Changing weather trends call for new insurance considerations
Ninety percent of U.S. counties suffered a weather disaster in the last 15 years.
Many people across U.S. now find themselves recovering from a series of intense summer weather events.
The National Oceanic and Atmospheric Administration (NOAA) reported four new billion-dollar disasters in June 2024 alone, including Category 5 Hurricane Beryl in the South, catastrophic flooding in the Midwest and record-breaking heat waves across the country.
These events have brought this year’s total of declared disasters to 15, three more than in June 2023.
Natural disasters are penetrating our armory of insurance coverage with an increasing intensity. The evolving nature of severe weather calls for a reevaluation of existing insurance frameworks and a sincere consideration of supplemental disaster insurance solutions to ensure more comprehensive coverage that protects consumer financial resilience.
Homeowners and renters must consider their financial vulnerabilities when it comes to looming disasters; however, few are aware of what their current insurance policies cover, or don’t.
A 2020 survey by Policygenius found that 53.3% of homeowners didn’t realize home insurance policies don’t typically cover flood damage, and more than 80% were unaware that earthquake damage is not covered by standard policies. Policyholders need help assessing their current coverage portfolio and getting honest about their emergency savings where severe weather patterns can wreak havoc on their lives and finances.
Disasters are ready to strike, even when consumers aren’t ready to weather them.
The first step in bolstering insurance coverage is understanding the changing nature of today’s weather landscape and the need for increased protection. No community is entirely immune to severe weather as data shows that 90% of counties across the U.S. suffered a weather disaster in the last 15 years.
And over the last five years, at least one weather-related disaster was declared in all 50 states, signaling a widespread need for severe weather considerations when building insurance portfolios. While we can never fully know Mother Nature’s next move, summer 2024 has been particularly startling with a series of unexpected and unusual weather events.
Looking to the South, Hurricane Beryl was the earliest Category 5 hurricane in Atlantic history. This anomaly is only setting the tone for the year’s hurricane season with the National Hurricane Center forecasting 17 to 25 named storms to occur by the end of November.
In addition to record-setting hurricane patterns, the tornado pace of 2024 is well above average. The number of tornadoes reported in July was the second highest since 2010, 45% higher than the average pace.
The notable tornado season has included the first strong tornado in almost 40 years in New York’s Oneida County, the highest record of tornadoes in Ohio since 1950, and the first February tornado in Wisconsin’s history. As severe weather continues to affect states in irregular ways, it is crucial that homeowners assess their preparedness against natural disasters beyond their normal scope of consideration.
Coverage needs are changing.
As disasters increasingly impact customers across the country, insurers are raising deductibles in areas especially prone to severe weather or exiting states entirely.
The insurance industry is keyed into these severe weather trends and constantly reacting, but “set it and forget it” consumers need more support in staying informed about these changes. For example, with the NHC’s prediction of an above-average number of hurricanes this year, consumers need to be made aware of the spreading nature of coverage stipulations like named storm deductibles.
Additionally, homeowners might not realize the average length of the insurance claims process until they experience it for the first time in the wake of a disaster. While natural disasters require immediacy in response and recovery, atypical surges in claims for an affected area can lead to long waiting times. The average claims cycle for catastrophic events reported in 2023 was over 34 days, prompting an exploration of additional coverage to one’s disaster portfolio that can secure their more immediate needs in the aftermath of a disaster.
Emergency savings aren’t enough.
While home and renter insurance policies can help cover damages and losses from natural disasters, their coverage gaps can result in massive out of pocket expenses for consumers. With only 44% of U.S. adults being able to afford an emergency expense of $1,000 or more with savings and 27% lacking emergency funds altogether, many people cannot afford the high deductibles needed to kick start support from their insurance policy.
Customers might also be unaware that disaster deductibles can cost as much as 20% of a home’s value, or of the underinsured exposure they may have when considering the rising cost of materials and increased demand for labor. On average, out of pocket costs for a disaster can reach up to $10,000 per household or more.
Supplemental insurance can connect consumers to the backup funds needed to overcome the immediate obstacles that come with a disaster. When natural disasters are the fifth most common cause of bankruptcies in the U.S., it’s time to evaluate how one’s insurance portfolio can better cover their financial vulnerabilities.
The severe weather trends of 2024 demonstrate how supplemental disaster insurance is not just an add-on but a vital component in providing comprehensive protection in an increasingly unpredictable climate landscape.
What worked 10 years ago might not be enough to safeguard customers today. By staying informed and adapting to new trends, you can deliver the right combination of insurance coverage that will adequately protect your clients from natural disasters ahead.
Darren Wood is the founder and president of Recoop Disaster Insurance, a first-of-its-kind, multi-peril disaster insurance product. Darren is an insurance industry veteran, with more than 25 years of experience. RecoopPR@agencyh5.com
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