Appendix 3: The FASTER Form © Crichton 2001

(Flood And STorm Event Report Form)
For quicker, but more detailed reporting on major flood and storm events.

By David Crichton

Following a major flood or storm event, insurers and loss adjusters can have major problems in dealing with the large volume of claims that arise.

There are basically three problem areas;

The first problem is the simple logistics of dealing the volume of claims. In recent years, insurers have been pressing loss adjusters for lower rates, and this has had the effect of reducing the number of skilled loss adjusters available. This can result in a slower service to customers.

The second problem concerns so called "claims inflation". During a major event, various types of behaviour can be seen:

•  Bandwagon Effect

Where claimants are tempted to seek higher settlements after talking to other victims, and are jealous of what others obtained, or are unwilling to accept the loss adjuster's offer.

•  Profiteering

Where tradesmen inflate their usual rates due to the high demand.

•  Sales pressure

Where tradesmen have pressured victims to accept unreasonable estimates or shoddy work.

•  Collusion

Collusion between tradesman and claimant to inflate the estimates (eg to cover the excess), or between tradesman and tradesman (to "fix" the lowest estimate).

•  Exaggeration

Where many claimants have exaggerated the amount of damage or he value of the losses.

•  Missing salvage

Suspicious cases where damaged contents have not been retained for inspection (perhaps they never existed, or were never owned by the claimant).

The third problem is Opportunistic Crime. Looting, mugging, assaults, and malicious damage can increase during the aftermath of a natural disaster, when the police are usually occupied elsewhere and homes may be abandoned.

Background

The last ten years have seen an unprecedented increase in the number and cost of flood and storm claims in the UK . Latest expert opinion on the impacts of climate change is that extremes of precipitation will increase in the UK and many now believe that there will also be more frequent and severe storms. Adaptation will mean the need for changes in building regulations, and the insurance industry may be called on to provide data on storm and flood damage to assist with that process.

Climate change raises several important challenges for insurers;

•  Can insurers streamline claims handling systems to be able to cope with a sudden flood or storm event more quickly, providing better customer service and minimising losses?

•  Can they capture more information about the effects of such an event so that they can provide Government with the data they will need for the purposes of tougher building standards?

•  Can they improve pricing structures to make premiums reflect the risk more accurately?

•  Can they improve catastrophe models to help to assess how much reinsurance is needed how much it should cost?

•  Can insurers tighten up on fraud and claims exaggeration?

At first sight, there seems to be a conflict here, how can claims handling systems be made faster, and yet tighten up on fraud and capture more data? The "FASTER" form is an attempt to address these problems.

Usually the loss adjuster makes notes while on site, after checking on any special requirements of the insurer involved. He or she then takes the notes back to the office, and dictates a preliminary report which is then typed up and posted to the insurer. With the "FASTER" form the whole process could be made significantly quicker, with a number of other benefits. If the insurance industry were to accept this form as providing all the initial information they need and agreed to accept it in place of the traditional preliminary report, the benefits could be significant: Also, because the form has been designed to be easy to use, insurance claims clerks could use it as a checklist when on site visits for smaller claims where a loss adjuster is not involved. Similar forms have been introduced in Australia for bushfire and earthquake.

The form was first designed back in 1996, and has been through an extensive consultation and piloting phase. Academics, architects, builders as well as loss adjusters and insurance experts, have made useful and constructive comments, and the questions have been revised many times as a result. The form has been strongly recommended by the Loss Prevention Council's Natural Perils Advisory Committee and the ABI Weather Damage Working Group, as a possible standard market form, and has been extensively used in connection with the University of Dundee project to collect flood damage data.

It has been suggested that much of the information requested in the form is already provided in loss adjusters' reports. This has not been the author's experience, after reading many hundreds of such reports, trying to extract critically important information such as depth of flood, or type of contamination of the water. Even if the information does appear in the reports, it is often embedded in text, and therefore hard to extract for analysis purposes. Loss adjusters have a problem in that different insurers require different data from them; some require a great deal of detail, while many do not give any guidance as to what information they want.

Benefits if the form were to become an industry standard

For the Loss Adjuster, claims clerk, or delegated authority contractor:

•  The form provides a simple check list of information to obtain during the site visit.

• Less chance of items being missed, saving on return visits.
• Possible indicators of fraud are highlighted.

•  The form can be used instead of site visit notes; just fill in the boxes on a paper form or laptop computer.

