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Weather and the Insurance Impact

For places like the Southeast, especially places as far south as Georgia, winter storms in January and February 2014 caught many Southerners off guard, including many government officials.  A January storm covered all the streets, trees and power lines with 1.2 to 1.5 inches of ice, and Georgians were mocked on social media at how a “mere two inches of snow paralyzed a metro area of 6 million.” However, there were more than 2,000 children trapped at school because parents couldn’t get to them. Commutes of people who were trying to get to their kids at school or even just to go home went from a typical 30-minute drive to 30 hours for some.  Georgia motorists began to give up and leave their cars on the side of the interstate, whether it was out of desperation or they ran out of gas. The same thing happened in Charlotte, NC just a few weeks later.

Based on information services firm Verisk Analytics, the severe winter weather between Jan. 1 and Feb. 21 caused more than $1.5 billion in insured losses, as well as 175,000 claims paid to policyholders. With numbers this high, the insurance world is booming. However, these kinds of claims and dollar figures mean both the insurance industry and the policyholders themselves will have to pay the price – and the price will be higher.

Carrier Absorption in the Aftermath

In Georgia alone, there were $75 million worth of insurance claims resulting from damage by the January ice storm. And just when the South thought it was over, the region was brutally hit again with another ice storm, which caused an additional estimated $25 million in damage.

In the South, limbs from century-old pine and oak trees were covered in ice. Trees toppled over and branches broke off, crashing through people’s homes and vehicles. Power lines iced over and fell into cars and homes. This would often cause a transformer to explode, which then caused more than 555,000 homes and businesses to be without power for an extended period of time. Because of this loss of power, some homeowners had to use their fireplaces or heat generators for the first time, which led to unexpected fires and then smoke damage. Pipes not properly prepped for such severe winter weather froze and then burst, causing floods and water damage to people’s homes.

It wasn’t just the homes that were affected. Because of all the stranded vehicles and accidents that occurred because of people stuck in traffic for days in the ice, insurance claims on vehicles skyrocketed as well.

For insurance companies, this spike in the number of claims filed caused somewhat of a “snowball” effect because it diluted the money “in the pot,” so to speak, meaning there was less to go around for everyone, including both the insurance companies and the policyholders. The more policyholders who had to file claims this year meant insurance companies had to hire more contractors and claims processors to take on the work, which meant having to spend more money on more people’s salaries.

Because there have been so many claims filed, insurance companies have less money to go around to all the policyholders, so they need to find more money to handle the unforeseen costs from somewhere.

The Responsibility of Policyholders

After January and February 2014, policyholders in all of the Southeast needed to look into what their current policies entailed, especially for winter storms, which could have come as a surprise to Southerners who very rarely have to use the “winter weather” aspect of their plans.  For car insurance, they needed to look at the types of damage that occurred to their vehicles because of ice damage, fallen limbs and power lines. In Atlanta and North Carolina, often the damage done to their vehicles was from other cars sliding into their vehicles, many of which were left on an icy highway over the span of three days as the owners waited for everything to thaw out before they could claim their vehicles.

There was also a surge in property claims and structural damage. With the spike in the amount of claims filed among all policyholders, they can expect higher premiums on their insurance in the future. Not only does it mean higher premiums for policyholders, but a longer wait time for contractors to come out and fix their damage. Although many insurance companies had placed additional resources in Georgia during the storm in late January to take care of all the damage, with the amount of claims to be dealt with, it could take much longer than usual.

The storms were catastrophic for the Southeast. There were 100 Army National Guard members activated, 125 four-wheel drive vehicles needed and 705 pieces of equipment from the Georgia Dept. of Transportation, including trucks, spreaders and plows. This was a huge jump from the city of Atlanta’s lack of winter storm-related vehicles in the past, where there were only eight snow plows and four sand trucks to handle the entire city. Both insurance companies and policyholders will be affected by the storm’s catastrophic results. For insurance companies, this means hiring more contractors and claims processors to have enough manpower to handle the spike in business. For policyholders, this probably means longer wait times for damages to be fixed and higher premiums in the future.