Severe hurricane season expected

February 28, 2024

A vehicle halfway submerged on a flooded street.
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Hurricane experts are predicting that the upcoming Atlantic hurricane season will be severe. Read more about it in this article from AccuWeather. 

We’re here to support you 

In addition to providing our adjusting services, we are here to support you through repair solutions, temporary housing, building consulting, contents and inventory solutions, forensic advisory services and engineering. If you have questions or need assistance, please contact our property team.

To report claims: Contact our CAT intake center for immediate setup and assignment.

P. 800.479.9188 E. [email protected]

Severe storms rage across the Midwest

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Hail, 80 mph winds and tornadoes caused severe damage and tens of thousands to go without power across the Midwest early Wednesday morning. Heavy rainfall, winter weather and high winds are expected to continue into the weekend across the Midwest and eastern U.S.

We’re here to support you

In addition to providing our adjusting services, we are here to support you through repair solutions, temporary housing, building consulting, contents and inventory solutions, forensic advisory services and engineering. If you have questions or need assistance, please contact our property team.

To report claims: Contact our CAT intake center for immediate setup and assignment.

P. 800.479.9188 E. [email protected]

Atmospheric river hits California

February 5, 2024

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Torrential rain and hurricane-force winds continue to cause dangerous flooding, mudslides and debris flows throughout the state. 

We’re here to support you 

In addition to providing our adjusting services, we are here to support you through repair solutions, temporary housing, building consulting, contents and inventory solutions, forensic advisory services and engineering. If you have questions or need assistance, please contact our property team.

To report claims: Contact our CAT intake center for immediate setup and assignment.

P. 800.479.9188 E. [email protected]

Navigating the temporary housing market when catastrophe hits

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Catastrophes like floods, fires, earthquakes, tornados and hurricanes can cause widespread property damage — suddenly forcing families out of their homes and in need of temporary housing. Many of those displaced are eligible for coverage of their temporary housing and additional living expenses through their homeowners insurance policies; our temporary housing division is dedicated to serving the needs of this population, along with the insurance professionals and emergency personnel who take care of them. 

Catastrophic events can wreak havoc on the availability of local temporary housing. But even under normal conditions, temporary housing markets have grown in complexity in recent years — making it ever more important to have an expert partner on your side that understands the nuances of the space and has established networks from which to draw. Here, we will highlight some of the trends impacting the short-term housing market and the temporary housing challenges that may arise in the aftermath of a catastrophe.

Market trends

The U.S. rental market has changed dramatically since COVID. During the pandemic, people avoided shared spaces like hotels to avoid getting sick. The risk of illness, combined with widespread hotel staffing shortages, prompted travelers to instead stay in vacation rentals — significantly driving up demand and rates on websites like Airbnb and Vrbo. Many guests found rentals to be more comfortable and convenient for their families and pets. 

Today, hotels are still struggling with staffing issues and have reduced their hospitality amenities as a result. Data shows that travelers who grew accustomed to vacation rentals during the pandemic continue to prefer them over hotel stays. 

At the same time, several factors are curbing the available supply of vacation rentals. Today’s rising mortgage rates and construction costs are creating barriers to ownership of rental properties. Additionally, many jurisdictions are enacting laws that restrict homeowners’ ability to operate short-term rental properties without proper permits. This became a significant issue in New York City in September 2023, when the area experienced severe flooding following Tropical Storm Ophelia and displaced residents struggled to find temporary housing.

Changing tides affect temporary housing

Consumer preference for vacation rentals over hotels can pose challenges when it comes to insurance coverage of temporary housing. Increasingly, displaced policyholders are requesting (and expecting insurers to provide) vacation rental accommodations rather than hotels in the immediate aftermath of damage to their homes. The issues here are threefold:

1. Vacation rentals are generally more expensive than hotels — especially when temporary housing partners can secure hotel discounts through their established networks. Use of vacation rentals for temporary housing often increases claim costs.

