The past week has highlighted the fragility of the current operating model that many insurers employ.
Most carriers did a terrific job responding to the outbreak of COVID-19 and executed business continuity plans effectively. The vast majority of employees are now effectively and productively working from home. Or, as recent discussions have suggested, “working from not here,” as more begin to work from remote vacation or family gathering locations.
The challenge now for insurers is to determine what their business continuity plan looks like when the WFH environment fails. This gap might have been acceptable when remote work appeared to be a temporary event. Now that we know this is a marathon more than a sprint, the model requires some carefully calibrated rethinking.
For example, a Category 1 hurricane that made landfall in North Carolina in early August, taking out electric power in New Jersey, Connecticut, and other coastal states. The recovery period was more than a week in some cases. Novarica spoke to one insurer that executed an emergency plan to bring employees back into a home office building temporarily only to have a water main break, causing another evacuation.
A few days later, a derecho swept Midwest with flooding rains and hurricane-force winds, once again taking utility infrastructure with it. Insurers we spoke to described situations of a third or more of their employees without power or internet service.
The timing of these events is perhaps unusual, but hurricane season is here, and winter is coming. As John Kennedy once said, “The time to repair the roof is when the sun is shining.” At the risk of stating the obvious, that would be right now.
For context, when Katrina hit the Gulf Coast, some organizations lost infrastructure for six months when Hurricane Katrina hit the Gulf Coast. Hurricane Sandy had a similar impact on portions of the northeast. New England lost power a few years ago due to freak, heavy snowfall in October, to say nothing of the fires that have devastated swaths of California in recent years.
So, a BCP that today depends on the presumption of good weather until the end of the pandemic seems to be seriously flawed. We discussed this flaw at a recent Novarica Virtual Town Hall that explored what comes next. It is a subject that will become more urgent as more companies that planned (hoped?) to be back in offices after Labor Day discover that RTO is a 2021 conversation. An executive brief from Novarica’s Research Library can also be a helpful resource in this time of planning—and re-planning.
Living in NC, we have developed muscle memory around these events. The checklist includes making sure the generator works and filling the bathtubs with water. (I added that last item three years ago. You don’t appreciate flush toilets until they stop working because the local pumping station flooded. “Test and learn” in action.)
Now is the time to review scenarios and do critical planning. The event that happens is seldom the one we plan for, but the act of planning builds muscle and forward-looking vision. Pleasant summer days are a terrible thing to waste.
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