At Nationwide, part of our commitment to our members is to find ways to prevent losses. As an insurance agent, it’s important to ensure that your clients have taken steps to prepare and plan for potential disasters. This planning can help minimize clients’ resulting losses and promote business continuity amid challenging circumstances. In particular, talking to your clients about natural disaster preparedness is vital.
After all, the past few years have seen natural disasters surge in both frequency and severity. According to the National Oceanic and Atmospheric Administration (NOAA), the United States experienced 22 weather and climate events with losses exceeding $1 billion in 2020—smashing the previous annual record of 16 events. Such events included widespread wildfires on the West Coast, a series of tornadoes spread across several Southeastern and Northeastern states, multiple hailstorms and heavy snow within the Midwest, and a devastating Atlantic hurricane season on the East Coast. What’s more, the NOAA confirmed that 2020 marked the sixth consecutive year (2015-2020) in which over 10 separate billion-dollar weather and climate events have wreaked havoc on the nation.1
With these numbers in mind, it’s crucial to open a dialogue with your clients on the subject of preparing for natural disasters. Having such conversations will allow you to boost clients’ awareness of the ramifications that can accompany these disasters and provide them with the resources they need to handle disasters when they strike. Here’s what you need to know about the potential losses facing your clients following natural disasters and how to help them mitigate these concerns.
How natural disasters impact your clients
Natural disasters can carry numerous implications for businesses—many of which can damage their overall stability. According to a Federal Emergency Management Agency (FEMA) study, 40% of businesses end up permanently closing their doors after a disaster occurs, while another 25% fail within one year.2 Specifically, the following issues could prove detrimental to your clients in the wake of a natural disaster:
- Property damage—All types of natural disasters have the potential to result in structural damage—and your clients’ properties are no exception. Depending on the severity of the disaster, this property damage can range from minor repair issues (e.g., a few broken windows from a tornado) to costly rebuilding concerns (e.g., a completely burned-down building from a wildfire).
- Business disruptions—Various problems caused by natural disasters can disrupt your clients’ operations, halting their sources of income for extended periods. Namely, these disasters can destroy essential equipment, contribute to supply chain or transportation failures, limit properties’ energy sources and delay or prevent critical business communications.
- Loss of customers—Natural disasters may also lead to your clients having a hard time maintaining customers. This is especially common when local officials instruct individuals to temporarily evacuate their homes due to a disaster—making clients’ nearby businesses less convenient or accessible to their communities. Based on the nature of the disaster, an evacuation may last for only a few days, or extend for several weeks or months. In any case, having a displaced customer base could substantially reduce clients’ profits.
- Employee injuries and fatalities—The Insurance Information Institute asserts that natural disasters claimed hundreds of U.S. lives in 2020.3 While it is hard even to imagine such a loss, these disasters could easily lead to increased injuries and fatalities among your clients’ workforces. Such serious losses not only contribute to lowered staff morale, but can also prevent your clients from being able to fill open positions following a disaster. In addition, some employees may decide to permanently relocate after a disaster occurs, leaving your clients with a limited talent pool.
Best practices to prepare clients for natural disasters
Despite the ramifications that natural disasters can cause for your clients, there are several measures that you can discuss with them to help minimize their resulting losses and remain operational, such as:
- Analyzing key risks—Your clients’ natural disaster exposures depend on where their businesses are located. For example, clients stationed in the Midwest should be focused on snowstorm risks rather than hurricane concerns. As a result, be sure that clients review the disaster exposures common within their specific areas. From there, instruct clients to conduct risk assessments that outline possible natural disaster scenarios and how these instances would impact their operations.
- Offering resources—Based on your clients’ findings in their natural disaster risk assessments, make sure you offer them ample resources to help control key exposures. In particular, encourage your clients to develop emergency response plans that address how their businesses can safely respond and maintain continuity in the event of a natural disaster. A variety of government resources can help your clients develop such plans, including:
- Addressing coverage concerns—Review your clients’ risk assessments and business properties to determine whether their current commercial insurance policies will offer adequate protection for losses stemming from natural disasters. Work with your clients to make policy adjustments and secure additional or specialized coverage as needed.
Overall, natural disasters are an ever-present threat for which your clients must prepare. Many weather experts predict that—in light of recent climate change trends—these disasters will only become more frequent and severe in the years to come.4 That is why Nationwide is working with the Insurance Institute for Business and Home Safety (IBHS) as well as a broad coalition of industry stakeholders to help local, state and federal governments better prepare for—and adapt to—climate change. You can find out more about those efforts by visiting adaptingtoclimate.com.
Nationwide has been a leading voice with Congress and FEMA in developing a national strategy for investing in disaster mitigation—a strategy that can help address our nation’s increasing number of severe and costly weather events. Preventive reforms will help save lives, dramatically reduce damage and reduce the cost of recovery for taxpayers.
The insurance industry plays a unique and critical role in the disaster mitigation and recovery process, serving as a leader in promoting pre-disaster loss-prevention techniques and communicating with your clients on this topic will allow them to bolster their emergency planning protocols as needed—thus helping them (and their businesses) successfully weather the storms ahead.