An Austin city official examines a recently repaired aqueduct after it froze in Austin, Texas on February 18.
Photographer: Thomas Ryan Allison / Bloomberg
Photographer: Thomas Ryan Allison / Bloomberg
Texas and other states crippled by a winter storm are becoming a hotbed for insurance claims. Analysts expect a high bill for losses.
Insured damage could be $ 18 billion for winter weather, six times the annual average, according to Karen Clark, whose company models disasters. In Texas, one of the worst hit regions, the State Farm Mutual Automobile Insurance Co. has already had as many frozen pipe claims in that state as the US’s largest home insurer last year, according to a state spokesman. The United Services Automobile Association said it received more than 20,000 weather-related claims, and the Insurance Council of Texas expects hundreds of thousands of claims from vehicles, homes, businesses and renters.
Texas is teetering on days of widespread power outages and water scarcity, and millions remain in the dark. Homeowners are grappling with nasty side effects, including frozen pipes and water damage. Winter storms like this one can also cause fire damage as residents look for ways to keep their homes warm, according to Brian Haden, whose Haden Claims Services acts as a policyholder expert.
“But the vast majority of claims will in fact be pipe burst claims,” Haden said.
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Clark’s current estimate, which includes states outside of Texas, would put this storm ahead of Hurricane Laura, which hit the United States last year, and well in excess of the average annual winter storm loss of $ 3 billion.
“It is probably that perfect storm In a way, with the temperature anomaly, the snow, the freezing rain, some wind causing blackouts in a wide area and so much over Texas, combined with the problems they have with the local power grid, ”said Clark, founder of Karen Clark & Co. said in a telephone interview. “The third aspect is the duration of the event – the extreme temperature anomalies lasted longer than previous cold spells.”
USAA expects overall damage to rise, saying most of it was due to power outages and pipe freezes. The bulk of the total losses will likely be related to commercial real estate, as claims tend to be more expensive when a pipe bursts in a church or museum compared to a house, Clark said.
“More than half of this will be for commercial real estate, as commercial real estate is the biggest loss producer to winter storms,” said Clark. Compared to houses, commercial properties have flatter roofs that are more likely to collapse under the weight of the snow, she said.
The event could also lead to interruption claims if businesses had to shut down for property damage, according to Lori Freedman, claims director at Marsh & McLennan Cos in Central Texas Days.
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The failure of the Texas power grid could lead to claims tied to energy properties like wind turbines or gas pipelines, depending on the specifics of each policy, said insurance broker Mike Hogue. However, an inoperable appliance due to freezing temperatures may function properly after defrosting and is therefore not covered.
“In general, these ownership guidelines would be linked to physical damage to insured property due to a risk that is not excluded,” said Hogue, executive director of Energy Practice at Arthur J. Gallagher & Co. “A weather event is not excluded.” Danger, but you must have been harmed. “
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