Recently in Asia, Typhoon Doksuri caused severe flooding, displacement and loss of life across China, Taiwan and the Philippines, with direct economic losses amounting to over US$2.3 billion in China’s Hebei province alone1. With extreme weather events increasing in frequency, severity and financial impact, businesses urgently need to prioritise the right preparedness actions to ensure they have an opportunity to bounce back following these losses and interruptions.
When a typhoon or flood hits, what can companies do to aid recovery and streamline claims?
Typhoon and flood risk: 2 key ingredients to building preparedness
One of the first actions companies should take is to implement a crisis management plan. This involves identifying staff who will be actively involved in the response, assigning clearly defined roles and conducting simulation exercises to fine-tune the response, so decisions such as suspending operations, shutting down physical facilities, or having employees work remotely can be made and put into practice quickly.
These actions, which require a coordinated effort between corporate headquarters and local operating sites, also highlight the importance of a continuous channel of communication. This means that businesses should diversify their communication platforms and consider the use of backups such as mobile apps to ensure uninterrupted communication with all stakeholders — including employees, customers and partners — and enable them to receive timely information to help mitigate further damage or loss.
A post-crisis review is also vital to identifying what worked well and what did not. Gathering unbiased feedback and analysing the impact of decisions and actions on employees and external stakeholders can help uncover gaps in existing emergency response and business continuity plans (BCPs). In turn, these plans should be dynamic and regularly reviewed and updated.
Business continuity planning
Business continuity planning is also key to resilience. Beyond simply having a plan in place for when a storm strikes, maintaining strong connections with key vendors and partners can help get your business back up and running after a typhoon or flood.
Quick and effective responses to mitigate the loss are also important, be it from a business interruption standpoint or rebuilding an asset. This might involve implementing temporary measures to prevent further damage, arranging for emergency repairs, or finding alternative ways to continue business operations while repairs are being carried out.
BCPs must also encompass supply chains. For instance, a typhoon could leave your business assets unscathed but wreak havoc on your suppliers’ facilities and logistic capabilities. To prevent extensive business interruption that result from extreme weather events, it is vital to map potential vulnerabilities in your supply chain and take the right remedial actions, such as identifying critical suppliers in high-risk areas and seeking alternate suppliers outside these areas.
In mapping out the components of supply chains, businesses should take every stage into account: from raw material supply to end-product delivery and logistics. Even if the business does not have a physical location in a high-risk area, businesses must understand how the impact of typhoons or flood damages in one location can cascade and impact their operations, and take action accordingly.
Learn a robust approach to mitigate climate risks and extreme weather impacts here.
Consider stress-test workshops
One way that businesses can ensure effective disaster response and claims management during a crisis is to work with their risk advisor to run stress-test workshops. These simulations provide a dry run of what to expect and how to operate when an extreme weather event occurs, providing businesses with invaluable practical experience via experiential learning to bolster their claims management effectiveness and readiness.
In essence, effective claims handling involves a combination of preparation, understanding, and swift action. These efforts can ensure a more favourable outcome when your business bears the impact of a typhoon or flood.
Managing claims effectively
As the hardening property insurance market (especially concerning Nat Cat coverage) translates to tighter policy wordings and stricter claims management from insurers, businesses must not only have an in-depth understanding of how their insurance is structured to ensure that it is adequate to cover potential losses and disruptions, but also reexamine their entire claims process. This involves understanding the scope of policy coverage, the policy’s claims conditions, how to document a loss, protect evidence, and the obligations on handling a claim.
When you analyse your insurance policies well in advance of any potential events and understand the amount of risk that you retain, you will get a clear understanding of your deductible, any policy limits or exclusions, and how they relate to your business.
A vital component of the claims process involves knowing how to document a loss and protect evidence. Record keeping, such as taking photographs, recording videos of the damage, keeping repair work receipts and a record of communication with the insurer all contribute to a seamless claims experience.
Understanding property valuations for adequate insurance coverage
Businesses must also establish an accurate understanding of the replacement costs of their physical assets in the event of major catastrophes to ensure sufficient claim payout for recovery. This is especially vital given that insurers are closely monitoring exposures in natural catastrophe (Nat Cat) exposed territories, frequently requesting updated valuations amid the inflationary environment, and restricting terms in some cases for contingent business interruption according to the Q2 2023 Asia Insurance Market Index Report.
In assessing the potential costs of asset replacement in the event of a typhoon or flood, businesses should bear in mind that the price for labour and materials can significantly inflate the cost of rebuilding. Hence, when obtaining insurance coverage, businesses must not only consider the original cost of the property, but also take into account the potential inflation in costs.
Read more about the dangers of inadequate asset valuations here.
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