• Saves time in writing out details in longhand.

•  On return to the office, instead of dictating a preliminary report, just fax or e mail the form.

• Eliminates time spent on producing reports following site visits; the time can be spent on giving more attention to the needs of claimants and giving faster service.
• Eliminates costs and delays due to typing preliminary reports.

Additional benefits for the Loss Adjuster,

•  No need to check up on any special requirements of the insurer before the site visit.

•  Time saved, and less confusion over different insurers' requirements

•  Publication of the tables of average claims costs could provide guidance to adjusters for future claims; cases with claims in excess of what might be expected could be spotted more easily.

• Helps with loss adjusters' training programmes, improves consistency, helps spot fraud.

For the Insurer

Customer Service

Much faster receipt of preliminary reports; if sent by fax or electronic mail, the completed form could be received within minutes of the site visit.

Better customer service thanks to quicker decisions on emergency repairs etc.

More likely to be able to get the repair work done by a preferred contractor - the longer the delay the more chance that the insurer will have to accept a less reliable, or more costly contractor.

Setting Reserves

Data received already formatted, ready to be processed by the insurer to establish an early indication of likely total costs.

• Quicker, more accurate reports to help with setting reserves.

Reducing Fraud

Provides more details than would be obtained from a standard preliminary report.

• Helps to spot fraudulent claims.

De skilling for small claims site visits

The form can be used by the insurer's own staff (including non claims staff) to do site visit reports on small claims.

• Potential to reduce claims handling costs and small claims fraud. This is especially important during a major event, when the need for a claims form may be waived, and loss adjusters may be used only for the biggest claims.

For the Insurance Industry

ABI.

By sending a copy of the "FASTER" form to a designated university, the details could be scanned into a computer database (after removing details which identify the insurer, loss adjuster, or claimant), and daily updates and analyses of the total likely costs and nature of the event could be made available to the ABI.

•  ABI better prepared to communicate with media and emergency services.

Premium levels and catastrophe reinsurance

By building up a database of various flood and storm event details, the industry can improve its understanding of the effect of such events on claims costs and can improve the accuracy of its premium levels and catastrophe models.

•  Better assessment of how much catastrophe reinsurance is required.

•  More accurate costings for premium levels and reinsurance.

Risk Management

By identifying the main contributory factors to flood and storm costs, the industry will

•  Be better placed to reduce costs through targeting risk management activities,

•  Be better able if necessary to influence building techniques and standards.

•  Be able to highlight potential underwriting factors such as the age or type of construction of the property.

Procedures

Please note; the form is only intended for use where there has been a visit to the site of the damage, by a loss adjuster, or an employee of the insurer, or a delegated authority building contractor.

If completed by a loss adjuster or contractor, forms should be sent by fax to the relevant insurer and to the designated university as soon as possible. Alternatively, the form can be sent by electronic mail. If completed by an insurance company employee, a copy should be sent to the designated university either by fax, or posted in batches.

One Faster form should be completed for each site of damage.

When all sites have been visited, a copy of the "Event Form" should be completed for all insurers involved.

Event Form; General Issues

This supplementary sheet is intended to be used to give the loss adjuster's or claims handler's general impressions about aspects of the event which could have implications for the claims costs. In the aftermath of a major event, there are many factors which can operate to increase the claims costs, and this would have obvious effects on catastrophe modelling. Keeping this as a separate form, applying to all the sites visited, not only saves duplication, it will hopefully encourage a franker, more forthright disclosure of some of the more sensitive and difficult aspects of the claims.

Instructions for Completion of Forms

A guide to completion, and what the questions are for...

Header

The form is intended to be used in place of the adjuster's site notes and preliminary report.

By completing the form on site, and faxing it to the insurer and to the university immediately after the visit, not only can a great deal of time be saved which can be more effectively used out on site, but also the industry can get a much earlier picture of the extent of the losses. Note that there is space to show the name of the individual who completed the form, and the date of the visit. There is also space for a rubber stamp showing the adjuster's name and address. Just above this is a space for "File Ref. No", to be used for the loss adjuster's file reference number, or, if the form is completed by an insurance company employee, the claim number or policy number.

Part One. General Information

This is information relevant to different types of natural perils claims.

•  If the premises does not have a postcode, e.g. a church, item of plant, electric substation etc., then give the nearest postcode available and write "next to" above the postcode field.

