Tropical Storm Andrea is speeding up the Eastern Seaboard, forecast to bear down on New Jersey and New York today and stay into the weekend.
But Andrea’s heavy rains will strike a very different New England region than the one that, just over seven months ago, was devastated by what would become the second-costliest hurricane in U.S. history: Superstorm Sandy.
Unprepared, Then in the Dark
“We weren’t prepared for this, you know. Nobody was prepared for it,” Tom Carbone, who runs a Staten Island-based agency, told A.M. Best TV, which released a five-minute retrospective this week on the disaster, what it was like for insurers in its aftermath and its lasting impact on the insurance industry.
“On Staten Island, I think there were a lot of people that didn’t believe this hurricane was going to be as big as it was,” Carbone said.
Sandy’s unexpected intensity for New York and New Jersey residents was likely the result of something that isn’t obvious to the common person: the link between population density and storm damage.
And even as Sandy waned, those left in its wake faced bigger problems of initial cleanup and rebuilding—in the dark.
“When you have a storm of this magnitude hitting some of the most densely populated states in the U.S., it sets into motion all kinds of incredible chain reactions impacting, for instance, not only the power outages, the transportation disruptions but, from an insurance perspective, getting all these adjusters out into the field,” Michael Barry, vice president of media relations for the Insurance Information Institute (III), said in the segment.
Many insurance agencies faced a surge of claims without the common amenities of Internet and electricity. In New Jersey’s Ocean City, William McMahon said his agency dealt with those basic hurdles in stride.
“When the disaster actually hit, you have all this technology, this technology that was advanced so you were able to handle stuff,” he said. “And we went back to the basic: Here’s a piece of paper, put the name on there, and we’d hand it to someone else and they would take the claim.”
Carbone said he worked around the clock to work on claims from residents who lost almost everything they had to Sandy.
“By the grace of God, I guess, I took as much as I can do every day and went home exhausted,” he said.
For claims adjusters, Sandy presented some of the same, simple logistical problems. Michael Rotolo, an executive general adjuster with William Kramer Associates, said that maneuvering storm-damaged areas to get to claim sites was a significant setback.
“I think in some of the other hurricanes, down south in Texas and Florida, it wasn’t quite as hard to navigate the roads,” he said. “Here we had a lot of trees down and it was very hard to get around.”
Saltwater made efforts even more difficult, according to Rotolo.
“We had a lot of equipment that was under saltwater that had to be removed, replaced, repaired and electrical, of course, is the most affected by that,” he said. “It’s just a shortage of manpower, shortage of materials. It was very difficult to get things done.”
The III’s New York City offices were closed as Sandy flooded much of the downtown area. As the storm dissipated on Oct. 31, Loretta Worters, an III spokeswoman, said insurers were still blocked off from many impacted parts of the city.
“There’s a lot of pumping out of water because there are still a lot of electrical safety issues,” she told Online Auto Insurance immediately after the storm. “Once it’s safe enough to go in, insurers will start gathering claims information.”
An Industry Weathers the Storm
The full cost came into fuller view once claims data began rolling in, with Superstorm Sandy ultimately racking up the third-highest amount in insured losses out of natural disasters in U.S. history. The III’s latest estimate puts losses from Sandy-related claims at nearly $20 billion, behind Hurricane Katrina in 2005 and Hurricane Andrew in 1992.
But the industry is proud of its response to Sandy, according to Barry, pointing to New Jersey and New York regulators reporting high rates of claim settlements after the catastrophe.
Sandy cut such a wide swath through the northeastern U.S. that car claims stretched across more than a dozen states from Maryland to Maine. The National Insurance Crime Bureau (NICB) reported in February a total of 250,500 vehicle claims generated by Sandy, with nearly 60 percent of those claims coming from New York. New Jersey car coverage claims made up almost 24 percent of total vehicle claims, and just over 3 percent were Connecticut-based.
Claims work was expedited by several efforts from lawmakers: federal mediators and programs swooped into New Jersey to begin handling claim disputes; regulatory administrators shortened required response times to claims; and New York Gov. Andrew Cuomo authorized out-of-state licenses for claims adjusters. By the six-month anniversary of Sandy, New York reported that a vast majority of its claims had been closed.
“That’s quite an accomplishment given the magnitude of the event,” Barry told A.M Best.
Insurers are also pitching in their part, with some enforcing forgiveness programs for Sandy-related claims like New Jersey-based Plymouth Rock Assurance, which said that it will not count such claims against a policyholder when re-pricing them for coverage.
“We’ve had the privilege of calling New Jersey our home for over 20 years,” the insurer said in a statement about its program. “We’ve felt Sandy’s devastation firsthand, and we know the last thing New Jersey needs to worry about right now is increased rates because of Sandy-related car insurance claims.”
A relatively calm year of disasters in 2012 helped the industry build capital to weather losses from the storm, with “not so much as a single insurance company [going] out of business as a result of Sandy,” A.M. Best reported.
Industry Faces Forecast of Active Hurricane Season
But that sunny news doesn’t mean smooth sailing ahead for the industry. An “active Atlantic hurricane season” is on the horizon, according to the National Weather Service.
New Jersey and New York residents are already under familiarly wet conditions as Tropical Storm Andrea makes her move through several states.
But other types of disasters are already hitting the industry hard early in the year, with tornadoes in Oklahoma last month reportedly causing hundreds of millions in damage.
Despite that, according to A.M. Best, the insurance industry “seems ready” to handle the predicted active hurricane season.
A briefing from A.M. Best, a firm offering industry news and analysis, showed that catastrophe-related losses from a survey of U.S. insurers in the first quarter of 2013 trailed the same period in 2012 by $1.2 billion.
With the NWS predicting three to six major hurricanes for the rest of the year, that extra billion or so could prove handy.
