By Nancy Doucette nancyd@in.net
"...And I'll huff, and I'll puff, and I'll blow your house down!" --The Big Bad Wolf
In the story of The Three Little Pigs it didn't matter to the Big Bad Wolf whether the pigs' property was built of sticks, straw or brick. He put them on notice that he was going to wreak havoc on their property.
And so it goes for a huge number of insurance agencies across the country. The Big Bad Wolf may take the shape of an earthquake, a flood, hurricane or tornado; and according to Alex Soto of the Independent Insurance Agents of America's Catastrophe Working Group, as many as 80% of the IIAA's member agencies are susceptible to some kind of natural disaster. But when you think about it, every agency is vulnerable when you factor in man-made catastrophes such as brownouts, malfunctioning sprinkler heads, or disk crashes.
The good news is that technology has become an integral part of the agency workflow during the past 10 years, and it can be leveraged to bring the operation back up to speed quickly following a disaster. However, that can also be the bad news for agencies that do not develop well-thought-out disaster recovery plans beforehand.
By "walking through" the technology your agency uses to service your customers, you can begin to identify some critical areas that you need to address once you begin to develop your disaster recovery plan.
After Hurricane Hugo devastated Charleston, South Carolina, in 1989, the George Chadwick Agency, located in Wilmington, North Carolina, decided to buy a generator. Aileen Batchelor is the operations manager for the agency and had been recommending the purchase to the agency owner for several years. "For several hours it appeared that Hugo would hit Wilmington," Batchelor recalls. That possibility convinced the agency's owner that buying a generator would be money well spent.
Fortunately Batchelor didn't stop worrying once the agency purchased the generator. She began developing a disaster recovery plan and now instructs other agents on how to create their own plans at regional Applied Systems user group meetings.
Some of the observations she shares with her audience are based on firsthand experience. Between July 12, 1996, and September 5, 1996, Wilmington was hit by two hurricanes.
"You need to have contingency plans in case you lose your primary workspace, communication or computer processing capability," she explains.
Part of the George Chadwick Agency's disaster plan includes having mirrored hard drives and a backup file server which is also used as a workstation. The two hard drives have exactly the same information on them; so when a hurricane is imminent, the backup file server, external drive and a spare laser printer are taken off site. If the primary location were to be severely damaged, operations could continue at the off-site location. Batchelor adds that a hard drive failure or disk crash is less of a concern with dual hard drives. Similarly, it's reassuring to have a backup file server in the event the primary server fails for some reason.
However, not every agency is going to invest in a backup file server, she continues. In those instances, the agency needs to have detailed system documentation. "You're going to have to recreate that file server in order to use your backup. One of the most basic rules: Take your backup software--and the instructions on how to use it--off site. And be sure to have your system software stored off site as well. You have to get your system software back up first before you can even access your backup software to do a restore."
You also need to know about the system itself. In the event of a disk crash, for instance, if you don't know what you have, you don't know whom to call. Batchelor cautions that even if you're working with an automation vendor, you shouldn't assume they have all the "specs" of your system at their disposal. "The more you know, the better prepared you're going to be," she notes. "Someone in the agency needs to oversee the system."
Another important element of the agency's disaster recovery plan is transactional filing. The George Chadwick Agency has been t-filing for four years. "Our database is a lot more portable and easily protected when it is electronic," Batchelor says. Paper files are destroyed by hurricanes, fires or floods. "Recreating the electronic files is a lot easier than recreating paper files."
Use of an uninterrupted power supply (UPS) system assures a consistent current of electricity from the generator. After the last hurricane, the agency had air conditioning, lights and every terminal was up. Without the generator, Batchelor says, the agency would have been without power for four days. (Check with your automation vendor to see if it has a catastrophe plan for assisting customers. Ask specifically if using a generator will have an impact on your maintenance agreement. Also check with your state agent association. Many have catastrophe guides or disaster recovery plans available. And of course the Internet has a wealth of information on disaster management and recovery.)
Realistically, buying a generator isn't worthwhile for every agency. But if you are without power for an extended period, due to an ice storm, for instance, how are you going to service your customers? No heat. No electricity. No computer. No phones. Batchelor acknowledges that agencies don't have to do everything, but they should think their processes through and plan accordingly.
