Wind Deductibles and Sandy: What It Means for Total Insured Losses

By Philip S. Borba | November 28, 2012
Superstorm Sandy Closes Stock Exchange (AP Photo/Richard Drew)

  • November 28, 2012 at 1:43 pm
    Matthew Guilbault says:
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    Who is suggesting removing hurricane deductibles?

  • November 28, 2012 at 1:53 pm
    Jay says:
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    ha h ah ha ah , I stopped reading at ” the insured would have an incentive to take action” ! They don’t read their policies; they don’t care that they’ve had reduction for ten years for the wind deductible; I still have people trying to make claims, a full 30 days later!

    • December 7, 2012 at 9:36 am
      ya_yaya says:
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      I second that, most people are not diligent enough to read their policies. I work in the industry and can attest to that. Most are suprised when something isn’t covered. Given the typical reaction to uncovered damage, I doubt that most are motivated to be proactive because the language of the policy (even if that is the intention).

  • November 28, 2012 at 1:54 pm
    San Antonio Rose says:
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    I think we should just go to WIND deductibles. That way, there’s no difference between straight winds of 40 mph, a tornado, and a hurricane.

    • November 28, 2012 at 1:59 pm
      Celtica says:
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      It is somewhat ironic that blue states have coverages outside the normal insurance policy (earthquake and hurricane) while red states have that all nice and tidy covered by general wind damage in the normal homeownr’s policy. Just an observation.

  • November 28, 2012 at 1:59 pm
    Brian says:
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    Excellent article. A few years from now the Northeast will have an insurance market similar to our’s in South Florida. It is not the weather that will keep the companies from competing in the market rather the state executives and their ill informed decisions.
    In 2004 Florida was hit by 4 consecutive storms- Charlie, Frances, Ivan and Jean. The state executives mandated that the hurricane deductible will be applied on a calendar year basis rather than per occurence. The companies paid the claims and left the state. The company filings were on a per occurence basis and the state executives changed the game in the middle, same as what is happeningh in the Northeast. Good Luck in the Northeast, you are going to need it.

  • November 28, 2012 at 2:09 pm
    GETREAL says:
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    Can someone explain how a state can “order” or “mandate” to insurance companies to make them waive their wind deductibles (when the policy coverage was approved & filed in those states to which they conduct business)?

    • December 3, 2012 at 2:28 pm
      GETREAL says:
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      In certain states, perhaps below NY & NJ on down (?), a “wind deductible”, “named storm deductible”, or a “hurricane deductible”, or a “calandar year wind deductible” is almost always a (%) percentage deductible.

      You guys must have completely different carrier filings than those other coastal state?!

  • November 28, 2012 at 2:40 pm
    Don Quixote says:
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    The author should not use the term “Wind” deductible because it is totally misleading. In NJ at least, there are 3 different deductibles. There is a “Hurricane” deductible, which is the one the Governor ordered companies not to apply. This is typically a percentage of coverage A anywhere from 2% – 5%.

    There is also a “Wind” deductible, which applies to any wind loss other than a Hurricane. So, the “Wind” deductible applies to all wind related damages caused by Sandy. That deductible has no “trigger” other than the loss is caused by wind so there is no room for political interference with the contract. Wind is wind.

    The third deductible is, of course, the standard deductible that applies to all other types of losses.

    The author notes the possible existance of a 3rd deductible parenthetically, but he should still use the term “Hurricane” deductible throughtout the article to distinguish the two. Wind deductibles apply to Sandy losses.

    • November 28, 2012 at 3:04 pm
      Tired of it all says:
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      @Don Quixote Glad you made the point so I did not have to. From a purely selfish perspective I hope the states keep right on doing stupid things to the admitted markets so more business will be forced into the E&S segment. I need the business.

  • November 28, 2012 at 3:58 pm
    Ins Guy says:
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    Just as alarming is the %of uninsured property. How about a FEMA penalty (er, um…tax) for those who choose not to buy insurance?

  • November 29, 2012 at 8:39 am
    Mike says:
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    I don’t think the issue with Sandy was the hurricane v. tropical storm distinction. Instead, it was the fact that the NWS re-classified Sandy as a “post-tropical” storm shortly before landfall, stating that it was no longer exhibiting “tropical characteristics”. I think many policies, based on the policy language alone, do not apply a hurricane or tropical storm deductible to a storm that isn’t “tropical”. I also believe that several northeastern states pointed to the “post-tropical” distinction in their press releases concerning how hurricane deductibles would not being applicable.

  • November 30, 2012 at 2:04 pm
    MMM says:
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    Thanks for bringing that up, Don Quixote. I’ve been struggling to understand why so many people are responding to the deductible proclimations as though they were such a scandal. When Sandy hit land, it was not classified as a hurricane; therefore a deductible that is meant to apply to losses caused by a hurricane should not apply. This is why I used wind/hail deductibles instead of named storm or hurricane deductibles whenever possible.

  • December 3, 2012 at 1:26 pm
    Jessica says:
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    Run off the insurers so the government has to step in and provide more insurance?? TWIA and NFIP are already GREAT examples of why the government should stay out of the insurance biz. My HO carrier just finally started offering a separate flat AOP deductible again – before it was 2% all perils – Given this situation I can only imagine they will be going back to that model again and I can’t say I blame them.

  • December 4, 2012 at 10:17 am
    ExciteBiker says:
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    I am confused. The article starts out saying the governors waived hurricane deductibles. It later says they waived wind deductibles. Which is it? Did they waive % Named Storm / % Hurricane? Or % Wind? Or both? If they only waived % Hurricane, is this perhaps an irrelevant regulatory action in light of the NWS post-tropical designation?

    I also do not understand the hullaballo about the tropical storm (and post-tropical storm) designations. These are not subjective opinions put forth to make Andrew Cuomo happy. They are pre-defined storm gradings based on measurable characteristics. Sandy was a tropical storm which strengthened into a hurricane and then weakend back into a tropical storm before making landfall on the East Coast.

    Isaac was also a weak storm from a max sustained wind speed standpoint. What I have not seen is a question, namely “what would Sandy/Isaac have been like if the storms were Category 4/5″?



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