Claims: The Labor Cost of Catastrophes

Catastrophic events place a huge strain on insurers’ resources and challenge claims managers to staff at the right level

JERSEY CITY, N.J., August 19, 2015 — Major catastrophes frequently mean longer hours and extended periods away from home for claims staff on catastrophe duty. However, wide variations in logistical planning and catastrophe duty compensation have been revealed in a far-reaching study from Property Claim Services® (PCS®), a Verisk Analytics (Nasdaq:VRSK) business.

For the first time, the labor cost of catastrophe claims has been assessed in the PCS Catastrophe Compensation Report, published today and designed to help firms refine or develop a comprehensive catastrophe compensation plan.

PCS surveyed 76 property/casualty companies across the United States about their approach to managing personnel during peak periods of catastrophe claims. The resulting report covers staffing levels, pay, additional incentives and rewards, overtime, and compensatory time off considerations.

The findings:

The survey found that approaches to managing and compensating catastrophe personnel vary across geographies, company size, and employee rank.

The aggregated report breaks down the average daily and weekend rates along with a geographic breakdown, which revealed that the lowest average catastrophe pay rate is in the Northwest, while the highest average daily weekday rate was in the Northeast and the South.

The top 25 ranked property/casualty companies have the highest weekend rate, although their weekday rates are below the top 100 ranked companies. Top 100 ranked companies are also the group most likely to offer bonuses and compensatory time off.

Sixty percent said catastrophe pay is not offered to managers. Of the 31 percent of companies that offer compensatory time off to staff on cat duty, 92 percent provide it to managers, but only 25 percent provide it to dedicated cat team employees.

Within the companies that pay bonuses for catastrophe duty, 54 percent give bonuses to managers, but only 38 percent give bonuses specifically to cat site management.

The PCS Catastrophe Compensation Report also found that property claims departments are not the only area under pressure during catastrophic events. Seventy percent said their companies draw support from departments other than property claims to assist with cat duty, with underwriting (54 percent) and non-claims customer support (51 percent) being the departments most frequently called upon.

While field catastrophe staff expect to work long hours to handle claims during a catastrophe, the survey found that 58 percent of companies also require inside adjusters and support staff to work extended hours.

Half of the respondents said adjusters who are not on catastrophe duty are given extra compensation for completing claim-heavy noncatastrophe workloads when resources are thinly stretched.

Further findings:

  • For most companies, compensation policy varied among exempt versus nonexempt employees.
  • Fifty-three percent of firms represented in the survey require employees working catastrophe duty to work on holidays.
  • Companies varied in use of a full-time, dedicated team of inside adjusters to handle catastrophe claims, and more than 50 percent use independent claims adjusters to handle overflow inside cat claims.

According to Joe Louwagie, assistant vice president, Property Claim Services, “We’re pleased to provide the claims community information to help inform catastrophe compensation policy decision making.

The Catastrophe Compensation Report contains a high level of detail about how employees engaged in catastrophe duty are currently compensated in the United States. It provides direction on ways to stay competitive with U.S. catastrophe pay scales based on company geography and size. This information can also help guide the global insurance market in shaping catastrophe claims management and compensation policies.” The Catastrophe Compensation Report is the first in a series of catastrophe claims benchmarking reports to be published by PCS. For further information and a copy of the full survey, please contact PCS.

About Verisk Analytics

Verisk Analytics (Nasdaq:VRSK) is a leading data analytics provider serving customers in insurance, energy, healthcare, financial services, government, and risk management. Using advanced technologies to collect and analyze billions of records, Verisk Analytics draws on vast industry expertise and unique proprietary data sets to provide predictive analytics and decision support solutions in fraud prevention, actuarial science, insurance coverages, fire protection, catastrophe and weather risk, data management, and many other fields. In the United States and around the world, Verisk Analytics helps customers protect people, property, and financial assets. For more information, visit www.verisk.com.

Contact:
Giuseppe Barone/Colleen Finley
MWW Group (for Verisk Analytics)
201-507-9500
gbarone@mww.com
cfinley@mww.com