Creative solutions to tough problems

It seems straightforward enough—to adjust a claim, start by getting a claims adjuster to a loss site. Then, pay the claim.

But in the aftermath of huge catastrophes, such as Hurricane Katrina in 2005, the claims handling process is anything but simple. Katrina—the worst natural disaster in recent U.S. history—tested adjusters and home-office claims staffs in a way they'd seldom been tested before: Adjusters had to be sheltered and fed where shelter and food were scarce, infrastructure from power grids to the U.S. mail was down and policyholders needed payment as quickly as possible.

"Katrina was a different kind of catastrophe," said Gerry Alonso, senior vp-claims, for Johnston, R.I-based Factory Mutual Insurance Co., which does business as FM Global. Nevertheless, the insurer, which stationed many of its staff in Baton Rouge, La., had people on the ground within 2-1/2 hours of the hurricane and equipped them with badges and permits to allow them access to restricted areas.

Once at the sites, "we were the eyes and ears of our clients," Mr. Alonso said. Clients' employees had been evacuated or "were back home dealing with their housing tragedies."

"If there was any difficulty, it was where to put our adjusters up as far as where they slept at night," he said. Evacuees and Federal Emergency Management Agency personnel competed for available hotel rooms. As a result, FM Global had "people sleeping on air mattresses in banquet halls and had people sleeping in RVs."

Gary Brown, senior vp and director-branch operations for independent adjuster McLarens Young International in Glendale, Calif., said the scope of the destruction meant adjusters had to stay far from their worksites. People drove from Mobile, Ala., into hurricane-devastated Mississippi every day, "a decent-sized drive before you could even start work," he said.

"One of the biggest challenges for us in this storm was the shortage of rental cars," Mr. Brown said. So McLarens Young arranged "to pick a bunch of cars up in Georgia and return them in the affected area."

After large catastrophes, however, one of the biggest problems is that "everyone needs help at the same time," said Nick Ciabattoni, vp-property claims operations for Hartford Financial Services Group in Hartford, Conn. "All the people you go to get that help from can be victims themselves," such as board-up companies. "Even if they are operational, you can guarantee that their phone's ringing off the hook."

Each customer has its own needs—electricity, phone service and temporary repairs, Mr. Ciabattoni said. "How quickly can we get their business up and running" is the main question. "Once we understand their needs, we go about making it happen."

For workers compensation beneficiaries dependent on receiving their benefits checks by mail, the temporary shutdown of post offices in parts of the post-Katrina Gulf Coast was a major issue, said Michael Jaudon, client banking director at Sedgwick Claims Management Services Inc. in Memphis, Tenn. "We knew these injured workers needed their money more than ever," but many of the beneficiaries had been moved elsewhere, he said.

Sedgwick discovered that mail was being held in bulk postal facilities in Texas, so it sent a communication to all its offices instructing them to contact headquarters once an injured worker contacted the local office and provided a temporary address. "We took those calls here in Memphis within the client banking group," Mr. Jaudon said.

In some cases, Sedgwick stopped payment on stalled checks and overnighted new ones to the injured workers. In other cases, money was wired to claimants' banks. "We wanted to do everything that was reasonably possible to make a bad situation a little better," Mr. Jaudon said.

Call from dying cell phone

Dave Crowe, vp-claims for Lexington Insurance Co., a Boston-based unit of American International Group Inc., said one particular call from a personal lines customer in Mississippi led to a creative way of getting funds to clients. The policyholder called from "his dying cell phone, out of gas, out of money with his wife and two kids crying" wondering what to do. ATMs had no electricity and the policyholder had been driven from his home.

Mr. Crowe explained the situation to Lexington Chief Executive Officer Kevin Kelley and President Shaun Kelly, who immediately asked, "What about Western Union?"

Lexington transferred $1 million to Western Union on the first day of the program. As policyholders called, they were told to go to the closest open Western Union office to get claims payments.

Paying claims of commercial clients was an easier transaction. During the first week after Katrina, Lexington wired about $40 million to commercial policyholders, sent more than $160 million in wire transfers and checks in the first 30 days, and more than $300 million in the first 60 days, said Mr. Crowe.

Sometimes, adjusters have to take to the air. For example, Mr. Alonso noted that FM Global insured a facility in a flood-prone area. In an incident that did not involve Katrina, the building flooded. Equipment began oxidizing, but there was no way to remove it by truck. So FM Global cut a hole in the roof, rented a helicopter and airlifted the equipment out, he said

Helicopters played a role in documenting post-Katrina damage when flooding barred access by car, said McLarens Young's Mr. Brown. To deal with flooded tank farms, the adjusting company had two helicopters "do flyovers to get as much photographic evidence as we could to try to document the losses."

But to effectively ensure that claims are paid speedily, policyholders should provide their insurers or adjusters with a full list of values in terms of both property and business income in a catastrophe-prone area, said Mr. Brown.

If a catastrophe wipes out a store or other facility, the insurer will already have a reasonable idea of the types and values of lost inventory and the levels of income that facilities generate, he said.

"If they have that information, it's much easier for an independent adjuster to get the insurance company to make a quick and substantial payment," he said.