial as a communication channel can’t be understated as a real-time tool for two way communication. Start by encouraging customers to follow your social media sites.
- Encourage commercial customers that are renting to inquire about the insurance coverage the property owner has on the premises. They should assess the adequacy of the landlord’s coverage in terms of how that coverage may impact them in the event of an emergency.
- Remind commercial clients to encourage their staff to have a 72-hour kit with survival necessities to last them for at least three days – demonstrating their concern for their employee’s health and safety in case of a disaster.
- Ask customers when the last time they reviewed their emergency preparedness plans – for example, ensure the contents of 72-hour kits are up-to-date (additions to the family, changes in medications, or expired food). For businesses, ask if their company directory is up-to-date.
- If a dangerous situation is developing, use this opportunity to communicate with customers and urge them to prepare their property and take cover. For example, if a severe storm is coming and you know they have a boat, urge them to tie it down; or if they have a house, suggest boarding up windows and checking sump pumps; or if a spring thaw is expected, urge residential customers to clear their roofs to protect from water damage. Again, engaging with them on social media in advance will set the stage for communicating during and after a disaster.
- Maintain a list of reliable vendors who can help customers prepare for an emergency.
- Encourage commercial customers to pre-screen and line-up service providers, such as a restoration provider, so that if they need help recovering, they won’t have any delays immediately following the disaster.

During an Emergency

- Facilitate sharing of vital information – for example, utilize social media to provide information or direct customers to important sources. An Edmonton web developer, for example, created a website full of information for Fort McMurray evacuees and a real-estate investment network blogged about information for Fort McMurray evacuees.

After an Emergency

- Check-in with customers to see how they are coping and how you can help.
- Be prepared to explain the exact details of the customer’s insurance coverage.
- Encourage customers to document the incident with photos of damaged areas and remind them to keep receipts for expenses they incur.
- Be prepared to recommend qualified tradespeople. After a disaster, service providers often rush in and unfortunately, not all are reputable; desperate customers could be easy targets.
- Help mediate with the insurance company on behalf of the customer.
- Put customers in touch with reputable independent claims adjuster if the customer requests a second opinion.
- Work with the insurance company to ensure contractors are paid in a timely fashion. Everyone wants restoration companies and contractors to respond quickly after an emergency, yet sometimes they end up at the back of the line when it comes to being paid by insurance companies who may be busy looking after their customers.

Conclusion

In the event of an emergency, customers are aware that the role of the insurance industry is mitigating and responding to risk. However, there is opportunity to provide customers with valuable insight and information about emergency preparedness. While it may not be visible to the public at large, there are measures that can be taken to start changing this perception, with proactive engagement with customers. Ultimately, the time and energy insurance professionals put into helping customers prepare for emergencies benefits the customer, their community, and the industry.

Addendum: Tools for Your Customers 

Below are some tools that are widely available and that would be useful for many customers:

Checklists 

- CNA offers the free brochure, Risk Control Bulleting: Emergency Planning, which provides an excellent selection of checklists to prepare for different types of emergencies- from floods to freezes, to bomb threats.
- CNA also offers a Disaster Recover Self-Assessment Checklist.

Basic business continuity planning info

The Calgary Emergency Management Agency has a wealth of information available on its website, including a terrific 42-page booklet called: “Is your business prepared? Business Continuity Template”, which is downloadable in a writable MSWord format. There is also a sample template available.

App Recommendations

There are a number of terrific apps (available for free at the AppStore and Google Play) that provide valuable information customers would find useful before, during, and after an emergency:

- Canadian Red Cross’s Be Ready app
- Canadian Red Cross’s First Aid app
- Aviva’s Plan & Protect app

Risk Map-based Tools

Since geography impacts the risk of natural disaster, there are many tools that provide information about risks based on location:

- ICLR’s Earthquake Risk Mapping Tool provides information about the likelihood of an earthquake based on the user’s postal code
- The Alberta government has a few apps that provide up-to-date information to about the location of specific natural disasters:
Alberta River: Data and Advisories App
Alberta Wildfire app