Damage Estimated in Billions as Insurers Work to Pay Claims

By | May 4, 2011

Officials, insurers and residents are starting the daunting task of assessing and cleaning up the damage from the massive storm system that hit the Southeast as the amount of insured losses is heading into the billions of dollars.

The National Weather System reported that over 160 tornados hit the area last week along with high winds and hail in what it called “a major tornado breakout of unprecedented proportions.” Hardest hit was Alabama, Mississippi and Georgia although damage reports are coming in from as far east as Virginia and North Carolina and north as Tennessee and Kentucky.

The initial damage estimates have quickly climbed into the billions even as many areas have yet to be assessed by claims adjusters. EQECAT stated that based on its computer catastrophe models that the total losses from the combined storms of April that affected both the Southeast and portions of the Midwest at $2 billion to $5 billion dollars.

In Georgia alone, Insurance Commissioner Ralph Hudgins said the damage estimate for the April 27 storms was at $75 million and counting. This figure comes on top of the estimate $50 million in damages from the other storms that swept to the state on April 7th.

One of the hardest hit areas was Tuscaloosa, Alabama where Mayor Walt Maddox said that clean-up cost alone could exceed $100 million.

Insurance Information Institute spokesperson Bill Davis who is on the ground in Tuscaloosa said the damage is reminiscent of Hurricane Katrina. Describing the resident’s mood as somber, he said the clean-up crews and tree removal services had just started to clear away some of the debris that has prevented residents and claims adjusters from accessing some of the properties.

He went on to say that there are thousands of claims adjusters throughout the state as insurers have moved in multiple mobile catastrophe units. While he said it will take time to fully assess the damage the industry is in a good position to handle the claims. “This is why people have insurance,” he said. “The industry has the capacity and it shouldn’t have an impact on rates unless we see this same sort of damage over and over again.”

State Farm spokesperson Roszell Gadson, who is also in Tuscaloosa, said the insurer has already received 13,000 homeowners and auto claims in Alabama. He said the insurer is facing a long term project as it sorts through all the damage. “This is an operation that will take years before the city looked like it once did, if it ever does,” he said.

Noting that the University of Alabama is located in Tuscaloosa, Gadson said there are a lot of rental properties where occupants are facing a total loss because they didn’t purchase rental insurance. “This is another reason why people should review their insurance needs,” he said. “Renters insurance is available at reasonable rates.”

Farmers Insurance Company spokesperson Jerry Davies said that the company so far has received 4,000 claims in Alabama, a number he expects to rapidly increase. He said that due to the widespread power outages, agents are literally going door-to-door to find policyholders. “We have agents fanning out in neighborhoods wearing their Farmers jackets and asking people if they are insurer by Farmers,” he said. “It’s a yeoman’s job, but we will be here until it is all through.”

Meanwhile, insurance commissioners in the affected areas have stepped in to provide relief to policyholders by giving them more time to pay claims.

Alabama Insurance Commissioner Jim Ridling has instructed all insurance companies to give all policyholders a 30-day grace period for paying premiums. Under his directive, insurers could not drop a policy for non-payment of premiums until May 27. A similar directive was issued in the wake of Hurricane Katrina and Ivan. “There has been a great disruption in mail service in several parts of the state and with the real possibility of extended power outages, many Alabama consumers will have great difficulty paying premiums on time,” he said.

Mississippi Insurance Commissioner Mike Chaney issued a similar bulletin giving policyholders 60 days to pay their premiums due to the disruption in mail service after the storms of April 15 and April 27. The extension applies to homeowners, commercial property, dwelling and fire and commercial and personal vehicle coverage. “I hope the moratorium will create one less burden during the process of recovery,” he said. “However, I want to remind those policyholders that this is not a permanent wavier, just an extension of a grace period of 60 days in which to pay premiums.”

The National Weather Service said that based on the number of storms, this year’s activity is some 30 percent higher than the historical average and the tornado season has just started. After all the numbers all tallied, the April 27th storms may exceed the worst tornado outbreak in U.S. history, which occurred in April 1974, when 148 tornados covered 13 states over a 165-hour period killing 330 and injuring 5,484. RMS estimated that the final damage tally for the storm exceed $3 billion.

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