Hail and Other Severe Weather Events are Changing How We Do Business
Every part of the country has a weather event that creates changes within the insurance industry that either increases premiums or deductibles. Events such as hurricanes, tornadoes, floods, and of course, hail have caused high dollar payouts to cover resulting damages. Residents in hail-prone areas along the Front Range know that each year, it is not a matter of whether a storm is going to occur but when.
Severe Weather
NOAA’s National Weather Service issued their severe weather report summary for 2018 and total hail reports for the country were 4,610, of which 332 occurred in Colorado, ranking it third for the most events. The incident mapping indicates that the majority of the events occurred east of the Continental Divide.
The 2017 Severe Weather Report listed 6,045 hail events nationwide, 172 of which occurred in Colorado, which ranked tenth.
Damage Payments
Over the years, costs to repair hail damage have increased. Many theories why have been discussed, including fraud, an increased number of buildings across the front range, and an increase in the number of vehicles.
When you look at the severity of damages during 2017 and 2018, the most expensive event in Colorado occurred on May 8, 2017 causing $2.31B in damages as compared to the event on June 18-19, 2018 which caused $281.2M in damages.
Events such as these are going to continue to occur, so the insurance industry is requiring policyholders to share in the costs to repair damages. Limiting coverage grants, increasing premiums anywhere from 5% to 30%, increasing property deductibles by requiring a higher dollar amount or applying a percentage of 1% to 5% of the damaged building, and increasing automobile physical damage deductible amounts are ways they are managing the cost of a hail risk.
Pool Coverage for 2020
We have seen our share of claims resulting from hail events, and we implemented changes to the 2020 Property contribution and coverage grants. However, they are not as significant as they could be. In an effort to meet our goal of providing a stable alternative to traditional insurance, we are sharing in the risks of hail in order to keep our Property program competitive.
Members will see a 7% rate increase as well as two endorsements added to their Property program:
- A Cosmetic Damage Waiver endorsement that excludes coverage for cosmetic damage to roof surfacing caused by wind and/or hail. However, if there is damage to the front entry or to visibly apparent areas of the roof composing of less than 25% of the total roof area, the Pool will pay for such damage.
- A Hail Deductible endorsement stating that if a hail event causes damage to a member’s building or structure, a deductible of 2% of the damaged property value, subject to a $5,000 minimum and $50,000 maximum, shall apply unless a higher deductible is scheduled at the damaged location.
Upgrading to Hail Resistive Roofing Materials
Future insurance pricing and deductibles could continue to increase. One way to mitigate higher costs is to consider using hail resistive roofing materials the next time you need to replace a building’s roof.
When comparing the products available, ask to see the costs for asphalt shingle roof coverings with a Class 4 rating (shown to be extremely resistant to hail impact) versus material with a Class 1 rating which is the least resistant. For metal roofs, metal panels with a higher UL impact rating will provide a more hail resistant roof.
The additional costs for better materials might offset the higher deductibles members are retaining because you may not have to repair a roof every time a hail event occurs. Comparing your options will help you evaluate the best options available for the cost.
Budget Accordingly
Severe weather will continue and with it, damage. Members should include deductible amounts in their budgets, or if that is difficult, build up their funds gradually so that when the next major hail storm hits they can pay the higher deductible. By building up your contingency fund, evaluating additional mitigation techniques, or installing higher resistive roofing materials, you can prepare for Mother Nature’s unpredictability today.
