It is difficult to pick up a newspaper and not see a headline story related to one disaster or another: from COVID-19 and pandemic related issues to weather related disasters like wildfires, flooding, severe hail storms, tornadoes, or hurricanes; from civil unrest and cyber-attacks to tectonic shifts in the workplace. All of these factors have heavily impacted the insurance industry with an increase in claims frequency and severity.
A few key findings:
- From 2001 to 2018 the number of major weather-related events has increased by 85%[1].
- To highlight 2020 alone:
- It was the second warmest year on record with 2019 right behind it causing significant shifts in weather related issues[2].
- There were seven billion-dollar tropical cyclones which is the most in one year since NOAA started tracking in 1980. The combined cost of these systems was approximately $40.1 billion[3].
- 5 of the 6 largest wildfires in CA occurred[4].
- There were 22 weather and climate disasters. Each exceeded $1 billion in damages, for a grand total of $95 billion[5].
- Material costs have increased across the board in the past ten years and the pandemic has only worsened the situation with supply chain issues and shortages[6].
- Labor costs are up – and that is when you can find an available contractor[7].
- Technology has increased the cost of replacing household appliances and vehicle systems[8].
In Pennsylvania, we have seen a significant increase in the number of severe weather-related claims from hail, snow, wind, and rain storms and flooding.
There has also been a significant increase in claims related to older plumbing systems and/or more complex plumbing systems due to an increased number of conveniences such as multiple bathrooms on each floor, wet bars, kitchenettes, and laundry rooms on upper levels, among other things. This creates more room for errors, leaking pipes, and burst frozen pipes during the colder months. The average cost of a non-weather water loss in our niche market is over $60,000. When you include the actual cost of the damage to your home and belongings, bringing in hygienists, rebuilding to code, and time spent out of your home while repairs are made, these figures can add up very quickly.
There has also been a significant increase in demand for labor and materials. With the pandemic, disruptions in the supply chain have caused significant delays and driven up the cost of repairs and replacements, and pushed out project completion dates[9].
As a result of these trends and factors, carriers have pulled out altogether or reduced capacity in severely impacted states such as CA and FL[10]. Many carriers have been forced to take rate and/or restructure their credit system in order to avoid pulling out of certain market places altogether[11]. Many will reward clients who install risk mitigation features such as a water leak detection shutoff device and are taking proactive measures to keep their home systems up to date. Increasing your deductibles and paying in full can also provide advantages to you annually.
With delays in delivery of mail through the USPS[12], we urge clients to consider making payments electronically or setting up their accounts for automatic payment through EFT and to also take proactive measures to improve their cyber posture[13] to safeguard against the increase in cyber-attacks.
The pandemic has brought additional shifts in our daily lives as we have all been searching for our silver linings and what we want or need right now. Many clients have bought secondary homes or moved to their secondary home while leaving their main home empty or rented out. Some have moved out of more urban areas into more suburban or rural areas or to a different, more affordable urban area. Others that have remained in their primary home or condo have done renovations to enhance their living space. Many have refinanced their mortgages.
If any of these have happened or are on the horizon for you, please reach out so we can discuss. These are all points where we will want to provide risk management guidance, arm you with information you should consider in the decision-making process and recalibrate your program along the way.
We are here for you to help in protecting tomorrow, today.
Sources:
[1] https://www.chubb.com/content/dam/aem-chubb-global/amc/pdf/Market%20Trends%202021%20Key%20Facts.pdf
[2] https://www.noaa.gov/news/2020-was-earth-s-2nd-hottest-year-just-behind-2016
[3] https://www.noaa.gov/stories/record-number-of-billion-dollar-disasters-struck-us-in-2020
[4] https://www.noaa.gov/stories/record-number-of-billion-dollar-disasters-struck-us-in-2020
[5] https://www.noaa.gov/stories/record-number-of-billion-dollar-disasters-struck-us-in-2020
[6] https://www.chubb.com/content/dam/aem-chubb-global/amc/pdf/Market%20Trends%202021%20Key%20Facts.pdf
[7] Chubb.com
[8] https://www.chubb.com/content/dam/aem-chubb-global/amc/pdf/Market%20Trends%202021%20Key%20Facts.pdf
[9] https://www.inquirer.com/real-estate/housing/new-home-construction-single-family-builders-pennsylvania-20210224.html & https://www.inquirer.com/real-estate/housing/lumber-prices-home-construction-20210128.html
[10] https://www.marketplace.org/2020/08/31/insurance-increasingly-unaffordable-as-climate-change-brings-more-disasters/
[11] https://www.forbes.com/advisor/homeowners-insurance/home-insurance-outlook-2021/
[12] https://about.usps.com/newsroom/service-alerts/
[13] https://simpsonmccrady.com/what-to-know-about-cybersecurity/