To avoid any possibility of Data Protection Act problems, the University which will be analysing the data will be subject to a confidentiality agreement and will not be capturing the house number; that information is purely for the benefit of the insurer dealing with the claim.

•  This is intended to assess proximity of adjoining property as this can affect wind gusts and flood velocity and contamination. It could be a potential future underwriting factor. Topography also affects the local maximum gust speed; the figures from the nearest weather station may not be appropriate to the local situation. The question is also relevant to flood.

•  This shows three very broad industry groupings, plus residential, motor trade, and unoccupied. Anything outside these may have unusual features and so it needs to be specified, in case it affects the validity of including the data.

It is tempting to ask for more detailed information about occupation, e.g. asking for the Standard Industrial Classification, but the main purpose of the form is to be able to produce mean loss ratios. The more variables the more complex this task will be. Occupation reveals something about the contents, (this is why motor trade merits a special mention - see the comments on question 3.5) while there is another question about the type of building (2.2). There is also, of course, an unoccupancy option.

Part Two: Information about the property

Note that non conventional properties are excluded from the scope of this part of the form, but it still requests information about losses. Individual insurers may wish to revisit such claims asking for specific information.

•  Only a limited menu here, - this reflects an expectation of the factors to be shown in the mean loss ratio tables.

•  This is to get a general idea of the building stock type. By having two "dimensions" it is potentially possible to identify 25 different types of building from only two ticks. A further tick in the next question raises this to 100 potential types. In practice, mean loss tables will tend to group types with similar results, but to do this requires a fairly detailed set of data.

•  These are the bands currently used in the Middlesex University flood mean loss tables. Using these bands will aid comparison.

•  Even a very old flood event will be of interest for flood risk mapping purposes. Recent storm damage will also be of interest, from the point of view of whether repairs were satisfactory.

Part Three: Flood and Freeze

•  Flood and freeze have been combined in this part, because freeze damage to burst pipes could result in similar damage to flood. However flood is also associated with contaminated water, impacts etc. so questions 3.2, 3.3, 3.4, and 3.5 are not relevant to freeze and can be skipped in such cases. Separate surveys have already identified information about precautions people take to prevent freeze damage, so there are no questions about this in the form, however, there is an unoccupancy question which would be relevant (1.3)

The aim of this section is to collect information about water damage claims. Not all such claims will be covered under the flood or burst pipes sections of the policy - please ensure that you are aware of the limits of such covers in the relevant policy.

•  The source of the flood is useful for identifying the event and mapping its extent. Roof failure is a common cause of flooding when there is a long spell of torrential rain; gutters and down pipes may be blocked, tiles may be broken, flashings may not cope with the volume etc. Also roof failure may be the result of storm damage and in a wet storm, there can be significant water damage inside the building. Rising groundwater is not usually regarded as "flood" and is normally excluded from cover. However, in certain circumstances, e.g. where the event is sudden and is related to flood conditions, then it may be decided to indemnify. For example, seepage under an earth flood defence due to pressure of water from a river or the sea. A burst water main is not a natural catastrophe, but what is important is data on water damage for mean loss ratios. For that purpose, it is valid to include such an event.

•  Contamination and impact are important factors influencing the amount of damage.

•  Studies in the UK show that flood warnings can have a major effect on reducing average flood losses. A two hour warning can reduce average losses by as much as 50% for a 0.3m flood in residential property (43% in a shop). However, a four hour warning only increases the saving to 55% (47% in a shop). [Cole, G and Penning-Rowsell E C, 1981 in "Flood Studies Report; five years on" pp143-151].

Long warnings are unusual in the UK , due to the relatively small scale of river catchments and coastlines and it is clear that the first two hours are critical.

In the USA , it is possible to have quite long warnings: a Mississippi flood can take more than two days to reach New Orleans for example. However, there is some evidence from the USA that a warning of more than eight hours has little more effect than a warning of less than eight hours. It is not known whether the same applies in the UK . Finding out how the warning was given is a bonus; it would be very useful to the insurance industry and the authorities to discover the most effective source of warnings because this could potentially help make future warnings more effective, something which is in everyone's interest.

If the policyholder takes action as a result of a warning, this will affect the loss and therefore the costs will have to be treated differently when collecting data for the mean loss ratios.

If no action is taken, the reasons should be explored, hence the reference to Question 5.5.

