Oklahoma tornadoes: Violent weather likely will prompt higher insurance rates, less coverage

Oklahoma insurance rates could go up statewide in part because of this week's series of tornadoes.
by Adam Wilmoth and Brianna Bailey Published: May 25, 2013

Moore resident John Landis lost two homes to tornadoes. When the May 3 tornado leveled his home in 1999, Landis had no insurance on the property.

“I basically owned a pair of blue jeans at that point,” Landis said.

The home Landis purchased with the help of a loan from FEMA after the 1999 storm is a total loss after Monday's tornado swept through Moore.

After walking up to the Farmers Insurance mobile claims unit set up in the parking lot of First Baptist Church, Landis has been able to get a prepaid debit card to use for his living expenses while the company processes his claim.

Landis has used the money for a hotel room and to purchase new clothes. Most his belongings are littered with insulation fiber and other debris.

With the insurance money he receives from his homeowners policy, Landis plans to rebuild an underground home on the outskirts of Moore.

“Do you cover underground homes?” he asked a Farmers Insurance representative helping him with his claim on Friday. Landis was only half joking.

Farmers estimates it has received more than 4,000 claims in Oklahoma from Sunday and Monday's storms.

“I've been impressed with the people I've met so far in terms of their resilience and wanting to get their lives moving forward again,” Jeff Daily, Farmers Insurance CEO, told The Oklahoman Friday after touring the destruction in Moore and south Oklahoma City.

In all, more than 14,000 insurance claims have been filed this week in Oklahoma related to Sunday and Monday's tornadoes. More than 1,800 insurance agents have registered with the state and are helping with customers affected by this week's tornadoes.

State Insurance Commissioner John Doak on Friday asked for help from retired agents to volunteer at the agency's consumer assistance booth at 301 NE 27 Street.

“There is a great need from so many people due to the tornado disasters earlier this week, and we need to help them,” Doak said. “For them to have any confusion or frustration during the recovery process while navigating insurance claims is the last thing they need.”

Insurance changes blocked

Also Friday, Doak issued an order barring insurance companies from dropping coverage for nonpayment in disaster-struck counties.

“Insurers cannot cancel, nonrenew or terminate coverage while this bulletin is in effect,” Doak said.

The order also requires companies to defer rate increases until the emergency period is over, as defined by Gov. Mary Fallin.

This covers Caddo, Cleveland, Comanche, Creek, Garfield, Grant, Greer, Kiowa, Lincoln, Logan, McClain, Okfuskee, Oklahoma, Pawnee, Payne and Pottawatomie counties.

While Doak's order will prevent insurance prices from jumping in the short term, this week's twisters likely will eventually lead to premium hikes.

“This one individual event doesn't impact rates immediately, but in making rates down the road, we try to make predictions as best we can on what the exposure is going to look like,” said John Wiscaver, vice president with Oklahoma Farm Bureau Insurance. “It's a tough state to do business in because we keep having these large weather events.”

Home and auto insurance rates in Oklahoma are among the highest in the country because costly storms are common. But Monday's tornadoes threaten to push rates higher.

“To some extent, the rates have built-in catastrophe loads in them,” Daily said. “We'll have to analyze whether this type of catastrophe was built into the rates or whether we need to change them accordingly.”

Wiscaver said the damage caused by this week's tornadoes is only part of what determines insurance rates in the state.

“There are a lot of times when we have widespread thunderstorms throughout the state with damaging hail. Those events from a standpoint of overall claim dollars can have as much if not more of an impact than a tornado,” he said. “We had a lot of hail in April and May.

To help offset losses from increasingly expensive storms in recent years, many Oklahoma insurers have added higher deductibles and other charges. Many policies now include deductibles of up to 2 percent for wind and hail damage, and some prorate coverage for roofs that are more than 10 years old.

Because of those changes, insurance customers likely will receive less from insurance claims today than they would have 14 years ago after the May 3, 1999, tornado.

Wiscaver said the changes were necessary because of the higher payouts insurance companies have paid in recent years.

“That is important to help keep it (insurance) affordable and available,” he said. “It's not a maintenance policy. The days of $250 and $500 deductibles are over. We have to manage risk accordingly.”

The changes have made it even more important for consumers to stay in regular contact with their insurance agents and review their policies at least once a year, Wiscaver said.

“It's important to help folks take a deductible they can manage so they can keep it affordable and available for large events,” he said. “That is what the presence of insurance is supposed to be.”

CONTRIBUTING: Jay F. Marks, business writer



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