2. Homeowners insurance policies may dictate set allowances for coverage of temporary housing and additional living expenses. Policyholders who choose vacation rentals over more cost-effective options are likely to exhaust their allowance before their damaged homes are inhabitable again.

3. Families who will be out of their damaged homes for extended periods generally transition from short-term emergency housing to a home or apartment with a limited-term lease (6-12 months, etc.). When policyholders start out in a vacation rental, rather than a hotel room, they tend to settle in and don’t want to move to more cost-effective leased properties, which may offer equal or lesser amenities. 

Part of our role as a temporary housing partner to the insurance industry is to stay on top of economic and consumer trends in the housing market and how they impact our carrier clients. With an understanding of the cost factors and psychographics, we can provide professional guidance to insurers on how to navigate these issues and communicate effectively with their policyholders to ensure the best outcome for all involved parties. 

Maui fires: location-specific challenges 

In August 2023, wildfires ravaged the Hawaiian island of Maui — killing 100+ people, destroying over 2,000 buildings, causing around $5.5 billion in damage, and leaving more than 7,000 people homeless. Temporary housing for Maui’s displaced residents was (and, months later, remains) a dire need.

The post-wildfire housing crisis in Maui has been compounded by factors that far exceed the standard challenges of a CAT event. The whole island is about 730 square miles (1,880 square kilometers) and inter-island travel is not easy, so available resources are limited. Because Maui is a high-end tourist destination, hotel rates are pricey. Additionally, a large percentage of Maui’s residential properties are vacation rentals, and many homeowners hesitated to commit to longer-term guests for fear of losing out on peak-season tourism income. (Financial incentives provided by various government agencies are helping in this regard.) 

Despite the many obstacles, the Sedgwick temporary housing team has helped hundreds of displaced Maui residents in their time of need. Thanks to our 24/7 concierge service, established relationships with hotel chains and strong network of contacts in Hawaii, we’ve worked with multiple insurers to secure safe short- and long-term accommodations for their policyholders. Our team has also assisted in setting up leases for dozens of families so they can be settled until their homes are rebuilt. Our 27 years of experience in post-catastrophe temporary housing have served us well in identifying creative solutions to seemingly insurmountable challenges in the aftermath of the devastating wildfires. 

In it for the long haul

Building materials must be imported from the U.S. mainland or Asia. And in an environment with many competing for limited resources, the rebuilding of structures contributing to the island’s economic recovery may take precedence over single-family homes. 

Regardless of how long the recovery takes, Sedgwick is committed to being there to support our clients and their policyholders on Maui. If we can be of assistance to you, please contact our temporary housing team at [email protected]or our property loss adjusters at [email protected]

Learn more — watch this video and read this flyer about Sedgwick’s temporary housing solutions, and visit our CAT resource center to explore our catastrophe planning and response solutions

Winter storms continue across the U.S.

January 16, 2024

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Strong winds, heavy snow, freezing temperatures, hail and rain continue to cause damage across the U.S. 

We’re here to support you

In addition to providing our adjusting services, we are here to support you through repair solutions, temporary housing, building consulting, contents and inventory solutions, forensic advisory services and engineering. If you have questions or need assistance, please contact our property team.

To report claims: Contact our CAT intake center for immediate setup and assignment.

P. 800.479.9188 E. [email protected]

Weathering the winter storm season in the U.S.

January 9, 2024

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Millions of people across the U.S. are at risk as winter storms led to power outages, freezing pipes, dangerous roads and more. As the 2024 winter weather season unfolds, what should insurers, property owners and vehicle owners keep in mind? In this podcast, two of Sedgwick’s experts, Nicole Bartunek, client services manager and Andy McCallum, VP, specialty operations, discuss the major risks during this time of year and how to mitigate them.

