The volatility of our recent weather is unprecedented – especially in the last decade.
Hurricane and tornado damage has literally doubled since the 1990s, according to the Insurance Information Institute.
The Ozarks have been impacted significantly with the tornadoes in Joplin and most recently Branson. The tornado in Moore, Okla., and the extensive damages in that community are still fresh in our minds.
Nationally, Superstorm Sandy hammered the East Coast with an estimated $30 billion to $50 billion in direct damage.
Insurance claims continue to mount from these events.
The recent outbreak of tornadoes and hail storms across the Midwest has generated more than 29,000 claims. That’s about 12,000 claims more than the roughly 17,000 claims following the May 22, 2011, Joplin twister, which produced $2.8 billion in insured losses, according to the Missouri Department of Insurance.
Weather volatility has not only impacted communities, it also has ravaged the insurance industry. The Insurance Information Institute reports that prior to 1990, weather catastrophes accounted for approximately 1 percent of premiums collected. As volatility escalated, the 1990s weather drove costs to 3.5 percent of premiums and, as we enter the 2010s, these events are projected to increase costs to between 7 and 8 percent of total premiums.
To make matters worse, the geographic area where these events commonly occur continues to expand.
Past tornado, hurricane and earthquake activity predominately took place in about 14 states, but has now significantly impacted 38 states, with tornadoes spotted in 48 of 50 states, according to the Insurance Information Institute.
Since 2010, almost 50,000 severe weather reports have been filed, and the numbers continue to climb.
Although no one can change or control weather, there are proactive strategies that will help reduce risk and cost. As catastrophic weather events and insurance premiums rise, a modification in risk or insurance programs can make a big difference in the outcome if disaster strikes. Consider the following strategies.
Protect your propertyIf you’re building or remodeling, use materials and techniques that reduce the likelihood of damage. Wood shake roofs are particularly susceptible to damage. Consider architectural asphalt shingles as an alternative.
If you’re planning new construction, pay close attention to flood zones and areas prone to high winds. Recent heavy rains in our area are an example of how surface water runoff can damage property. Make sure water runoff is funneled away from your home or business.
Check property valuesBe sure your property is properly valued on your insurance policy. It’s estimated that 75 percent of properties are underinsured by an average of 40 percent, according to valuation experts at Marshall & Swift/Boeckh LLC. A 2012 year-end report by Conning Insurance said building materials continue to increase in cost, up 7.1 percent in 2011 and more than 10 percent in 2012, and most confuse market value (selling price) with what it would cost to replace a property (replacement cost). As you can imagine, replacing a building or home after a disaster is more expensive than the cost when you are not impacted by time or community restraints.
Raise deductiblesProperty insurance rates are rising and will continue to increase. The insurance industry is responding by sharing more risk and are not only increasing rates, but also looking at deductibles, roof materials, age of the structure and building construction to adequately price and underwrite specific properties.
Although none of us can change weather patterns, we can change how we react to them. Be intentional on how you build, value and insure your property.
Richard Ollis is president and CEO of Springfield-based Ollis and Co., specializing in risk, employee benefits and insurance. He serves on the national board of the Wellness Council of America and can be reached at richard.ollis@ollisco.com.
