Summer of Storms

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As I write this Tropical Storm Alberto, the rare named storm in the month of May, churns in the Gulf of Mexico towards the Gulf Coast where 65 MPH winds just shy of hurricane strength are predicted to come ashore. After a record 2017 hurricane season one can only wonder whether our Memorial Day weekend’s weather is an indication of what the summer of 2018 has in store for all of us and leads me to want to share a few facts and figures about the upcoming hurricane season as well as what I will call last year’s Summer of Storms.

2017 was a record year for hurricane activity and was dominated by Hurricane Harvey’s more than 600,000 claims in Texas, our own Hurricane Irma and her 924,439 claims here in South Florida and Puerto Rico’s Hurricane Maria, a storm so devastating that some on that island are still without power.

Hurricane Harvey made landfall in Texas on August 24th and 25th and today is tied with 2005’s Hurricane Katrina as the most costly hurricane in American history at $ 125 Billion in damage.

Hurricane Irma made landfall in the Lower Florida Keys about 10 miles north of Key West on September 10th. According to the Florida Office of Insurance Regulation Irma led to a record 924,339 claims and saw losses reported in every county in Florida.

Harvey, and then Irma, hitting U.S. shores barely two weeks apart crippled the insurance industry as the sheer number of losses and the extent of the damage slowed the claims and rebuilding process in many frustrating ways. Insurers do not staff armies of adjusters awaiting the next catastrophe (or three in this case) and instead rely on independent claims adjusters that travel from one disaster to another each year. In most cases (Andrew, Katrina, 9/11) the process works and works well. In 2017, however, the number of storms and resulting number of claims exposed weaknesses in the claims process and caused a great deal of frustration, some of which lingers today, as property owners struggle to meet with adjusters, contractors, engineers, building officials and others needed to determine the scope of their damage, the cost of repairs and both get paid and begin rebuilding.

Based on the Florida Office of Insurance Regulation’s most recent data 88.5% of all Irma windstorm claims have been closed which, of course, means that 11.5% of all Irma claims remain open nearly nine months after the storm made landfall. You can review the State’s claim’s data on Irma by clicking here. The state’s data is filled with a number of interesting items including these facts:

A. In Miami-Dade, where 120,921 claims were filed, 80.2% of all claims have, thus far, been settled.

B. In Monroe County, where 30,183 claims were filed, 88.2% have been closed.

C. 770,658 residential property wind claims were filed by homeowners, condo unit owners and renters. Of those some 90.5% have been closed based on the state’s most recent data.

D. 58,237 commercial windstorm claims were filed and of these only 58.5% have been closed according to the state’s data. Why the disparity between the percent of residential claims having been closed versus a much lower result for commercial claims? The answer is likely related to the fact that commercial claims generally tend to be larger and more complex and often require experts including engineers and accountants as well as contractors and materials that are in short supply in a state with nearly 1,000,000 total claims reported from this one loss. Commercial claims can also have business income losses that might begin immediately before a storm when a government issues an evacuation and continue through reconstruction and even after a building or business reopens and is finished.

E. 1,778 private flood policies reported having had claims and of these 88.3% of their claims have been closed.

F. Although a Federal program and, thus, not reported within the State of Florida’s data, FEMA reports that its National Flood Insurance Program had 27,690 claims reported from Irma (versus over 87,000 for Hurricane Harvey). The disparity between claims from private policies with private insurers and those insured in the long established Federal FEMA program illustrates the limited impact the private flood market is thus far having in our region since private flood programs became available in recent years.

INNOVATIONS

While the insurance industry can be traced to ancient times when Chinese cargo ships transferred their risks in the 3rd and 2nd millennia BC, the industry has long been one of innovation and evolution. A few innovations that are brewing in the industry of late and that relate to hurricane and flood losses include the following:

TECHNOLOGY

Technology continues to rapidly impact the insurance industry but phone apps and web access have little value without a reliable internet connection and power, especially so in the weeks immediately following a catastrophe. That said, the increased use of automated technology by some insurers has provided consumers and agents more consistent updates on their claims but has not nearly replaced the need for live people to be involved.

STORM PEACE

Insurers such as Aflac, Colonial, Transamerica and many others have long offered what I call ‘indemnity insurance’ as part of employer’s benefit plans for their employees. Their concept is simple, if one event or another takes place, say one has an accident or contracts cancer, then you receive a check for a pre-determined benefit and that money can be used to help cover all sorts of expenses (such as a medical insurance deductible or lost wages).