Scotland’s hydro-electric schemes, severe flooding and insurer implications

December 21, 2023

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Hydropower has played a critical role over the past century in connecting vast swathes of rural Scotland to the power grid, all by using its plentiful natural resources to generate electricity: steep mountains and hillsides, lochs and reliably heavy rainfall. Scotland now provides 85% of Great Britain’s hydro-electric resource, with a total generation capacity of 1,500 megawatt units (MW). 

In recent years, there’s been a notable growth in small-scale hydro-electric schemes — that typically generate ~6 MW — installed by estate and property owners in the Scottish Highlands. The schemes take advantage of the hilly slopes and water runoff to generate clean energy, while simultaneously raising revenue and positive cash flow to offset the property’s expenses.

But as climate change perpetuates extreme weather events in both size and frequency, property owners and insurers alike face an unprecedented challenge: contending with the impacts severe flooding events are having on small-scale hydropower schemes. Is this renewable energy source truly insurable, and are the assets built robustly enough to withstand intensive weather patterns to come? 

The innerworkings of a hydro scheme

A typical small hydro-electric power scheme comprises a turbine and electrical generator positioned within a pump house located at a low-level where water run-off is collected. The water run-off flows into a mechanical turbine (essentially a propeller) resulting in its rotation and the production of hydro energy utilised to power an electrical generator. 

By nature, a pump house must be located at the bottom of a hill — as water flowing downhill is the mechanism that powers the turbine. As a result, there’s always potential exposure for the pump house to become flooded. 

Flooding is highly problematic for several reasons. Electrical assets, like the generator and control panels, can easily be damaged or destroyed altogether by floodwaters, necessitating costly repairs or full-on replacement. Secondly, it can render a scheme unusable until fixed properly, amounting to a costly business interruption (BI) during the period — often several months at a time — that energy generation is suspended.

Any viable solution would be as costly — if not more so — than bearing the consequences when flooding occurs. Either engineers must redesign pump houses to be more robust, or property owners must invest the necessary funds to install flood resilience measures and ensure a pump house is as watertight as possible. Few mitigation options remain in between. 

Climate change exacerbates severe weather patterns

Climate change continues to affect Scotland’s natural environment. Over recent decades, Scotland has experienced a warming trend that has both shifted rainfall patterns — including higher average annual rainfall and an increasing proportion of rain falling during heavy rainfall events — and contributed to rising sea levels. 

An evidence report, the third UK Climate Change Risk Assessment (CCRA3), found that the risk of flooding to people, communities and buildings remains among the most severe risks for Scotland and is the costliest hazard to businesses. It also found that water, energy and transport infrastructure networks are at imminent risk of “cascading failures,” and infrastructure services are at risk of river and surface water flooding. 

Such risks are expected to become more dire year by year. According to a March 2023 report published by the UK’s Climate Change Committee, by 2050 the UK is expected to have ~5% wetter winters on average, ~10% increased intensity of heavy rainfall, and a 10-30 cm increase in average sea levels — all making way for more acute river, surface and coastal flooding, and subsequent loss of transmission and distribution capacity due to flood damage.

Implications for insurers and insureds

For insurers, on the construction side, there is potential for large loss(es) to occur, and insurers must consider high-complexity risks to third-party property and the environment. Operationally, there is potential for large loss(es) to occur as well, due to inherent and environmental factors. Claims for small-scale schemes amount to around £1 to 2 million for site works, property damage works and BI. 

Insurers are increasingly concerned about policy limits, and if the BI sum insureds are high enough to cover a potential loss — particularly as energy prices soar. If flooding and subsequent damage occurs more frequently, insurers will ultimately need to decide: Is insuring hydropower assets disproportionate to the risk? 

Where hydro losses occur a multi-discipline team comprising of loss adjusters, forensic engineers, forensic accountants and environmental consultants with specialist training should be engaged. It’s critical to partner with an entity educated in emerging technology and local market/industry knowledge to assess repair versus replacement options and provide guidance.

Learn more — Read about Sedgwick’s recently-launched power and energy division in the UK.

