When uncommon storms make a surprise visit

From preparedness to recovery, 2011's storms were a test for New England agents

By Susan R.A. Honeyman

It's like a tax on good fortune. No one wishes for storms to frequently ravage his or her piece of the world, but when storms do hit areas that usually escape them, people often pay a price for their complacency and inexperience.

"In Florida and the Carolinas, when a hurricane is on the way, people move to get out of its way," says Steve Pifer, corporate claims catastrophe manager at State Auto in Columbus, Ohio, a super regional carrier. "They know you can't replace human life.

"Wherever it's been a long time since the last hurricane, though, people become complacent," Pifer says, drawing on 34 years of claims and catastrophe-claims experience.

New England, including Connecticut, the "Land of Steady Habits," is one of those usually fortunate places that storms hit gently or miss altogether. Not this past year, though.

In August, Irene, a hurricane downgraded to a tropical storm as it hit land, nevertheless pounded the Connecticut shoreline, causing severe wind damage, flooding and property damage. Shore towns saw seawalls breached, properties flooded, and docks and even homes swept away. And massive power outages affected more than 650,000 customers of United Illuminating and Connecticut Light & Power Co. (CL&P), the state's two major utilities. It had been more than 25 years since Tropical Storm Gloria had reaped heavy damage and caused large power outages there.

ISO's Property Claim Services estimated covered losses from Irene at $4.3 billion nationwide from about 855,000 claims.

Two months later, a severe Halloween winter storm swept up the East Coast from West Virginia to Maine, carrying not candy but ice and severe snow. The heavy, unseasonable snowstorm may have left millions without power. In tiny Connecticut, the first measurable October snowfall since 1979 spawned frustration, then anger, as more than 700,000 customers found themselves without heat or light.

By all accounts, Connecticut's utilities were ill-prepared for the storms and failed on both the service and communications ends of disaster preparedness. They had few crews in place when the storms hit and repeatedly missed deadlines to restore power. Eventually, information officially stopped flowing altogether and crewmembers in New Haven reportedly were instructed to drive away when approached rather than speak with angry customers. Homes in some of state's toniest suburbs were without power,information, or repair-crew sightings for more than a week, while customers in neighboring states seemed to get service restored much faster. Finally, Jeffrey Butler was forced to resign as CL&P president and chief operating officer, and a governor-appointed Two Storm Panel recommended higher performance standards for the state's utilities.

Storm handling was decidedly better on the insurance front, where agents and carriers used many communications methods to provide the service levels they promise but seldom need to deliver to so many so quickly.

"Because we don't usually have these storms, we're not well-educated about how to handle them," says Chris Paradiso, owner of Paradiso Insurance in Stafford, Connecticut, on the state's northern border. Nevertheless his agency's 13-member staff fielded 374 claims from the two storms.

Paradiso is particularly sensitive to how the claim experience feels to his clients and found the agency's job more difficult because of the discrepancies in the way different carriers responded to similar claims.

During the snowstorm, for example, some carriers paid the cost of removing heavy snow from roofs to avoid leakage and even roof collapse, while others refused to pay. Some policies even contain an exclusion for damage to shingles or tar during snow shoveling.

The agency insured two businesses one-quarter mile apart that were both closed for more than a week before power could be restored. One had a business-interruption claim paid quickly because the outage was caused by a damaged overhead transmission line that ran in front of the business; the other lost power because of a substation problem and was still waiting for the business-interruption claim payment three months after filing it, says Fred Nassiff, claim specialist at Paradiso Insurance.

These experiences underscore the need for agents to carefully review policies with clients, but they also offer a teaching moment when clients may be receptive to improving their protection.

Prior to these storms, says Richard Epstein of R.H. Brenner Insurance Co. in New Haven, Connecticut, just coastal property owners tended to have flood insurance, but more people away from the coast now are purchasing flood coverage in the New Haven area. He sees no increase in other precautions, like hurricane shutters, though.

Meanwhile, agents at Paradiso Insurance are advising clients to use higher deductibles because the agency received notice that one of its standard-market carriers would no longer accept risks with two claims over a three-year period. Most policies have at least a $1,000 deductible, but many clients are following their advice and are increasing to a $2,500 or even a $5,000 deductible since the storms proved one can easily have two claims in a short time, says Paradiso. Storm "survivors" have found other business and personal take-aways, too:

• Install a generator so you don'tlose power.

• Keep an old-fashioned plug-in phone because modern phones need electric power. A Smartphone uses Internet or phone lines to communicate.

• And, of course, be able to securely access important files from remote locations.

• When e-mail is slow or down and material must get through, try texting, says Pifer.

• Fill auto gas tanks before storms since electric-powered gas pumps are useless absent power.

• Check out some of the new storm-technology innovations like battery devices that charge cell phones, or hand-cranked radios.

Going forward, carriers are reflecting the storms' impact by raising wind deductibles in coastal areas. Epstein has seen policies that had no wind deductible or 1% or 2% wind now being renewed with a 5% deductible. Some carriers are completely backing off waterfront properties or those within a couple of miles from shore. He also sees premiums rising significantly as "a good portion" of insurers use storms as an opportunity to raise previously stagnant rates to make property lines more profitable.

Reflecting on 2011, Paul Murphy of Paul T. Murphy Insurance Agency in Malden, Massachusetts, believes insurance carriers and agents got it right. "In the past 10 years, I think we've moved 100 years forward," he says.

This time, carriers were more proactive prior to the hurricane, with most setting up hot lines, adding extra staff, setting up mobile sites to deal with questions and claims, says Murphy. They realized many customers were going to be facing the second or even third event (including the heavy snow storms in early 2011) and they acted sensitively, he says. "The cream really does rise to the top."