That’s similar to what Storm Peace offers to homeowners. StormPeace payments and eligibility are pre-agreed and based on the intensity of a hurricane and its distance to your property based on the storm’s track. No adjusters are used and payment is made within days. StormPeace has no deductibles, no exclusions, and no sub-limits. Just a pre-determined amount of money is paid to you if a pre-defined event takes place. The idea is that StormPeace’s payment helps cover post-event expenses that a homeowner’s policy might not cover such as:

  • Completing home repairs that fall within your deductible
  • Removing fallen trees
  • Restoring power
  • Replacing spoiled food
  • Paying for a hotel room
  • Replacing landscaping
  • Repairing outdoor/detached property that are located on the insured property premises (swimming pool cages, boat docks, piers)

Limits ranging from $ 1,000.00 to $ 60,000.00 are available for homeowners and renters. You can review a brochure on StormPeace by clicking here and can read their detailed descriptions of coverage, available limits and more by clicking here. Please contact our professional agents and underwriters with your questions or to receive a free quotation for StormPeace protection at any time.

Hurricane Contingent Business Income Coverage

Contingent business income coverage is not new to the world of business insurance but offering such coverage based on the total gross receipts lost for businesses who suffer no property damage due to hurricane threats is a novel concept. Conlon Company and Beazley USA, a Lloyds of London syndicate, are offering what they call Hurricane Contingent Business Interruption Insurance. Here’s how it works;

o The National Hurricane Center (NHC) issues storm advisories four times a day and each one predicts where a storm’s center will be as well as its strength. Conlon & Beazley use the National Hurricane Center’s prediction that’s issued as 48 hours advanced notice and if a storm is predicted to be a Category II (winds of 96 MPH) or stronger and if it’s predicted to come within 107 miles of your property then they will cover lost income for a 30 day period.

o Weather Command, one of the weather statistical centers used by Lloyds, will use the NNC’s data to determine distances from the predicted center of the storm to your location and if it’s within 107 miles of your property they will pay for all income lost up to your limit for a period of 30 days after a deductible as low as $ 1,000.00 is met. Your limit of coverage will be determined based on a historical 30 day period of gross receipts during the previous hurricane season and will be modified to estimate the current year’s projected receipts.

o Here is how the underwriter that created the program explains the coverage:

We like to think of Loss of Income/BI coverage as being part of a Property form, but this isn’t that. Really it’s a ‘weather form’. There are no “perils” of coverage. Anything that may occur that lowers expected income is “covered”. We don’t care why the insured’s income comes down after a covered event. Whether it be power outage caused anywhere to any type of lines or equipment, no access to an insured’s location, evacuation, business slow to pick up; to name a few things that come to mind that would lower income. It’s just a matter of comparing last year’s income for that period, modifying the expected income due to business trending up or down, and writing a check.

PRIVATE FLOOD INSURANCE

Private flood insurance is also not a new idea but one that’s resurrected itself in the last couple of years as some insurers sought new revenue opportunities at a time when the U.S. had not had a hurricane make landfall for nearly 12 years until Irma and Harvey arrived. We’ve written a good bit about private flood (and you can read newsletters on the topic here and here) in recent years and represent all of the leading insurers that offer such coverage.

Six decades or so ago the Federal government stepped into the marketplace and had to create the National Flood Insurance Program because private insurers tired of paying repeated claims and left the market. With some private insurers again offering flood insurance it remains to be seen if the current interest will be sustainable much less whether private insurers will selectively offer coverage to those less likely to flood and leave higher risk properties in the already stressed National Flood Insurance programs. If you’d like to discuss the ‘pluses and minuses’ of private flood (and there are some of both for sure) please contact our professional agents or underwriters at any time.

YOUR PROTECTION: HURRICANE SEASON 2018

As we hope that 2018’s hurricane season is not a repeat of last year’s ‘summer of storms’ we are pleased to prudently provide you with a copy of our annual Hurricane Season edition of our Your Protection newsletter. We, of course, hope that you don’t need its suggestions on what to do before a storm arrives, or when one is nearing our shores, but you’ll find tips related to both topics and an entire page (Page 2) devoted to insurance coverage topics to consider before a storm threatens you and your property.

Please contact any of our fine professional agents or underwriters here at Morris & Reynolds with your questions about any of these topics as well as those noted within this blog or anything else as we are most happy to help.

As always, thank you kindly for allowing us to provide your protection.


[PDF] Hurricane Season – Summer 2018

[PDF] Storm Peace Definition

[Article] Forecasters call for more normal, but still active, Atlantic hurricane season

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