The rise of claim severity and complexity

December 18, 2023

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Conversations around severe weather events, rising inflation and lingering labor shortages and supply chain issues have become commonplace; because these trends affect our lives, our businesses — even our insurance. Rising claim complexity and severity doesn’t seem to be slowing down, and it’s important to explore the factors driving this trend and its potential implications for the property and liability claims sectors.

The impact of climate change

Globally, we’re seeing more extreme weather events and conditions, occurring more frequently — resulting in an unprecedented number of claims and a higher percentage of them involving significant complexity and severity. 

The first half of 2023 saw elevated disaster losses, according to an Aon report, with the fifth-highest economic impact on record and the highest since 2011.The single costliest disaster was the February earthquakes in Turkey and Syria, although remaining insured losses were largely driven by severe convective storm activity in the U.S. 

This year, close to a dozen insurance companies in Florida went bankrupt, while others restricted coverage due to increased hurricane losses and litigation costs. Insurers are declining to write policies in hurricane-prone areas of Louisiana; one stopped issuing new policies in California altogether. Another carrier reduced its coverage to homes along the East Coast at risk of flooding and those in western states at risk of burning. 

Other contributing factors

The human drive to build bigger and better is fueling innovation in sophisticated building design and the use of new technologies and materials in construction. But stretching the bounds of aesthetic and technological precedents also leads to greater risk and more complex claims against the companies behind the work when something goes wrong. Whether it be traditional materials used in new ways or complex features like retractable roofs, the more companies deviate from standard procedures, the more risk they assume.

Labor shortages in the construction market coupled with wage inflation, high demand for projects and the steadily rising costs of materials are all contributing to higher repair and replacement costs. Increases have been exceptionally high for the goods and services that drive personal insurance claims.

Inflation is further driving up costs. McKinsey and Company estimated that inflation alone increased U.S. property and casualty insurance loss costs over historical levels by $30 billion in 2021.

In our increasingly litigious society, according to Sedgwick’s book of business, litigated claims account for as much as 50% or more of the total amount paid on all claims. According to a Carlton Fields survey, class action spending has increased for eight consecutive years due to two major drivers: claims are getting larger, and more companies are facing such lawsuits. 

Preparing for and mitigating claims: best practices

Because litigation is one of the primary cost drivers in liability claims, we recommend that companies always lead with litigation avoidance. But if necessary, having the right partner with a strong management process for legal spend can ensure attorneys are maintaining each individual case and billing according to agreed-upon guidelines. Robust attorney oversight is vital as well.

It’s important to have partnerships, policies and emergency plans in place in advance of a catastrophe to minimize business interruptions and expedite restoration and resolution. These plans should be current, tested regularly, and reflect industry best practices for disasters like hurricanes while aligning with your carrier’s specific terms. Ensure your partners possess both technical expertise and a service-minded, empathetic-led approach.

To counter climate change-related challenges, sustainable construction practices — such as designing for sustainability and energy efficiency and selecting locally sourced, renewable and recyclable materials — have emerged as a proactive way to reduce the building industry’s adverse impact on the environment. By using water-efficient fixtures, rainwater harvesting techniques, and adopting waste reduction and recycling practices, companies can conserve and decrease waste output.

Looking forward

As we continue to face the reality of managing larger and more complex claims, insurers must keep an eye on trends and adapt strategies accordingly. Establishing the right partnerships, preparing in advance, and employing proactive mitigation and litigation practices are all critical to fulfilling our commitment to taking care of the people we serve.

Some of these ideas were featured in issue 22 of Sedgwick’s edge magazine.

Decoding the data: Is another Australian bushfire disaster looming?

December 13, 2023

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The devastating Black Summer bushfires of 2019/2020 in Australia had record-breaking insured losses — serving as a critical reminder of the intricate relationship between climate patterns and their impact on businesses. As we stand on the precipice of similar weather catastrophes, the question remains: can we improve the way we prepare for and respond to such events?

