EARTHQUAKE IN TüRK?YE: LESSONS LEARNED FROM A CLAIM PERSPECTIVE.

Türkiye has been hit by two major earthquakes on 6th of February 2023. More than 10 cities were devastated resulting in death of 40.000 people and injuries of over 100.000. Hatay, Kahramanmara? were the two mostly affected cities in the region making up the majority of fatalities as well as financial losses. An estimated 100.000 buildings were either collapsed or heavily damaged so as to make further accomodation impossible. Some major industrial establishments were also collapsed or damaged to be obliged to cease operations for long periods. Expected ultimate direct and indirect losses associated with this event is around 100 billion USD of only which %10 of is insured losses.

I want to share our claim experience following this event, ?in a way to split it into two main parts of lessons learned; one as the first proactive preparation phase and second as post disaster actions and approach. In this context even though I will try to mention a few words about underwriting concerns my main focus will be of claims, service and operations.

LETS START WITH PREPARATION PHASE I: What should be done before the catastrophe?

1-Emergency plans:-Insurance companies who? have a business continuity and emergency plan in place are one step forward than their competitors especially when these plans were tested beforehand so as to? verify an actionable plan and all parties involvement. Communication is at the very heart of this process and a complete plan of communication either all internal and external parties should in place.

2-Reinsurance coverage: Reinsurance in case of catastrophic evets are critical to solvency of insurance companies in case of huge natural catastrophes. Catastrophic excess of loss agreements protect the risk of conservation of all agreed branches in case ot a catastrophic even on a agreed layers with multiple reinsurers. Therefore;

2.1.Precise overall pml calculation of losses under different catastrophic scenarios and buying an optimum protection level is of utmost importance.

2.2.Creditability and solvency of reinsurers taking part in these agreements are also important.

2.2.Treaty reinsurance, facultative reinsurance and? CATXL reinsurance agreements will all be active in this process and they should all be taken into consideration

2.3.Including all branches/products to CATXL agreement where relevant earthquake protections are offered. A forgetful approach resulting in excluding even one branch (health, accident) can cause an unexpected result of hit to solvency.

2.4.CATXL agreements should include down payments options and enable insurers to request down payments from their reinsurers even before they settle claims, this is critical

3. Back up teams: A team of people with adequate skill set of claim handlers and claim adjusters should be established beforehand so as to replace the ones that are affected and unable to perform their tasks, another aspect is to spread teams in multiple geographical areas to serve for one another when needed.

4.Claim systems functionality and maturity: A claim system which connects related actors and tpa’s in a single online platform and eliminating need for physical documents is key to overall functioning of claims departments regardless of location flexibly.

5. Mismatch of coverage bought versus real risk needed to be insured: (underinsurance) Underinsurance has been one of the very critical outcome that has been found out at the very first days after the earthquakes especially when individual risks are concerned. Many houses which are covered by compulsory earthquake policy an done that are lucky to have complimentary home insurance policy turned out to be underinsured. This was due to the fact that a proper communication has not been carried out by agents, banks and insurance companies to policyholders and vice-versa. And another very dramatic finding was that policyholders' information were negligently and knowingly misleading and therefore a proper pre communication before has not been possible. All individuals should buy adequate coverage for building and holdings and actively be advised when they are not anyhow to able to do so in a timely and proactively manner.

PHASE 2: POST CATASTROPHIC APPROACH: CAT happened now what?

1.????? Communication is again at the very heart of first days and weeks of post incident days including communication with employees (claim staff), claim adjusters, repair stations, protection and salvage companies so as to ensure physical and psychological well being of these parties and their potential capability to take role in exercising their duties.

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2.????? Support and contribution to claim teams: As there will be an overwhelming amount of claims to be settled following an earthquake internal claim handler teams should be supported with additional human sources who are most eligible possible.

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3.????? Keeping Claim Records Right and timely: As this is not only applicable to catastrophic cases but in claims general, yet relative importance of tagging all direct and indirect claims resulting form that catastrophic event in an understandable parametric approach is of critical importance. Claim reasons, proximate causes dates and city information are key to tag the event right and pool all similar claims for reinsurance or operational/reporting purposes. Call centres should also be educated and advised? thoroughly for following the right procedures.

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4.????? Call Centre Location: Right after the earthquake fnol process becomes one of the most critical functionality expected. A properly functioning call centre is at the centre of the communication chain and also serving as confidence to policy holders.

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5.????? Assistance Services: Assistance services are also very vital following the incident; RSA and RAC services do not only serve for regular needs but plays a vital role for the people affected in the region and wants to move to other cities temporarily. However it is critical to be open and clear whether the assistance services include or exclude earthquake coverage not to cause confusion.

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6.????? Agency/Broker Interaction: Agency located in the effected area are both victims of the incident but still the ones who represent the insurer in field with close interaction with the local people and customers. In this sense, agencies should be kept in the information chain from the first day on and guided to report claims with as many possible details as possible. The earlier are the claims are known with more details the better the projection for financial results and operational source estimates.

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7.????? Reinsurance agreements: Reinsurance agreements (treaty facultative and catxl should be exercised carefully and claims should be demanded from reinsurers promptly for speed claim settlements as well as balanced cashflow.

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8.????? Operational flexibility and document free/flexible claim settlement: catastrophic events are rare and demolishing events that effect everyday life of policyholders which is so obvious. Accordingly the way that we settle claims should be revised and simplified instantly eliminating paperwork, enabling down payments and speeding payment and approving processes.

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Last but not least Turkey is a major high earthquake risk country - this is an undisputable fact. Accordingly overall public awareness for earthquakes and its possible consequences together with strictly followed strategic action plan addressed by public authorities is key to minimizing risks and losses. Awareness of public and a strategic actionable plan of government, I believe is supporting one another and there is bilateral dependence. Insurance companies here play a key social role in remembering, reminding this continuously and promote actors to assess and minimize their earthquake risks not only after earthquakes or catastrophic evens but in a way to keep it always in the top of our agendas.

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