In our ongoing discussion of how microinsurance responded after 2013’s Typhoon Haiyan in the Philippines, we come to the point in time where the storm subsides—and the microinsurers’ real work begins.
To understand the challenge facing the insurance industry in settling claims, we first must grasp the magnitude of the damage. Typhoon Haiyan was a disaster that didn’t discriminate between young or old, rich or poor. In Tacloban, a resident recalled how water rushed through the streets and he could barely open the front door of his home. Another resident saw her mother being pulled through the front door of their home by the torrent of water. She grabbed and held on to her mother with her good arm, as the other arm, in a sling, held on for safety, preventing both of them from being swept away.
After the storm, survivors recalled the deafening silence as they walked in a daze through streets where trucks were overturned, debris blocked access, and bodies were strewn everywhere.
It took a week for aid to reach the hardest-hit area of Tacloban. Even afterward, banking facilities were unavailable. As much as two weeks following the disaster, only two banks were open and there was a limit on withdrawals. Once ATMs were available, survivors attempting to withdraw money risked being accosted by muggers.
Insurers and intermediaries confronted the dangers of debris-blocked roadways and looters to reach financial institutions, bringing food, water and canned goods as quickly as two days after the disaster.
The magnitude of the devastation made it difficult for microinsurers to get to the task of claims processing. The job was delayed until people were reached, or found, in the case of missing persons or families that had relocated because their homes were destroyed. With these chaotic conditions, much paper and electronic information was lost.
Luckily, the IC’s planning paid off. Claims processing was simplified by allowing payment with goods if agreed upon, initial payments permitted with minimal documentation, and the use of mass onsite assessments of areas rather than preparing individual claims.
Additionally, insurers used satellite imaging and crisis maps to assess claims, enabling them to speed up the claims process.
Insurer representatives also visited the stricken areas and saw the damage for themselves. Two providers were in Tacloban within the week and based on their findings, declared which areas and associated addresses would be paid claims. Then they relied on the intermediary and its network to find the affected customers and file a group claim on behalf of all those who lived in the declared areas.
The upshot was that by July 2014, a total of 111,461 claims were settled for Typhoon Haiyan, amounting to PHP 532 million (USD $12 million). Of the seven providers interviewed in the study, five indicated that all known claims had been paid, although claims are still trickling in. Most of these claims were linked to calamity insurance (see chart below).
The rejection rate for invalid claims was 4.4 percent. Denied calamity claims were due to houses being only partially damaged when coverage was for total damage, and in mass assessments, some customers were double-paid, or did not live in the qualifying area. The credit life rejection rate was 9.4 percent, due to no record of coverage claimed.
Next week we will take a closer look at the important role that intermediaries played in claims settlement after Typhoon Haiyan.