We’re not sure where and we’re not sure when but we don’t need to be a fortune teller to know that we will soon experience another surge event. Whether that’s a flood, a heatwave, or another storm we know that due to the impacts of climate change these once infrequent events are now becoming more regular and it’s important for an insurer to be prepared.
Given surge events were often planned for as a ‘one in ten years’ event, insurers would often do a review after one event then put it away in a dusty cupboard never to be seen again, let alone brought out a decade later. The dynamic has moved on – surge reviews should not simply be completed after the event, they need to be regularly reviewed and updated in line with any new processes or developments in your business, any new planned scenarios and importantly shared with your people and suppliers.
It isn’t as difficult as it seems. Insurers have a huge amount of their own data available to analyse and experts such as the team at Procurato can provide you with much more so you can benchmark your current capability against that of your peers.
Here are our five top tips to preparing for the next surge event.
1. Review your historic data and current portfolio
Do you understand what and where your surge risks are? Are they still in alignment with your risk appetite and if so, do you need to review your pricing and supplier strategies?
2. Re-evaluate how well you handled your last surge event.
What lessons did you learn? Dust off the review (if you did one) and make sure nothing needs updating? Are there new team members who need to be aware of this? Make sure your teams are aware of the process if an unexpected event happens again. If you didn’t do a review, why not ask the questions now?
Did you communicate well with your teams and suppliers? Was the right leadership team in place? Were you able to provide real-time updates to customers? Did you have the resource (people and phone lines) to manage the increased claims? Was your technology fit for purpose? This includes both the website for customers and your own internal systems. Could you have responded sooner? Did your suppliers react in the way you needed them to?
3. Create an internal surge team
Consider creating a specific surge teams who operate as a crisis management team. Ensure everyone knows their roles in the process and run test simulation events to ensure the process works. Identify any gaps and ensure they are filled as much as possible in preparation.
4. Review your supplier contracts
It’s vital that you understand the capability of your supply chain. When was the last time you reviewed your suppliers’ performance? How are you evaluating that you are getting what you are paying for? Do you understand the resilience of your suppliers so if there is a surge you know they can handle it? Is it time for the contract to be updated?
5. Operational Resilience
Can you financially weather the storm? FCA guidance came into effect on 31 March 2022 which means certain insurers must have identified their important business services, identified any vulnerabilities in their operational resilience and set impact tolerances for the maximum tolerable disruption. With any gaps needing to be filled within the next three years are you ready for these regulatory changes?
Related reading
Step 4 raises a question this article does not have space to answer: what specifically should a supplier contract review be looking for right now, and against what backdrop? The home repair cost environment has shifted materially in the past two years, with construction labour costs up by as much as 25% in some regions, basket inflation tracking at over 8%, and builder pricing windows compressing to as little as 24 hours. Our analysis of home repair inflation and its real cost to property insurers sets out the full picture; the labour, materials and supply chain pressures that determine whether your existing contracts are still fit for purpose, and what the best-performing insurers are doing to stay ahead of them.
How Procurato can help
The five steps this article outlines are sound in principle, but the practical challenge for most insurers is having the capacity and external perspective to execute them rigorously rather than reactively. Our Insurance Claims Supply Chain Development service is designed to support exactly this kind of structured review: assessing your current supplier base for capability and resilience, identifying where contracts need strengthening, and building the frameworks that keep your supply chain ready between surge events rather than only after them. If you are not confident your supplier arrangements would hold under pressure, we are happy to work through what a review would look like.
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