Property insurance claims in Oklahoma totaled $1.6 billion in 2011, according to one attorney familiar with the property insurance market in that state. Much of that was the result of catastrophic weather conditions that have slammed Oklahoma in recent years.
By comparison, insurers paid out $320 million in property claims in 2005, attorney Renee DeMoss, with the Oklahoma-based law firm of GableGotwals, said in a recent podcast sponsored by A.M. Best.
“For the last five years we’ve had virtually every natural disaster there is from hailstorms, to floods, droughts and tornadoes. And we’ve even had this year some magnitude 5.6 earthquakes. There’s a lot of disagreement about whether these are actually permanent weather changes or just temporary,” DeMoss said.
One thing for sure, though, is that “they have had a devastating impact on property in Oklahoma in [terms of] the number of claims and severity of claims,” she added.
Insurers in Oklahoma in 2011 paid out $620 million more in property claims than they received in premium, according to DeMoss. Hail and wind are the primary forces behind those claims, with 75 cents out of every premium dollar collected going to pay wind and hail losses.
Insurance companies, DeMoss said, are not only seeing claims costs rising due to the increasing number and severity of weather related claims in Oklahoma, they also are paying more to reinsurers for their own coverage for property damage.
As a result, homeowners insurance premium rates are heading north not only in Oklahoma, DeMoss said, but nationwide as well. Homeowners premiums nationwide are expected to average $1,004 this year, “which will be the first time the average premium for homeowners insurance in the U.S. is above $1000,” she said.
Homeowners insurance rates in Oklahoma are already above the national average. The average homeowners premium in Oklahoma in 2011 was around $1,600 annually. DeMoss expects that for 2012 that number will probably rise to around $1,700.
Smaller insurers may be having a difficult time with the increasing claims because they are not as well capitalized as larger carriers. Some of those smaller companies have cut back on their exposure levels in high density areas such as Tulsa and Oklahoma City, but there has not been a mass exodus of homeowners insurers from the state. Oklahoma still has more than 100 companies offering homeowners coverage in the state, DeMoss said.
Fraud following natural disasters is problem in Oklahoma, as it is in other states, DeMoss said. However, changes in various fraud statutes that went into effect in July 2012 included tougher penalties for insurance fraud.
For example, if an unscrupulous roofing contractor is charged with swindling several individuals for a few thousand dollars each, those events may now be grouped together so that the contractor can be charged with a more serious crime.