What’s Really Happening With Hail Claims?
There’s a sense among insurers that hail storms have become more frequent and increasingly severe in the U.S., driving up property claims. But is that really true? And if it isn’t, where has that perception come from?
We decided it would be worth digging a little deeper to find out if there’s evidence to back up the idea that hail is a more serious problem than in the past.
A comparative study, based on research materials that used 30 to 100 years of hail events for their analyses, showed us that there is no systematic increase in a countrywide trend for the frequency of hail events.
In the absence of any long-term research on severity, we conducted our own review using large losses through ISO’s Property Claim Service unit (PCS), doing a statistical analysis of the data to test for the severity trend.
After adjusting the claims for inflation and exposure across Personal, Commercial and Auto lines, the results revealed no change in trend in the claims for any one of these individual lines or all lines combined.
To find out where the perception of hail risk intensifying came from, we looked into associated media reports and concluded that much of the discussion can probably be traced back to two reports: Property Hail Claims in the United States: 2000-2013, by Verisk and Keeping Pace With Texas Hail Claim "Case-Runners", by Zelle Hofmann Voelbel & Mason LLP.
The Verisk report does not mention any adjustment to claims for inflation or increase in exposure, and it examines a very short timeframe. Even then, it identifies 2006 and 2012 as outliers.
The Texas Case-Runners report identifies the practice of case-running by public adjusters and other third parties involving themselves in the property insurance claim process. It focuses on Hidalgo County, TX which has seen 35% of hail claims going into litigation. We couldn’t find another county in the U.S. where this issue is causing such an abrupt increase in hail claims.
One trend that we do think could start to have an effect on hail storm-related claims is the growth in the number of solar panels being installed on properties. But there’s little overlap between the states with high hail susceptibility and those with the greatest number of solar panel installations.
So, on balance, we don’t believe that the recent observed increase in hail claims reflects a systematic increase that will continue into the near future.
That said, with the average Cat model version changing every five years, companies are individually challenged with understanding, monitoring and evaluating changes in trend - and Gen Re can help with that.