on May 23, 2013 by admin in Insurance Industry, Comments (0)

Tornado has insurance industry poised for deluge of claims

As Oklahoma communities grapple with the devastation caused by this week's deadly tornadoes, the financial impact from the loss of homes and other property remains unclear.

It could be weeks before an accurate picture emerges on the extent of the damage. But, viewing the hard-hit areas of the state, losses will be in the billions of dollars.

Hundreds of insurance agents and claims adjusters are expected to gather in Moore in the coming days to help those affected by the destruction and assess the insurance needs.

John Wiscaver, chairman of the Oklahoma insurance catastrophe task force and vice president of public affairs for the Oklahoma Farm Bureau, noted that insurance agents and adjusters are being directed to a staging area at First Baptist Church of Moore, 301 N.E. 27th, where consumers also can go to file claims.

Oklahoma Insurance Commissioner John Doak said his agency will be available to serve those in need.

"You can replace property, but you can't replace kids, and we're really focused on letting the search and rescue teams and emergency responders do their part," he said Tuesday.

"We're going to remain committed here in the area until Oklahomans are taken care of," he said.

Doak encouraged people from the stricken areas to keep their receipts for meals, lodging, clothing, medication and other expenses for insurance purposes. He also warns of potential fraud that may arise as individuals offer to repair homes or remove trees for large sums of cash.

"No large transactions of cash should be taking place right now," he said. "That is a first indicator of fraud."

Although it is too early to know what the impact on insurance will be, Doak said, "We expect the first claims level will be significant."

Doak estimates that the Moore tornado did more than $3 billion in damages, according to Reuters.

If that turns out to be correct, then damage from Monday's tornado would surpass the $2.2 billion in insured damages that Joplin, Mo., incurred following the tornado of May 2011, according to numbers from the Insurance Information Institute.

By midmorning Tuesday, Farmers Insurance had received nearly 1,040 homeowner claims and 594 other claims related to the tornadoes that struck Sunday and Monday, said Mark Toohey, head of media relations for the company.

Clients of Farmers Insurance are encouraged to call in their claims to 800-435-7764. The company also has a mobile catastrophe claims bus available at First Baptist Church in Moore, where people can get snacks and water and file claims.

"While replacing and repairing damaged properties may not be a high priority at the moment, the insurance industry will play a significant role in rebuilding Moore and other parts of Oklahoma just as it did following the storms in 1999," said Robert Hartwig, president of the Insurance Information Institute and an economist, in a release.

Hartwig added that the United States is in the midst of the most expensive period in recorded history for thunderstorm events, which include damage from tornadoes.

To get an idea of what this week's tornado damage might have on Oklahoma, one need only look at the deadly tornado that ravaged much of the same area in and around Moore on May 3, 1999. Damage from that tornado generated about 146,000 claims and resulted in insured claims payouts of nearly $1 billion, which would equal about $1.4 billion in today's dollars, according to ISO's Property Claim Services estimates.

Official tallies of destroyed properties, including homes, from Monday's storm are not yet available. However, the EF-5 tornado that barreled through Moore in 1999, and followed a similar path as Monday's EF-5 tornado, destroyed more than 8,000 homes, according to AIR Worldwide, which models the risk from natural catastrophes.

Because of the uncertainty in the exact size of Monday's tornado, AIR Worldwide released two different estimates on replacement value of properties within the tornado's path.

For instance, the estimated replacement value of properties within a 0.4-mile buffer zone of Monday's tornado track - for a total width of 0.8 miles - is $2.2 billion, including $1.73 billion for residential and $477 million for commercial.

When that is expanded to within a 1-mile buffer zone of the storm track, for a total width of 2 miles, the estimated total replacement value of properties jumps to $6.4 billion, including $4.6 billion for residential and $1.8 billion for commercial.

"Damage assessments from the National Weather Service are ongoing, and it will take weeks to develop a more complete picture of the destruction," said AIR Worldwide.

Pre-tornado preparations

  • Create a detailed inventory of your possessions, including receipts, descriptions and photos of your home's contents.

  • Review insurance policies and contact your insurance agent or company to discuss coverage options.

  • Replacement cost policies generally provide reimbursement for full value of items that are damaged, while cash value policies only provide reimbursement for its depreciated value.

After a tornado strikes

  • Tornado losses to a home are covered by the "windstorm" peril under the policy.

  • Secure property from further damage or theft.

  • Contact your insurance agent or company representative as soon as possible to report damage.

  • Inventory losses and photograph damage to provide to your insurance adjustor. Save receipts for any damage-related purchases for filing your reimbursements.

  • Many standard homeowners and renter policies provide reimbursement of additional living expenses when the property is determined to be uninhabitable due to damage.

  • Be aware of scam artists. Contact your insurer, agent or local business bureau for reference or potential contractors, and ask for certificates of liability and workers' compensation insurance before signing contracts.

Source: Property Casualty Insurers Association of America

Laurie Winslow 918-581-8466

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