In Against the Gods, Peter Bernstein suggests that risk and time are two sides of the same coin. The concept of insurance didn’t exist until the idea of planning a future did, and in early history this was no foregone conclusion. Ancient Greek playwrights portray humans as helpless to the fates, and in real life, faced frequent conflicts and acts of God. This is perhaps why Ancient Greek scholars, despite being advanced enough to shape modern medicine and math, failed to develop a theory of probability.

When some of these conflicts had cooled, the basic principles of insurance would help early civilizations regain a sense of control. Even when faced with the unexpected, insurance policies allow us to live with risk, if not avoid its impact entirely. Natural disasters are devastating events, both emotionally and financially – but when the impossible happens, the insurance industry plays a critical role in providing relief, stability, and support. 

The inevitable rise in claims volume following a natural disaster

Insurance companies face a staggering number of claims in the aftermath of a disaster. Insurers have reported more than 221,582 claims in the aftermath of Hurricane Milton, for example, and over $2.7 billion in costs. For a claims team, handling surge is tremendously challenging. At the other end of each claim is someone seeking help in a moment of crisis. The individual, family, or business, has likely faced unimaginable uncertainty or loss. The claims management team may work overtime to process these claims, but sheer volume can still lead to delay. 

When a disaster occurs, insurers are there to provide relief and guidance. However, the high volume of claims that will naturally follow a disaster can strain insurer resources and prevent those impacted from getting the help they need. When this help is as critical as booking someone a hotel room after a flood, even small delays add up to a big deal.

For policyholders, accessing funds quickly is crucial. According to the Wharton Risk Center, natural disasters can act as tipping points for low income households – roughly 40% of these households do not have $400 in liquid funds for an emergency and cannot access credit. In these situations, a slow insurer response following a natural disaster may consume savings, threaten housing stability, and push households into financial insecurity.  

For insurance companies, surges in the number of claims – and the importance of processing each one correctly – can make it difficult for the claims team to keep up. To manage high volume claims more effectively, insurance companies often partner with third-party administrators (TPAs). These administrators act as an extension of the insurer – on the insurance company’s behalf, they will often step in to offer extra resources or expertise, ultimately helping the company process more claims and provide the care claimants need.

Automation and AI may be beneficial for natural disaster response

In addition to the added workforce of TPAs, insurers may benefit from implementing tools that leverage automation or artificial intelligence (AI). Automating repetitive tasks, such as sorting insurance claim paperwork, can not only help to relieve the claims team, but also help the claimant get earlier access to information about their claim. The added speed can deliver greater peace of mind for both claims team and claimant. Claims teams are on the front line of emotional situations with the claimants, and giving them more control over their time may also help alleviate burnout or compassion fatigue – as well as getting resources to the claimant more quickly. 

AI tools can (and increasingly are) also being used to streamline disaster claims. When faced with a high volume of claims, fraudulent claims can slow the process. AI screening tools are now being used to flag anomalies and analyze cases to assess initial damage. In both cases, AI and automation tools help the insurer to move forward more efficiently, and aid in providing a faster resolution. 

Freedom from fate? Natural disasters and the future of claims

In the late 15th century, Italian farmers set up agricultural cooperatives to protect themselves and each other against poor weather. After the growing season’s end, farms with good yields paid out those with less favorable conditions. Today, insurance principles function in much the same way: insurers use premiums from policyholders that did not sustain losses to compensate policyholders who have. 

Natural disasters remind us of the unpredictability of life itself. In many ways, risk management  is a way of rejecting the Greek tragedy and winning our freedom from fate. While nothing can stop the tides, the speedy processing of a critical claim will give claimants the support to move forward – even after facing great loss.