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Last Week’s Tornado Losses Will Likely Cost Insurer’s Over $1 Billion

In the aftermath of last week’s devastating tornadoes, independent agents and carriers are working to handle volumes of claims for those affected by the storms in the Midwest and South.  Two forceful storm systems swept through the regions, spawning a series of twisters that destroyed communities and left dozens reported dead. Some of the hardest-hit states include Illinois, Indiana and Kentucky.

While the amount of insured damage from the storms on Feb. 28 to 29 and March 2 to 3 is still being tallied, catastrophe modeler EQECAT pegged its initial estimate of insured losses at $1 billion to $2 billion.  On March 2 alone, there were 107 tornadoes—the most for the year so far, according to the National Weather Service.
Already, 2012 has an above-average start for catastrophes. The number of tornadoes so far this year—272—is more than twice the seven-year average of 123 for the same time period, according to EQECAT.  They follow a trend of significant disasters in recent years and come on the heels of a costly year for tornadoes in particular. In 2011, insured losses from tornadoes and thunderstorms totaled more than $25 billion, which is more than twice the amount of the previous record, according to the Insurance Information Institute.
To date, Ohio-based carrier Westfield Insurance has received about 450 claims related to last week’s storms, says Corry Novosel, director of the company’s catastrophe claims operations.  “The severity of the losses is very high,” says Novosel, whose company offers business and personal insurance in several of the affected states. “That’s very common with tornado damage.”
The storms also carried significant hail, which is also causing a lot of claims, Novosel says.  In areas such as Kentucky, there have been reports of baseball-sized hail, which can cause serious damage to roofs, porches, windows and siding because of its mass.
Roughly 70% of Westfield’s claims are filed through agents, with the remainder submitted directly by policyholders, Novosel says.  “You can imagine when a tornado or hail hits [for example in] Louisville, those agents there are going to be extremely busy for a week or two because their phones are going to be ringing off the hook with people wanting to report their claims,” he says.
While there’s an immediate influx of severe claims from tornado losses, hail-related claims tend to trickle in for months—even up to a year—after a storm, he notes.  Often, damage from hail is more cosmetic and may be noticed later. That’s been especially true in recent years, when roofing companies have offered free inspections for homeowners near areas affected by tornadoes, with the hope of generating new repair business if they discover any hail damage, Novesel says.
Meanwhile, in responding to catastrophic claims, Novosel says his company prioritizes open communication with agents to keep them updated.  “We need to make sure that they can get those claims to us,” he adds.
Westfield’s communications team uses different ways to regularly stay in touch with agents—from updating the company’s website to sending out emails—on information such as how many adjustors will be in the field, where they’ll be based and the best way to contact company representatives, he says.
Within 48 hours of a catastrophe, the company typically deploys its own adjustors to affected areas and encourages field staff to visit agencies to let them know they’re there and work as closely with them as preferred by agents, Novosel says. For last week’s storm, Westfield has teams in Cincinnati, Louisville, Ky., and Nashville, Tenn.
The amount of time adjustors stay in the field can range from three to six weeks, depending on the number of claims submitted. The company strives to resolve storm claims within 30 to 60 days of being filed, he adds.
 “You want to show up and be there for your policyholders and make your agents in that area look good, and be the guys that responded when tragedy struck,” he says.
Reviewed your homeowner’s policy to make sure you are appropriately protected.   If you live in North Carolina, now is the time to review your coverage and brace for another active tornado season.  Please contact us with any questions.