NEW ORLEANS – If there’s one area where the insurance industry fell apart in 2005, it was on adjusting claims.

Faced with Hurricane Katrina and a storm season that was so active the National Hurricane Center ran out of names, the insurance industry was overwhelmed by the task of administering claims.

Adjusters couldn’t get into New Orleans, couldn’t find homeowners and couldn’t find places to stay. With so many adjusters being mobilized for Katrina, there weren’t enough to go around for Rita and Wilma, respectively the seventh and third most costly hurricanes ever to hit the United States.

Should a hurricane strike the United States this year, the insurance industry says its response will be different.

“On the claims side, I think companies more than ever are making sure that they have adequate adjusters, independent adjusters before the storm season hits,” said Joseph Annotti, senior vice president of public affairs for the Property Casualty Insurers Association of America. “They’re looking for better ways for how to mobilize them or house them, and really trying to marshal forces with FEMA so that one adjuster can go out and adjust flood and wind claims.”

Improving the claims adjusting process tops the insurance industry’s list of preparations for the 2006 storm season.

Maintaining the solid financial footing that helped the industry achieve record profits the past two years and using technology to speed the claims process are also high priorities, according to the industry.

To deal with claims, insurance companies keep only a limited number of adjusters on the payroll, then contract with independent firms to meet the needs of a particular disaster. Normally that system works pretty well because it allows companies to save money while scaling up appropriately for a disaster, but it was overwhelmed in the 2005 hurricane season.

Terry Lisotta, secretary of Louisiana Citizens Property Insurance Corp., the state-sponsored insurer of last resort, said a company may contract for 900 independent adjusters only to find that those same 900 were promised several times over, so it may end up with only 50.

Citizens was wiser this year in negotiating contracts, Lisotta said, asking, “How many exclusive adjusters are you going to give me?”

Citizens, Louisiana’s third-largest insurance company, was sued last year over poor claims administration. Lisotta said Citizens has installed a new phone system that will switch callers over to a commercial call center if they’re on hold for more than 15 seconds, increased computer bandwith, and enabled customers to file claims from a wireless hand-held device such as a Blackberry. This year, Citizens will follow in the footsteps of State Farm and Allstate and be able to deploy mobile claims centers that can cut checks on site.

“We learned a lot of lessons,” Lisotta said.

Allstate, Louisiana’s second-largest residential insurer, said last year’s huge demand for adjusters led to the hiring of inexperienced people, which resulted in homeowners getting widely different estimates for similar damage.

Should hurricanes threaten this year, Allstate plans to call up an army of retired claims adjusters to help. “Those are well-trained people,” said Robert Hair, state manager for Allstate.

Allstate also learned last year when toll-free numbers to report claims didn’t work in south Louisiana that insurance agents are an important resource for helping consumers to understand their policies and to file claims.

Independent insurance agents have always viewed themselves as the public face of the insurance industry, and they say they’re ready to step in.

“If you’re there for the sale, you need to be there for the claim. Insurance is nothing more than a piece of paper until you need to use it,” said Robert Page, of Charles Page and Sons Insurance Agency Inc. in Houma and vice president of the National Association of Professional Insurance Agents.

Last year, the Professional Insurance Agents of Louisiana group created a section on its Web site where displaced insurance agents could post their temporary contact information so that customers could find them.

State Farm, the state’s largest residential insurer, said it didn’t have a problem with getting enough adjusters because it’s such a large company.

In addition to having contracts with independent adjuster firms, State Farm can ask many of its 73,000 employees to temporarily work as adjusters or cover different jobs so other people can. The company’s national network of 17,000 agents meant that people were available to help wherever policyholders landed after the storm.

“It’s not an issue for us,” spokesman Jeff McCollum said. “I think it’s because we’ve got such a deep bench. We made some changes to our system so that any claims could go to any State Farm agent.”

(OPTIONAL TRIM FOLLOWS)

Another problem highlighted by Hurricane Katrina was insurance adjusters’ lack of access to hard-hit areas.

“We normally respond to the hardest-hit claims first and work our way out,” said Gary Kerney, assistant vice president of Property Claims Services, which analyzes data for the insurance industry.

Because adjusters couldn’t get into many parts of the New Orleans area and couldn’t reach many of the people who were displaced from their homes, they were forced to do the opposite: start with the homes on the periphery, which were less likely to have major damage.

For the first week after Katrina, State Farm was forced to fly 150 adjusters back and forth from Houston to Baton Rouge each day while it built trailer cities to house them in Hammond and Gulfport, Miss. State Farm had built temporary towns for adjusters in previous hurricanes, but not to house 4,000 people. Because of the flooding in New Orleans and the number of people displaced, the company also rented vacant shop fronts, including a failed Kmart, to create a catastrophe office for 1,200 workers.

With manpower tight and many homes inaccessible, insurance companies for the first time used satellites to look at properties they insured, figure out whether it was possible to send adjusters to a house, and determine whether the homeowner was owed temporary living expenses. Satellites enabled insurers to determine, say, that a house sitting in nine feet of water that’s listed in the database as a one-story slab home was probably a total loss.

But some note that satellites are not a substitute for sending an adjuster to a house.

Citizens’ Lisotta said his homeowners insurance company used a satellite to determine that missing tiles on the roof of his flooded home were worth $416. But Lisotta said the company has never sent an adjuster, and that a closer inspection would reveal $71,000 of windstorm damage.

“That satellite photo didn’t see any of the vinyl underneath (the roof) taken away,” Lisotta said. “It’s a tool. You can’t use it exclusively.”

PH END MOWBRAY

(Rebecca Mowbray is a business writer for The Times-Picayune of New Orleans. She can be contacted at rmowbray(at)timespicayune.com.)

AP-NY-06-05-06 1432EDT

Copy the Story Link