Latest Colorado Hail Storm May Impact Insurance Industry Nationally

By Charee Voelz | October 20, 2014

Colorado’s insurance industry is weighing its options after the latest hailstorm hit densely populated South Metro Denver — unusual for the Rockies in late September.

What Coloradans might likely see down the road is that hail and wind are no longer covered in a basic homeowners policy. If weather patterns continue, the state may go the route that Florida takes, in which hail and wind are add-on policies similar to separate policies for flood insurance in Colorado.

According to the Rocky Mountain Insurance Information Association, the recent storm took insurance adjusters by surprise because Colorado’s damaging hail season typically occurs from mid-April to mid-August.

“Colorado’s Front Range is located in the heart of ‘Hail Alley,’ which receives the highest frequency of large hail in North America and most of the world, so residents usually can count on three or four catastrophic (defined as at least $25 million in insured damage) hailstorms every year,” RMIIA stated. “In the last 10 years, hailstorms have caused more than $3 billion in insured damage in Colorado.”

Hail is an enormous headache for consumers and the insurance industry in Colorado, much like hurricanes are to those along the Eastern Seaboard.

Many Colorado insurance carriers raised their homeowner premiums by upwards of 10 percent in 2013 — a result of Colorado’s wicked hailstorms that pummel homeowners’ roofs year after year in the Centennial State.

Hail is an enormous headache for consumers and the insurance industry in Colorado, much like hurricanes are to those along the Eastern Seaboard. Every time a storm hits, our profit and loss margin turns topsy-turvy and claims skyrocket. To offset the costs, insurers increase premiums, but changes may be coming to the way hail claims are covered by insurance.

As weather patterns continue to worsen across the country, we will all pay the price. After Superstorm Sandy and Hurricane Katrina, people in the affected area saw their rates go up and coverage reduced.

Insurance companies continuously look at the risk associated with doing business in any area and make broader policy decisions regardless of whether an area is in the path of past or future storms.

According to a PBS News Hour report, “the pricing model that insurance companies use is affected by not just individual events, such as hurricanes, tornadoes and hail storms, but the area’s history.”

Coloradans may find that insurance companies begin offering coverage for hail as a separate policy, and no longer include it in basic coverage.

Some insurers in Colorado are imposing a 1 percent deductible for wind and hail damage. Homeowners may be shocked when they find out that their claim may only get them a percentage of the cost to replace their roof after a hailstorm. That means if a home is insured for $500,000, a 1 percent (roughly $5,000) deductible must be paid before the insurance company will pay out for a claim.

Other Coloradans are finding out the hard way that insurers may be settling roof claims on an actual cash value basis, or may use a set depreciation chart to determine how much the roof will be covered. Depending on the roof material, and age of the roof, sometimes only a fraction of the full cost will be paid out to replace the roof.

The domino effect is another cause for higher premiums. After a significant weather event, neighborhoods hit hard by hail or other calamity create a domino effect where everyone on the block now wants a new roof, whether their roof has actual damage or not, as they see their neighbors having new roofs put on.

As a result of extreme weather-related patterns across the country, there are rumblings in the insurance industry that changes are coming. Insurance companies are beginning to put stricter policies in place for claims after a storm incident. Multiple claims may result in the insurer not renewing a policy or insuring new customers only if they have no more than one claim in the past five years.

Colorado’s latest hailstorm is only further confirmation that the insurance industry may begin leveraging its risk across the board.

Topics Catastrophe Carriers Claims Windstorm Market Homeowners Colorado

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