Chris Ritter: You've raised a couple of issues that are near and dear to both of us. You live in the Southeast. I live in California. I think we officially are about to start, or we have started hurricane season and I'm starting to look out for fires in my neck of the woods. Obviously, we hope none of these things happen, but what's going to be the effect if we have another bad fire season or we have another bad hurricane season?
Stephen Johnson: These are all property claims, of course. What we could have if we have a very busy hurricane season back to back, large-scale hurricanes not impacting California but the South and the Southeast. But don't forget Superstorm Sandy all the way up through New York and New Jersey.
Johnson: What can happen is with a lot of hurricane claims and then if we couple that with some wildfire claims and then, knock on wood, some earthquakes, all happening at about the same time, but with climate change, some say that this is more of the future. I know insurers are preparing with climate change in mind and what that can bring and they're trying to enhance their scalability to get more resources in when they have tremendous property claim spikes.
Johnson: But for insurers that would be faced with a lot of those catastrophe claims from those kind of events and a lot of COVID-19 property claims, that insurer, that hypothetical insurer really will be pressing to scale up to have enough resources to handle all the claims that come in at once, but some of the tools available to insurers for this I had mentioned third party administrators, TPAs.
Johnson: What TPAs do, they can contract with an insurance company and they can have their own employees who will do almost all of the claims handling even with certain dollar authorities to resolve claims. They're subject to the standards of good faith and fair dealing just like the company is itself. There are quality checks, but there are TPAs to help, independent adjusters can help. They are resources on the ground, they can go inspect claims, and so that's part of the scalability.
Johnson: In addition, many insurers have their own inspection staff located out in the field. It's very situational specific to a carrier but from an industry broad standpoint, what could happen is just with mega claim counts, if these things all converge at once, it will just put a strain on resources available to the industry.
Johnson: The industry has seen those strains in the past and has made efforts to have that scalability capability available. A lot of that has to do with just planning during the non-busy times. If you wait to figure out your plan, "I need a lot more claim staff because two hurricanes hit in the last ten days," you're not in a very good position. That is not the time to go seek those resources. That planning occurs in what we would call the slow times, or the catastrophe off-seasons.