How to prepare for a crisis

Vol 47: Issue 2 | July 2024

In short

• Every company should prepare for a crisis by assessing risk, creating a usable plan and regularly rehearsing its response.
• Effective training programs are tailored to team members’ different roles and responsibilities.
• In a crisis, saying nothing is not an option. Companies must be prepared to tell their own story before social media takes over with its own version of events.

Natural disaster, data breach, reputational challenge — whatever the crisis, an insurance company’s future can be shaped by how well it responds.

“Effective crisis management is never a last-minute response,” says Matthew Collins, director of FastTrack Solutions, a business continuity management consultancy based in New Zealand. “The whole team must be well prepared, match fit and sure of their role.”

And preparation begins with a comprehensive crisis management plan.

“This should include clear definitions of everyone’s roles and responsibilities, a communication strategy and a process for assessing and mitigating risks,” says

Craig Furness, CEO of Gallagher Bassett New Zealand. “It should also identify potential crises and their impact on operations, policyholders and stakeholders.

This assessment can then inform the creation and implementation of risk mitigation strategies, such as investing in resilient infrastructure, so insurers can minimise the severity of potential crises.”

At the same time, the plan must be short and simple enough to make sense under pressure. “One client started out with a 70-page tome,” says Collins. “No-one is going to work through that in the middle of a crisis. I managed to condense it to a usable three pages.”

Focus on the consequences

When clients are drawing up a plan, Collins asks them to focus on the consequences of an event, rather than trying to pin down every possible cause.

“Whether your IT system failure is due to sabotage, a virus, ransomware or a physical hardware malfunction, the consequences will be the same,” he says.

He would also like to see a less academic approach to risk assessment. “I often find that companies have simply updated previous assessments, rather than thinking outside the box and taking a broader view.”

Furness says a claims-surge plan is essential if there’s a possibility that the crisis will be triggered by a natural disaster or severe weather event.

“The rapid increase in claims, complex customer needs and challenging recoveries mean insurers should have established partnerships with expert claims management providers, loss adjusters, geotechnical engineers, quantity surveyors and the all-important remediation supply chain,” he says.

“These plans will detail the collaboration required with partners, with clearly defined roles and responsibilities in advance, so that the insurers can respond to a surge event in a co-ordinated way that protects their customers and reputation.”

Testing and training

Ben Hamilton, Sydney-based senior managing director at FTI Consulting, points out that even the best plan is worthless if the crisis management and crisis communications teams aren’t familiar with it.

“We recommend crisis teams test their plans through regular desktop exercises and at least one full crisis management simulation a year,” he says. “These pressure-test the teams, and it’s much better to do that in a controlled environment than in the midst of a real crisis event.”

Collins has found that well-run simulations can have an enduring effect.

“Last year, I did some work with a client I first consulted for in 1998,” he says. “People who are still with the firm said they vividly remember the simulations we did back then.”

The right responses also demand training, and training programs should be tailored to different roles and responsibilities.

“Senior executives may benefit from training in strategic decision-making and crisis communication,” says Furness.

“However, as frontline workers are the first point of contact for customers seeking support during a crisis, they’re likely to need training in how to support vulnerable or distressed customers, and also [in] the Fair Insurance Code.

Running regular upskilling during ‘peace time’ periods will also help to ensure that any temporary workers brought on to deal with a surge are supported by a highly skilled existing workforce.”

Furness adds that insurers and their partners should also remember that speaking to distraught customers can have a negative effect on a team’s wellbeing.

“We train our people to ensure they have the tools to manage difficult conversations with customers, as well as cope with the stress, uncertainty and heightened tension that the event can cause for a team member on an individual level,” he says.

Essential communication

A crisis communications plan is separate from, but closely related to, the crisis management plan.

“Whatever the nature of the crisis, saying nothing is not an option,” says Hamilton. “Customer and broader stakeholder communication is critical, and companies need to be prepared to tell their own story before someone else fills the gap. Once you lose control of the narrative, it can be very difficult to regain the voice of authority.”

He advises insurers to act as soon as possible to acknowledge that there has been an event, that you’re aware of it, that you’re working to resolve it, and that more information will be provided as it becomes available.

“Gone are the days of just relying on a media release,” says Hamilton. “Your stakeholders will be listening, watching, browsing — and your communications response needs to take that into account with a multichannel approach.”

This can include email, social media and your website, as well as direct communication through customer service channels like text or phone.

“In times of crisis, it’s critical that insurers are communicating in a clear and simple way,” says Furness.

“Customers will be in a state of stress and may be unable to process complex or confusing messages. Ensuring they receive important information through the medium they prefer means they’re more likely to retain what you need them to know.”

Messages should also be tailored to the specific needs and preferences of different customer segments.

“In New Zealand, for example, insurers need to consider how best to communicate with a diverse and multicultural population,” says Furness. “This can include engaging translators, adding image descriptions or utilising non-digital channels.”

Common factors for success

Hamilton has supported clients from many different sectors and industries through incident response. In his experience, those who handle a crisis well have a few things in common.

“I’ve found that their crisis teams are made up of people who trust each other, who know the intricacies of their businesses, who keep calm under pressure and who are able to lead the strategic response to a crisis,” he says.

“Like the crew of an airline, everyone in an insurance company’s team should be so familiar with their role in a crisis that they automatically respond smoothly and calmly. Insurers also need to prepare for the emotional toll a crisis takes on both its customers and its frontline workers, who might be affected by the crisis themselves.”

The most common mistake? “Not being prepared,” says Hamilton. “If you don’t have up-to-date crisis management and crisis communications plans, you won’t be able to respond effectively when a crisis hits.” 

A co-operative approach to crisis for ASEAN+3

In South-East Asia, some countries are taking a collaborative approach to crisis management. With a large regional population that is mostly underinsured, the initiative acknowledges that disasters don’t always recognise country borders.

In partnership with the World Bank, which serves as lead technical partner, the Southeast Asia Disaster Risk Insurance Facility (SEADRIF) provides cover for governments in the region and serves as a platform for rapid payouts in the aftermath of a loss event.

Participating nations also receive advisory and financial services to increase preparedness, resilience and co-operation in response to climate and disaster risks.

Cambodia, Indonesia, Lao PDR, Myanmar, Philippines, Singapore, Japan and Vietnam are currently members, and membership is open to all ASEAN+3 countries — the 10 ASEAN member states plus the People’s Republic of China, Japan and the Republic of Korea.

Disaster risk financing and insurance products are offered through the SEADRIF Insurance Company, which was incorporated in Singapore in 2019.

Read this article and all the other articles from the latest issue of the Journal e-magazine.

Read issue 2 of the Journal