Insurance Losses from Hail Damage on the Rise
Oct. 11, 2019—Hurricane season is here, and the cleanup and needed reconstruction from the damage in the Bahamas by Hurricane Dorian is a reminder of just how much damage severe weather can cause.
According to Aon Benfield—a company that specializes in analytics and investment banking, among other services—economic losses from global natural disasters in the first half of 2019 were $73 billion, with early estimates pointing to $20 billion in insured losses.
Susanna Gotsch, industry analyst and director of the CCC, reported about the growing danger of hailstorms for the automotive industry. Three of the $4 billion events for the insurance industry in the first half of 2019 occurred in the U.S. and were all weather-related. The events included powerful thunderstorms, tornadoes, large hail, high winds and flooding.
According to the Insurance Information Institute, 2018 was the third-worst year for U.S. insured catastrophe losses. And 2017 remains in the top spot, with hurricanes Harvey, Irma and Maria all occurring. While significant losses from a storm like Harvey comes from flooding, the largest contributor to overall insured economic losses has come from severe weather. Roughly $11.9 billion of the estimated $20 billion in global insured losses from the first half of 2019 came from severe weather, as estimated by Aon. In July 2019, Aon estimates there were $2 billion in losses from severe weather.
Both hail and tornado activity have increased across the country, according to the National Oceanic and Atmospheric Administration (NOAA). Hail damage is particularly common in Colorado, Missouri, Nebraska, Texas, Wyoming, Montana, South Dakota and Oklahoma, while tornado activity has increased in Mississippi, Arkansas, Tennessee, Louisiana, Alabama, Kentucky, Missouri, Illinois, Indiana, Wisconsin, Iowa and parts of Ohio and Michigan.
The CCC found that, nationally among overall annual appraisal counts, there has been an uptick in the percent with primary point of impact of “hail”. In states with lower populations, as well as fewer registered vehicles and automotive claim counts, a single event can result in a significant jump in overall counts.
The average cost of vehicle repairs for hail losses is 33 percent to more than 100 percent higher than other repairs, the CCC reported. It also takes a significantly longer period of time from the date of the loss to the date the customer reports the loss, and a longer time to repair the vehicle.
With a higher repair percent of total labor amount and a higher share of overall repair cost, repair times may be longer due to more labor hours per claim, as well as delays due to scheduling in third party paintless dent repair. States with a higher propensity to see hail losses also see repair volumes spike from a single large event, and the spikes in volume often result in a significant swing in certain key performance metrics.
As the temperature of the earth rises, these types of severe weather events are expected to grow. From 2008 to 2018, damage from hail alone was $19 billion or more annually. There’s no broadly accepted explanation for why hail losses are rising, but the CCC report says that most accept that these severe weather incidents will rise further as the climate changes.