While climatologists have long harnessed climate data to forecast environmental patterns, a parallel in the world of business interruption (BI) claims has been conspicuously absent — a gap we are now closing using data science. 

In this article, we explore the potential for major bushfires in the 2023/2024 summer, as well as what our data indicates could be the implications for business interruption claims.

Maintaining a carrier mindset and fueling a customer-focused approach

October 27, 2023

A graphic that says, "Imagine the Possibilities of RIMS 2023".
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Across the auto industry, trends range from lengthy cycle times and high indemnity costs to inefficient repair processes. This can often mean having to make a dozen calls to solve each challenge. But what if carriers and third party administrators (TPAs) worked together to became an extension of one another? 

The power of coming together

In this complex environment, strategic partnerships are more important than ever. Carriers are seeking solutions to various claims problems that are digging into profits, and turbulent times call for the utmost streamlined, efficient processes. Technology offers a significant opportunity to reduce claim costs; however, the capital investments required for some carriers and self-insured clients is high. 

Combining advanced technology with multiple methods of inspection (MOIs) helps control indemnity and cycle times. Our dedicated, full-time field staff appraisers are experts not only at estimating auto damage but providing outstanding customer service. Meanwhile, our vetted 1099 appraisers are qualified to support appraisers in providing nationwide coverage. Simply put, we act as an extension of the carrier to help restore efficiency and provide leveraged buying power that provides peace of mind in a difficult time.

Whether a client needs access to appraisersdirect repair auto shops, photos only solutions or staffing support, there’s peace of mind in having access to a one-stop-shop.

Staffing shortages

In today’s insurance market, companies must stay flexible and be able to respond to changes quickly. When an unexpected surge in claim volume occurs, it can cause staffing resource issues and service challenges. A TPA like Sedgwick can help insurance carriers manage increased claim volumes and ensure seamless services for clients and policyholders. 

In one case, a national carrier had a growing number of claims and not enough trained adjusters to manage them. Sedgwick first provided 25 full-time claims colleagues and delivered training within 15 business days, then expanded to include 100 claims colleagues within 60 days and nearly 200 by 90 days. This enabled the carrier to successfully manage their claims volume and maintain high quality service for policyholders. 

Weather catastrophes

When Hurricane Ian — the third-costliest weather disaster on record — made landfall last year in southwestern Florida, residents and CAT vendors alike were ill prepared for its severity. Many Florida-based carriers faced adjuster shortages when catastrophe hit, the moment their policyholders needed their help and support most. 

By the end of Ian’s wrath, affected areas sustained estimated preliminary insured losses between $50 billion and $65 billion, according to a December 2022 Swiss Re Institute report. Ian is also estimated to be the second-costliest insured loss on record, exceeded only by Hurricane Katrina in 2005. Among the destruction, experts estimate 70,000 vehicles were destroyed and more than 350,000 were damaged. These outcomes are neither adequate, nor sustainable.

Imagine instead, a coastal-based carrier partners with Sedgwick months earlier. A contract is secured that offers the following: in the event of a hurricane, within 24-hour notice, Sedgwick deploys 50 inside adjusters to the site. These adjusters have already familiarized themselves with the carrier’s CAT response processes. They have access to the carrier’s internal systems and technology. Their high level of technical expertise replicates the carrier’s own in-house adjusters’ and upholds their standards of service. 

Then news of a tropical storm spreads. It intensifies rapidly into a hurricane as it nears landfall, growing stronger than predicted, ready to batter thousands of insured cars and homes. A carrier has less than 24-hours to ready a team, but lacks adequate manpower. One phone call and they’ve secured 50 adjusters. No more scrambling to make dozens of calls, in desperate times, when every moment counts. 

Strategic partnership

Sedgwick has revolutionized auto loss adjusting and claims administration with our end-to-end auto solution, the industry’s most complete claims and loss management offering for insurance carriers, fleet management companies and corporate customers. We’re there for you when and where you need us most, with a carrier mindset and customer-focused approach.