Hurricane Helene Loss Adjustment Expenses Could Top $1 Billion
The Cost of Hurricane Helene
Hurricane Helene has left the insurance industry with substantial financial challenges. Leading storm modelling and analytics firm Karen Clark & Company estimates total insured losses from the storm could reach $6.4 billion. While not unprecedented, this level of damage underscores the growing financial burden associated with major hurricanes in the Gulf Coast region. As the claims process unfolds, one of the key concerns for insurers will be managing loss adjustment expenses (LAE), which could easily exceed $1 billion, further straining insurer resources.
The Escalating Burden of Loss Adjustment Expenses
Loss adjustment expenses, which encompass the costs of investigating, processing, and settling claims, are expected to soar in the wake of Hurricane Helene. With 79,360 property claims already filed in Florida alone, insurers must brace for the financial toll of managing a high volume of complex claims. This includes the costs of independent adjusters, engineers, and legal support, all of which add to the total LAE.
Given the projected $6.4 billion in insured losses, insurers could be looking at LAE ranging between $896 million and $1.28 billion. These expenses can quickly erode reserves, making it essential for insurers to implement strategies that mitigate and control costs.
Controlling LAE Through Automation and Technology
As insurers handle the rising volume of claims, controlling LAE becomes paramount. One of the most effective ways to achieve this is by leveraging technology that automates and streamlines the claims adjustment process. Tools like Bill Audit Pro (BAP) provide insurers with the ability to validate, audit, and submit adjuster invoices in real time, reducing administrative delays and errors.
Automation not only ensures that invoices are processed quickly, but it also helps to mitigate potential overpayments, ensuring that LAE remains within a manageable range. By integrating technology into the workflow, insurers can increase efficiency, reduce costs, and focus on processing claims faster, benefiting both adjusters and policyholders.
Lessons from Recent Hurricanes in the Gulf Coast
The Gulf Coast has seen significant hurricane activity since 2017, including events like Hurricane Harvey (2017), Michael (2018), and Ida (2021). Each of these storms brought enormous insured losses and skyrocketing LAE due to the high volume of claims and the complexity of adjusting those claims. For example, after Hurricane Michael, insurers faced higher-than-anticipated LAE because of delays in processing and difficulties in managing the claims surge.
These past experiences provide valuable lessons for insurers as they navigate the aftermath of Hurricane Helene. By focusing on operational efficiency and utilizing automation to handle claims more effectively, insurers can avoid some of the cost overruns and delays seen in previous storms.
Anticipating the Post-Helene Landscape
In the weeks and months following Hurricane Helene, insurers will face the ongoing challenge of managing high LAE while maintaining service levels. With LAE projected to exceed $1 billion, insurers will need to rely on technology and proactive strategies to control these costs. Insurers that invest in automation and streamlining their workflows will be better positioned to manage both the current claims from Hurricane Helene and future catastrophes. This will not only help reduce expenses but also enhance customer satisfaction by ensuring faster claims settlement.
