Now that Hurricanes Irma and Harvey are in the history books alongside Katrina, Andrew and other infamous U.S. storms, industry observers expect they’ll influence to some degree benefits selection during the upcoming enrollment season.
They could “spur some additional due diligence on the part of customers to figure out whether or not they’re getting a decent deal” on home and auto coverage lines offered in the workplace, says Michael Schneider, president of Cravens/Warren & Company in Houston, Texas.
Voluntary policies such as life, accident and critical illness are usually the first type of plans employees ask about during fourth quarter enrollment, explains Charlotte Santa Cruz, CEO of Santa Cruz Insurance Group, LLC, who specializes in the voluntary benefits segment of the market through partnerships with P&C insurers and health brokers. That’s because “it coincides with hurricane season and claims activity is typically high,” she adds.
As a survivor of Hurricane Katrina with corporate locations in both Louisiana and Mississippi where that killer storm did most of the damage, Santa Cruz recalls the deluge of claims and interest in increasing policy limits that came from both states post-Katrina.
While insurers are still tallying up the damage from a lively hurricane season, industry insiders cite a reluctance to share insight into sensitive claims-management strategies after emotionally charged disasters. EBA sought comment from several leading national auto and home insurance carriers, but in the end received a prepared statement from just one.
“Storms like Harvey and Irma are reminders for everyone to review their home and auto coverage at least annually so that they are best prepared for any storm,” according to State Farm.
“Right now our teams are surveying the damage and determining the resources needed to respond,” the company added, noting that State Farm and its affiliates represent the nation’s largest provider of auto and home insurance and expansive catastrophe response team.
The wrath of Hurricane Harvey appears to be more significant than Irma was over Florida, says Wayne S. Sakamoto, president of Health Insurance Interactive in Naples, Fla., who chose to ride out that storm rather than evacuate. “I didn’t really see as much flood damage as I thought people were going to report,” he says, recalling the devastation of Hurricane Andrew in 1992.
Any time there’s a big storm, it forces each insurer to re-evaluate its underwriting philosophy and posture, according to Schneider. “It could easily cause some insurers to react much more dramatically than others, depending on whether they had their reinsurance structured properly or too much exposure in certain areas they didn’t think they had much likelihood of losses.”
While Harvey did some serious damage further down the coast in small towns where it came ashore, he believes the number of homeowners claims relative to auto will be relatively small. Why so? Auto policies cover flood, regardless of how cars end up in a rain-soaked streets or parking lots, whereas not all homeowners carry flood insurance, he explains.
The price of auto and home insurance is determined by an “averaging mechanism” that ties premiums the claims incurred in a specific actuarial timeframe, Schneider says. Every carrier uses the same basic process to determine their rating formulas “and there’s sometimes a little bit of a discount because it’s done on a group basis,” he adds.
There are nuances to consider when explaining how these P&C policies are marketed, sold, distributed and designed in the employee benefits space. Jeanne M. Salvatore, a senior spokeswoman for the Insurance Information Institute, says auto and home claims are handled on a triage basis whereby policyholders with the worse damage receive the quickest attention.
Policies made available on a group basis through an employer, professional associations, alumnae groups or similar avenue are individually underwritten, according to Salvatore. However, she says the purchasing power of these groups may translate into discounts.
Santa Cruz says although most large-house brokers and insurance companies sell P&C products as well as employee benefits and voluntary plans, these two divisions are typically kept separate when it comes to product sales and service.
“Each line of coverage is a specific market that requires experts representing both sides.” Santa Cruz explains. “While the P&C portion is typically the driver of most agency revenue, the benefits division serves to round out the total package giving a company and their employees one reliable resource for all of their insurance needs.”
Producers walk a fine line when attempting to educate the marketplace following a natural disaster. “Not that agents are using catastrophic events to sell policies,” Santa Cruz observes, “but it’s important to share the value of these benefits and how they paid out to give employees a better appreciation of the coverage.”