2022 Hurricane Season Insurance Report
With summer heading into full swing, the U.S. hurricane season can’t be far behind.
Officially, forecasters at the National Oceanic and Atmospheric Administration (NOAA) and its Climate Prediction Center are predicting above-average hurricane activity this year, making it the seventh-straight years U.S. government weather experts are calling for an above-average hurricane season.
Overall, NOAA’s estimate for the 2022 Atlantic hurricane season (which starts June 1 and ends November 30) touts a “65% chance of an above-normal season, a 25% chance of a near-normal season and a 10% chance of a below-normal season.”
“For the 2022 hurricane season, NOAA is forecasting a likely range of 14-to-21 named storms (i.e., winds of 39 mph or higher), of which 6-to -0 could become hurricanes (i.e., winds of 74 mph or higher), including 3-to-6 major hurricanes (i.e., category 3, 4 or 5; with winds of 111 mph or higher),” said Kelly Rush, director, home vertical at LexisNexis Risk Solutions. “NOAA provides these ranges with a 70% confidence.”
The 2022 U.S. Hurricane Season: Impact on Insurance
Hurricane seasons and seasonal estimates have a big impact on insurance policies for households and businesses who reside in hurricane-threatened U.S. states, which usually stretch down the U.S. east coast and bending toward states bordering the Gulf of Mexico – a notorious hot spot for hurricane activity.
With many U.S. border states bracing for potentially aggressive hurricane activity this summer and fall, here are the big insurance issues consumers and businesses need to know about – before it’s too late.
Look for these dominant factors to have the largest impact on the insurance sector.
Climate change a burgeoning threat. A 2022 Aon Global Catastrophe report indicated the first three months of 2022 resulted in the sixth straight year in which there were more than $10 billion in insured losses from natural disasters around the world.
“The Aon study predicts that climate-related losses are likely going to continue to escalate as global warming increases,” said Mark Snyder, claims expert at Hi Marley, an insurance industry communications platform. “In addition, insurers are leveraging digital technologies to provide early warning of impending storms, and to efficiently and effectively communicate with large swaths of policyholders around hurricane preparedness.”
Climate change is also going to cause big expenses for property and casualty insurance, and the costs are most likely going to be passed on to consumers.
One report on insured wind losses shows that our warming climate has caused more Category 3 and above hurricanes,” said Sean Harper, president of Chicago-based Kin Insurance. “The additional storms have already pushed losses up by 11% above what we’d expect if climate change wasn’t a factor.
Moreover, the report also says global temperatures are projected to increase by an additional 0.4 to 1.3 degrees C by 2050 and that will most likely cause average annual hurricane wind losses to increase an additional 10 to 19 percent by 2050.
“That’s a big jump, but it’s spread out over 30 years,” Harper said. “Plus, insurance companies have this information and can use it to prepare for the cost.”
Hurricane coverage issues emerge
While a traditional homeowners insurance policy of insurance covers repair costs from damage caused by most natural disasters, it likely won’t cover flooding.
“Any flood damage caused by a hurricane and/or the resulting storm surge is typically excluded, regardless of whether your property is located in a coastal area or not,” Snyder said.
In a typical homeowners 3 (HO-3) policy, details of water damage-based exclusions can be found under Section 1, Exclusions.
Specifically excluded is ‘flood, surface water, waves, tidal water, tsunami, overflow of a body of water, storm surge or spray from any of these, whether or not driven by wind,” Snyder said. “By definition, this includes most types of surface borne water damage that is generated via hurricanes or similar storms.”
In addition, if properties are located in coastal areas, there may likely be significant wind exclusions which would necessitate the purchase of a separate wind policy product.
“The deductible on wind policies is usually on a percentage basis,” Snyder added. “For example, if your home is insured for $500,000 and your wind insurance deductible is 5%, your loss deductible amount would be $25,000.”
Insurers are stressed
Historically, the insurance industry has been committed to ensuring that insureds homes are properly covered.
