The May storms in Oklahoma that produced two EF-5 tornadoes, destroyed thousands of houses, resulted in 46 deaths and sent damage estimates above the $5 billion mark, were extreme examples of a years-long pattern of storms that has the insurance industry wondering what’s next.
Dan Ramsey, CEO of the Independent Insurance Agents of Oklahoma, said the past five years have been very difficult ones for insurance companies that write policies in Oklahoma.
“The thing is, the lesson is still being learned,” Ramsey said. “This is the fifth year in a row that portions of Oklahoma have been devastated. It’s a disturbing trend.”
It’s also expensive.
Data from the state insurance commissioner’s office shows that more than 36,000 claims for both businesses and residences were filed following both tornadoes.
And those numbers, Ramsey said, are hammering the industry.
Ramsey pointed to loss rations over the past five years as evidence of the difficulty faced by insurance companies who do business in the Sooner State.
“Since 2007, the loss ratios for homeowner’s insurance in Oklahoma are at 133 percent,” he said.
In 2010 that figure was 163.3 percent. And those figures don’t include the hailstorms of 2012, he said.
“It’s a picture that is disturbing,” Ramsey said. “When you’re paying out 14 cents more than every dollar collected, that’s a problem. Insurance companies can’t survive that way.”
He said the problem has become so bad that at least three insurance companies announced they would no longer write policies in Oklahoma due to high losses.
“If the trend continues, it could be a problem,” he said. “You have to have a stable insurance market to encourage economic development. If the insurance industry isn’t there, things stop.”
Ramsey said insurance industry officials would hold a summit in August to explore new ways to serve their customers, provide quality insurance and mitigate big losses.
“I think we’re going to have to be creative. We’re looking at everything – from wind and hail pools to market assistance to reinsurance,” he said. “We’re going to have to open our imaginations and see what is out there.”
State regulators say they support the efforts to improve the market and increase safety for Oklahomans. Oklahoma’s insurance commissioner, John Doak, said part of the discussion should also be on preparedness.
Doak, who has hosted several tornado summits for the insurance industry since 2010, said state officials have modeled their new response system after states that face hurricanes and other disasters.
Doak said partnering with agencies and groups across the spectrum helps to protect lives and speed recovery.
“We keep learning,” he said. “We saw the best practices outcome. We learned from Joplin, from Tuscaloosa from others. We now have broad partnerships. It’s all part of a bigger lesson.”
Doak pointed to efforts such as the insurance village and agreements with federal officials as ways the state continues to learn and improve its disaster recovery efforts.
“The insurance village was a great example,” he said. “It was staged at the First Baptist Church of Moore because of the church’s high visibility from the Interstate. Everything was there, together. There were disaster teams to help residents, industry representatives and state agencies, all in one place. That had never been done before.”
The village was so well thought out, he said, that residents could charge their cell phones, get a rental car and, in some cases, have their claims paid on the spot.
“We even used satellite imagery,” he said. “Companies were able to pull satellite photos of the neighborhood from before and after the storm. When an agent saw the home was completely gone, it was easy to process a claim for a total loss.”
Doak said Oklahoma’s banks and financial institutions also worked with state and industry officials to reduce the hold time on insurance fund payments. Checks were processed quickly and many customers had funds in their account without the traditional hold.
“We worked with banks and asked them to put no holds on checks from companies paying claims. We had mobile banks and ATMs. It was all, really, in the best interest of the customer.”
Doak said his office also sent in fraud teams to protect residents from unscrupulous contractors and builders who prey on storm victims.
“We deployed our anti-fraud unit. We worked with customers and municipalities, such as the city of Moore to make sure contractors wouldn’t take advantage of the customers. We sent those units in marked vehicles into the neighborhoods. You could tell that some contractors were very nervous but it sent a strong message.”
Yet even with the planning, the effort and the partnerships, Doak, Moore Mayor Glenn Lewis, Ramsey and others know that at some point, there will be another storm, another disaster.
But by continuing to apply the lessons learned from May’s storms and the experience gained from past disasters; Oklahoma, the trio believes, would be better prepared and better protected.
“We know there will be another tornado,” Lewis said. “We know there will be another disaster. But we’ve learned a great deal and we continue to learn a great deal. It’s an ongoing effort and it’s not something that you can ever stop. We all have to take steps and we all have to be prepared. And we all have to keep learning.”
Topics Carriers Profit Loss Windstorm Market Oklahoma
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