Insurance costs going up due to increase in weather events

Lee Guthrie, Tahlequah Daily Press, Okla.Tahlequah Daily Press

The cost of homeowners’ insurance has increased across all 50 states by an industry average of 25-30% in the last three years, industry experts say.

Insurance rates have risen in every state, and Oklahoma’s rates are either the highest or fourth highest in the United States – depending on the report, said Waco Howard, an agent with Shelter Insurance in Tahlequah.

“We’ve seen higher increases in the past few years, and there are several reasons why,” Howard said. “One of the biggest factors is after the material shortages during COVID-19, the replacement costs on a home increased drastically, sometimes as much as 50%.”

As an example, a roof that could be replaced in 2019 for $10,000, two years later could cost $15,000-$20,000, Howard said.

“Insurance companies have to adjust prices, because claims are costing so much more; it’s a domino effect,” Howard said.

He attributed this to straight-line winds, hail, tornadoes and now wildfires, which are happening more often.

“Hail storms, in particular, cause a lot of damage in this area,” Howard said. “I’ve been in the business for 15 years, and the last three or four years have been unlike anything I’ve seen as far as claims — just due to weather events.”

Another underlying issue is reinsurance, which is insurance for insurance companies, Howard said.

“If there is a catastrophe that costs the insurance more than, say $100 million as an example, then the reinsurance company will step in and pay the amount over the insurance company’s deductible,” Howard said. “It’s insurance that’s sold by insurance companies in other parts of the world.”

Companies in Europe may not have the exposure to claims like those in America, so they sell reinsurance to help offset insurers’ risks, Howard said.

“If we have a huge catastrophe like the Moore tornado in 2013, or the one in 1999, or the Joplin tornado – where the losses are in the billions – it’s hard for insurance companies to cover that loss,” Howard said. “It’s like an insured individual who has a deductible; insurance companies have a deductible with their reinsurance.”

He said insurance companies buy this reinsurance to protect their solvency.

“It used to be fairly infrequent — like once a year or so and sometimes not even that — that insurance companies had to tap into it,” Howard said. “Now that storms are becoming more frequent, more active and more severe, it’s happening more often.”

This causes rates charged by reinsurance companies to go up, which trickles down to the consumer, Howard said.

Tornadoes cause a lot of destruction, but hail seems to cause more damage and resulting claims, Howard said.

“Like the storm that came through last Monday; we got a lot of claims from that,” Howard said. “It’s mostly roofs and a lot of cars.”

Last week, Siloam Springs, Arkansas, was hit by one of the worst hail storms that Howard said he’s ever seen.

“Every customer I have in Siloam Springs filed a claim,” Howard said. “And the next day we had the weather event roll through Tahlequah and Northeast Oklahoma. We had a large number of claims.”

Real estate agent Amy McDonald, said she hasn’t seen a difference in her business of helping buyers purchase a home due to the increased insurance rates.

“In fact, I am busier now that I have ever been,” McDonald said. “We have 20+ pending at the moment. It seems as though rates have dropped some, which is wonderful, but even when they were at their highest we never noticed a drop in business.”

Ashton Henson, vice president and loan officer at Local Bank, said she hasn’t seen a decrease in homebuyer loans due to the price increases for insurance.

She has had clients that have been denied insurance because the insurer determined their roof was too old or other issues with a home.

With all the catastrophes, contractors have been knocking on doors asking homeowners to allow them to give an estimate and requesting they sign an “assignment of benefits” form.

House Bill 1084, authored by State Rep. Mark Tedford, R-District 69, and State Sen.

Aaron Reinhardt, R-District 37, passed, and wasn’t signed by Gov. Kevin Stitt but he allowed it to become law.

“The bill restricts use of assignment of benefits on auto and homeowner claims,” Tedford said. “We were hearing that a contractor would approach a homeowner and ask them to sign this form before they did the research on the estimate.”

An assignment of benefits form gives broad powers to contractors to file claims, do the work and file lawsuits, Tedford said.

Contractors wanted the form to be changed to an “assignment of payment,” because some homeowners were getting the claim check and not paying for the work, some suggested.

“This law prohibits assignment of benefits but allows for assignment of payment,” Tedford said.

Tedford said some contractors were abusing the assignment of benefits form and weren’t communicating with homeowners properly.

“It was not just contractors, but also body shops,” Tedford said. “The body shops had the same complaint and just want to get paid.”

These issues were increasing with the number of storm-related claims, and legislators passed the bill to keep fraud out of the equation, Tedford said.

“We think this will keep the bad actors out,” Tedford said.