The Thai floods hit nearly 1,000 factories feeding global supply chains – particularly in the auto sector – costing insurers an estimated $20bn.
Crawford’s own Bangkok office handled an unprecedented number of serious incidents, with many hundreds of individual claims valued at seven figures or over, in a disaster which placed the global underwriting community under significant pressure.
However, despite encountering myriad problems along the way, knowledge gleaned from the challenges faced by the market in Thailand over the past 12 months has encouraged the creation of a system at Crawford in which adjusters can respond more effectively when major disasters strike.
Thailand adjusting challenge
The adjusting community has been managing the surge of claims caused by the Thai floods for over a year. Given the flooded area was the size of Denmark and contained seven major industrial facilities which were each the size of the City of Birmingham and contained the world’s leading manufacturers of computer hard drives and major automotive part manufacturers, adjusters faced huge challenges.
Andrew Bart, Crawford’s CEO Asia Pacific, explains. “The flood waters took months to fully subside and the claims remain on-going. Japanese insurers issued their half yearly results in September and we were under increasing pressure from those clients to close or at a minimum update all losses so that they had current information for their own financial results.”
With these objectives defined, Andrew added: “We doubled the size of the Bangkok office to accommodate demand since October 2011 and despite the obvious pressures were able relatively quickly to deploy permanent and qualified staff in Thailand. We also knew the advantage that translation support would give us so we ensured there was a strong network of Japanese and Thai interpreters available for our adjusters and client relationship managers.”
“We currently have 140 staff working on the claims arising from the floods in Thailand and of that number around 50 have been brought in from overseas” confirms Andrew. “That level of international engagement has been constant throughout. What we have clearly demonstrated is that insurance is a global industry and as adjusters we need to have a global resource to meet the needs of our clients.”
The company’s ability to bring in highly experienced adjusters, from Australia, the UK and the US, has been an added bonus, some of whom returned to the front line from management positions as the pressure on the adjusting community intensified.
Submerged for weeks
As Andrew points out, what in many ways defined the Thai floods was the length of time that the waters remained after flood prevention measures taken to protect Bangkok ultimately left insureds’ factories submerged for weeks.
“Clearly this flood is not like an earthquake which while catastrophic, is over in a relatively short space of time. We had significant problems with accessing the area immediately after the floods and the slow rate at which the flood waters receded meant that it was very difficult for access to be gained to take any steps to tackle the oxidation process which clearly caused greater levels of damage to plant and machinery.”
“The specialist nature of the businesses affected by the floods was underscored at this point. We have been dealing with claims where valuable, specialist machinery needed to be replaced or repaired if at all possible,” he says.
As project managers for many aspects of the clean up, Crawford GTS made substantial efforts to co-ordinate resources in the region so that contractors who specialise in the preservation, restoration or replacement of this machinery could be on hand as quickly as possible. Andrew explains further: “What is perhaps unique about the Thai floods is that building damage was largely superficial in comparison to the machinery and business interruption losses incurred by manufacturers in the region. Where possible, we were able to deploy the resources of specialist contractors to help insureds protect their assets and even to liaise with the original manufacturers of the industrial equipment where necessary.”
Adjusters have faced a challenge of diplomacy as a result, particularly where negotiations between parties looking to manage down costs would tend to pursue restoration over reinstatement. Andrew says in many instances this was done successfully but in others, because of the high degree of sophistication and tolerance, restoration efforts were impractical. “Ultimately we’ve gathered a lot of knowledge about what is possible from a large scale commercial, industrial manufacturing loss after one of the severest floods the world has ever experienced. We had at all times to consider that insureds needed to get back in to production as quickly as possible.”
Early on in the process, Crawford recognised that its experience in Thailand would provide a framework of knowledge and transferable skill which can be implemented for future events. Andrew points out how human resources will be an important component in that framework.
“Thailand has been a tough place to operate from an overseas adjuster point of view and given the conditions that we have faced, we have been keen to put in place a programme to rotate staff to reduce the risks of stress and burn out,” he says. “There have been a lot of challenges for those working in the area and while we have had a core team that has been involved throughout, we have monitored our employees’ well-being carefully.
“In addition, like any project in which one has an interest, the needs of our insurer and reinsurer clients have been our major objective. Those with the very largest exposures in the region were provided with constant liaison and I’m confident the business has the right approach to putting senior individuals in customer facing roles so that lines of communication can be kept open and effective.”
No CAT claim is the same as another, and each will present its own challenges for adjusters at the coal face. Working with a global client base means there is no one size fits all approach to adjusting. Crawford has a robust system of peer review and audit so its reports to the insurance market stand up to scrutiny.
Andrew concludes: “Culturally, geographically, and logistically: ours is a responsibility to adapt to the local conditions. On one hand that simply means the physical challenges of the environment in which we find ourselves, but on the other we must also adapt to the needs of the insurers we represent. The experience of handling CAT claims in an industrial context within South East Asia has been invaluable.”