“However, the long term-trend in the U.S. is population continuing to grow in the South and in hurricane exposed coastal areas,” Rush said. “This adds to the growing concern of insurers about total exposure in the coastal areas, especially in areas of very hurricane-exposed geographies.”
Consequently, not only can very high damage stress an insurer financially, but insurer claims operations can also be stressed.
“Carriers must manage their operations to maintain their high financial standards and customer satisfaction goals,” Rush noted. “These stresses become even more challenging when they add to that the recent extreme increase in home values, home repairs, and home replacement.”
Carriers also don’t increase coverage levels purely based on hurricane experience.
“The industry standard is that carriers look annually at overall historical and projected claims experience and apply that claims trend as appropriate to coverage levels,” Rush added. “However, consumers are urged to periodically review their coverages with their agents. This will allow the best reflection of the current home conditions, value, and coverage needs of the consumer.”
The best insurance and safety tips for homeowners
Homeowners should obtain the best insurance policy as possible, “as self-insuring is crazy and you will end up with just raw land and the house has little coverage value,” said Jim Angleton, chief executive officer at AEGIS FinServ Corp., in Miami, Fla.
Generators are important, too, but avoid small portable generators, which Angleton describes as “worthless.”
“It’s better to rent or become part of a rental pool to obtain at least a 50kw diesel powered generator that will provide 100 percent energy for the home and keep the air condition going,” he said. “Otherwise, humidity and pressure from storms can cause mold to build up in the attic of your home and you may lose coverage.”
Window panels are good if the homeowner doesn’t have impact-based glass and doors.
“However, flying debris can still act like a missile and penetrate the three-pane glass windows so we recommend metal panels over the windows and large panels for doors,” Angleton noted. “Past that, don’t remain on the property during a hurricane. It’s best to take cash, food, family, and pets and leave for higher ground or go to another state. Only return when power has been restored and be careful of theft, people with guns in the streets who are desperate for food, money and water.”
Home Weatherproof Tips for Hurricanes
— If applicable, install a sump pump, a backup sump pump. “Also, make sure both pumps also have battery back up in the event of a power loss during a storm,” Snyder said.
— Make sure any susceptible foundation areas (cracks / gaps etc.) are properly protected by applying high-quality, long-lasting sealants to any potential risk areas.
— Ensure your property is properly graded (away from your house on all sides). “This will help mitigate potential damage from significant storm and water runoff events,” Snyder said.
— Install a back flow valve to prevent sewage or storm water backups into the home.
— Ensure gutters and downspouts are always free and clear of debris. “Make sure that downspouts pour out away from your home to prevent run off water pooling or backflowing into the foundation,” Snyder noted.
— If you have not already done so, consider installing six-inch gutters and downspouts instead of the standard five-inch versions.
— Reduce the potential for damage from flying debris by properly securing and storing at risk items-outdoor chairs, tables, umbrellas, and pool covers.”
Filing a Hurricane Damage Claim on Insurance
While hurricanes can be catastrophic events, homeowners should be patient with insurer claims personnel.
“Providing as much information upfront will facilitate the process,” Rush advised. “Consumers should document interactions with their insurers. In the rare situation where consumers are not receiving adequate updates and making adequate progress with the insurer, the consumer should be prepared to escalate with their carriers.”
The Takeaway on Hurricane Season and Insurance Needs
Overall, consumers concerned with hurricane insurance should balance annual premiums with the deductible levels.
“In some situations the deductible level might require too much financially from the consumer in the time of catastrophe,” Rush noted. “Conversely, the deductible level might be too low and the resulting premiums might be higher than the consumer would prefer long term.”
Consumers should also select an insurance carrier that best fits their unique needs.
“Some carriers specialize in low premium with basic coverage others specialize in higher premiums with broader coverage,” Rush added. “The consumer is best suited by discussing carrier fit with their agent, and also doing some personal research as to broad consumer feedback on carriers.”