•  The type of action taken will influence the extent to which the individual loss is mitigated. Another factor will be the occupation, which is an indicator of the type of contents in the premises. A good example of this is motor trade, where high value vehicles could be moved quickly at short notice, thus having a major effect on costs and a reduction in subsequent oil contamination for surrounding property.

The action taken may not be very effective, and it is vital to know whether it is or not for the input into the mean loss ratios data.

•  The longer the inundation, the greater the damage for a given depth. This is because capillary action and humidity will attack property above the level of the water. So pumping out the water and installing industrial dehumidifiers quickly is very important. Any calculations of mean loss ratios will be very much influenced by the duration of the inundation, and the effects of these secondary forces. For coastal floods, there could be the added complication of successive tides topping up the water level.

•  Depth is still the single most important factor, and will be the basis for all the flood mean loss ratio tables. There has been some debate about the use of bandings rather than asking for a depth figure and developing a "smooth curve". In practice, following studies of hundreds of loss adjusters' reports, it is clear that there is already a form of banding being used in that loss adjusters tend to give depth estimates in round numbers - after all they are usually estimates anyway.

Part Four: Windstorm

•  Roof damage is one of the commonest results of a storm. In the October 1987 storm, 63% of damage was to roofs. Note that for flat roofs the form does not ask for any construction details, because damage to a flat roof usually seems to be due to the lack of adequate ties holding it to the structure.

Sarking boards are an important element; they are generally used below slates or tiles in Scotland , but are much less common elsewhere. Indications are that sarking has a major effect in making the roof more storm resistant.

•  A number of experts expressed concern that unsupported gable walls would be very vulnerable in areas where storms are not traditionally very common.

•  There are a lot of different factors in this list, many of which have been derived from an Aberdeen University study (Loss Prevention Council, Paper LPR 8: 1998 ISBN 0 902167 49-9) which has examined the causes of windstorm damage. The factors shown here are the most common causes according to this study. While this will not help with the mean loss ratios, it is an excellent opportunity to create a very much larger database of such information, which can be used for a number of purposes, for example targeting areas for surveyors to check out, or providing information to those who set building and construction standards. This question can also give an indicator of a potential problem due to lack of maintenance, hence the cross-reference to question 5.5.

The question of lack of maintenance or the general condition of the property is an important one, and merits its own question later on (question 4.7)

•  Just as depth of flood is the major factor in flood mean loss ratios, so maximum gust speed is a major factor in windstorm. Unfortunately, gusts are very localised, and depend on local topography and surface friction (see question 1.2). In most cases therefore, the loss adjuster will have to rely on the mean windspeed from the nearest weather station. Note that conversion ratios are given for a number of different units of measurement, because the nearest weather station may not always be a Met Office one; it could be a WeatherNet station or perhaps a university, coastguard, marina, airfield, or private individual. The important point is that the station should be the closest one to the site, regardless of who operates it, provided they are qualified and the anemometer and recording equipment are to Met. Office standards.

•  Duration and whether the storm was "wet" are clearly important factors.

•  If the property is the only one in the area to suffer damage, this might indicate lower standards of maintenance, or suspicious circumstances, hence the reference to question 5.5.

•  Leading on from 4.6, there is a specific question about the condition of the property. In the case of severe storm damage, this may be hard to assess without closer examination, so again there is reference to question 5.5.

Part Five: Costs

These are self-explanatory. Note that the form asks for information before deductibles, excesses or average: this is because the information is for use in mean loss tables, not to calculate the cost for a particular insured. Although average is to be ignored, there is still a question about an appropriate sum insured, because this gives a good measure of the size of the property: different sizes/values of property may have different mixes of claims components.

The form asks for actual sums insured as well; this is for a possible future analysis of whether particular categories of policyholders have a tendency to underinsure. For example are those living in flood plains less likely to underinsure?

Note that for domestic contents costs should be on a "new for old" basis, not indemnity; this obviously would have an effect on claims costs.

This is the only part of the form that asks about outbuildings. These can be particularly vulnerable to storm damage, and may feature in many such claims.

For the purposes of producing mean loss tables, the estimates should assume that a preferred contractor will be used for the repairs, although in practice this may not be possible in a major event. This is catered for in question 5.5, which should help to produce some form of consensus about an appropriate claims inflation loading to the mean loss tables where a catastrophic event occurs.

Question 5.5 also gives the loss adjuster the chance to flag up any suspicious claims. In such cases a phone call to the adjuster is more appropriate than asking for comments in writing.

Thank you very much for completing this form

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