Natural Disasters and the Decisions That Follow
Jeff Rommel's introduction to Florida could be described as trial by hurricane. Rommel took over Florida operations for Nationwide Insurance in 2004. Over a 2-month period that year, Florida experienced its worst hurricane season in history—four major hurricanes (Charley, Frances, Ivan, and Jeanne) slammed the state, causing an estimated $40 billion in damage. In the hurricanes' wake, Nationwide received more than 119,000 claims, collectively worth $850 million.
Although dealing with those claims was difficult, even more difficult was Rommel's later decision to cancel approximately 40,000 homeowners' policies. Nationwide received a huge amount of media attention as a result, almost all negative. In reflecting on the decision, Rommel said, "Pulling out was a sound business decision. Was it good for the individual customer? No, I can't say it was. But the rationale was sound."
Hurricanes aren't the only weapons in nature's arsenal, and the insurance industry is hardly the only industry affected by nature. Consider the airline industry. American Airlines has 80,000 employees, 4 of whom make decisions to cancel flights. One of them is Danny Burgin. When a weather system approaches, Burgin needs to consider a host of factors in deciding which flights to cancel and how to reroute affected passengers. He argues that of two major weather factors, winter snowstorms and summer thunderstorms, snowstorms are easier to handle because they are more predictable.
Don't tell that to JetBlue, however. On February 14, 2007, JetBlue was unprepared for a snowstorm that hit the East Coast. Due to the lack of planning, JetBlue held hundreds of passengers on its planes at JFK, in some cases for as long as 10 hours (with bathrooms closed!). To the stranded travelers, JetBlue's tepid offer of a refund was just as outrageous. For a carrier that prided itself on customer service and had regularly been rated the top US airline in customer...