In St. Louis, Missouri, Chuck Hembree's agency would be affected should a major earthquake occur along the New Madrid fault. With the potential for earthquake a reality, part of his agency's disaster plan includes operating from an off-site location. The agency subscribes to the area phone service's disaster routing plan. In the event of a disaster, the agency puts in a code number and the phone company switches the phone lines over to the off-site office. Calls are then routed there.
Fortunately, the agency has never had to deploy its plan. Regular reviews keep the plan current, taking into consideration changes in equipment, procedures and personnel. Practice drills familiarize the staff with the particulars of the plan.
"A simple plan is better than no plan," Hembree stresses. "Having a plan gives you something to work off during a crisis situation. You can do the thinking ahead of time, when you have the opportunity to consider the possibilities." That said, though, he points out that having a plan doesn't eliminate the stress that the wake of a disaster will create.
Wick Powell, regional property and catastrophe supervisor for the Southern Region for GAB Robins, a national independent adjusting firm, says agents can better serve their clients following a disaster by taking a simple step at renewal time. He suggests printing out a property loss notice for each client as the property policy renews. The partially completed form would include all the pertinent information--insured information, policy number, limits, deductible, form and endorsement numbers. Only the date of loss and loss description would be missing. That would be filled in should a loss occur. In a worst-case situation where there is no electricity, agency personnel--who might be completing the forms in longhand by candle light--will have to fill in a minimum of information if forms have been pre-filled as Powell suggests. That means that the forms will be more legible for the adjustors, which means fewer delays.
But even if circumstances weren't that dire, having partially completed loss notices available would speed the process of getting the loss notice to the insurance company or adjustor.
For agencies with thousands of customers, some with a property policy, a flood policy, and a separate windstorm policy, printing out loss notices for every customer is not practical. Technology can help, though, when a hurricane is heading your way. By pulling accounts according to zip code, those that are most vulnerable can be identified. Windstorm and flood loss notices can be pre-filled for those clients.
Hello?
If communication with your customers is important during normal circumstances, just think how important it is following a disaster. Aileen Batchelor recommends that agencies contact their local phone and power companies to request that the agency be placed on a priority list. More and more, she says, utilities are recognizing the critical role that insurance agencies play following a disaster.
In many instances, though, the phone lines aren't damaged. It's the absence of electricity that causes the interruption of phone service. Most telephone systems used by agencies today are electronic phones, which won't work without electricity. But don't get out the soup cans and string just yet. The Florida Association of Insurance Agents (FAIA) has been a long-time leader in the development and enhancement of its Agency Catastrophe Guide. The Guide recommends consulting your local telephone vendor regarding the availability of "old-fashioned" rotary manual telephones. Separate lines would have to be run to connect the phones but those prewired lines could be stored in the ceiling and dropped down when needed.
The Guide also recommends that agencies planning on using cellular phones during emergency operations have enough batteries and battery chargers. Announce these new phone numbers in the newspaper and on the radio. You should also check with your local cellular service provider to see if it has a priority access program for catastrophe operations. Under this program only customers with a priority access number will be able to use the cellular phone airwaves after a catastrophe.
As Alex Soto pointed out earlier, a significant number of independent agencies are susceptible to disasters. What's worse, when a disaster occurs, its impact isn't limited to the event itself. Soto explains that two "disasters" actually occur: the event itself, then the avalanche of claims. And in some markets, there's a third disaster: market fallout, where markets either disappear altogether or insurers increase deductibles and/or decrease coverage. This article has concentrated on only one aspect of what a disaster plan should consider. And while technology is important to getting the agency back on its feet following a disaster, there are many other contingencies to plan for. *
Doug Henderson, a certified disaster recovery planner, was in South Florida when Hurricane Andrew came ashore in 1992. In the aftermath, he saw how unprepared businesses were. He founded Disaster Management, Inc., on the premise that creating a business continuation plan did not have to be a costly undertaking.His Business Continuation Plan is a turnkey package which includes a set of 10 field inspection checklists. There is a three-page questionnaire about each major business department. The information obtained from the fill-in-the-blank questionnaire is used to complete the plan. This approach is suitable for most of the smaller firms in the service industry, he says.
The plan addresses a variety of threats--natural and man-made.
Henderson also offers consulting assistance. Agents may work with him on behalf of their clients or he can work with the client directly.
Additional information is available from Disaster Management, Inc. in Plantation, Florida, by calling (954) 452-1091 or at their Web site: http://www.disastermgt.com.
©COPYRIGHT: The Rough Notes Magazine, 1997