Personal Insurance: Texas Storm a Blow to Market Stability

Storm floods neighborhood

It may take months to determine how many people died as a result of the February blast of winter that crippled much of Texas and other parts of the Gulf Coast. The overall human suffering is immeasurable.

In terms of damage to property, monetary figures may also be impossible determine precisely. Current estimates vary widely, from the $45-50 billion overall figure projected by AccuWeather to more than $125 billion in Texas alone, as reported by the Texas Tribune.

It may be impossible to accurately gauge the storm’s economic impact because the effects will extend well beyond Texas’ borders and reach into personal Property Insurance rates throughout the U.S. Here’s why the storm’s aftermath will be so pervasive:

  1. The damage was widespread and significant. “Insurers could suffer record first-quarter catastrophe losses after the historic Texas winter storm, which crippled the state’s electrical grid and caused extensive property damage including collapsed roofs and broken pipes,” Insurance Journal reported on February 21, citing a report by credit rating agency A.M. Best.
  2. Insurers will cover much of that cost through claims. “The claims are still coming in,” Camille Garcia, Director of Communications and Public Affairs for the Insurance Council of Texas, told Yahoo! News in a February 28 report. “We are projecting hundreds of thousands across auto, home, renters and business insurance.” Garcia added that there could be more claims filed as a result of last month’s blast of winter than from any other storm in Texas history. This in a state that in 2017 endured Hurricane Harvey, which, adjusted for inflation, led to about $20.1 billion in insurance claims, according to PropertyCasualty360.
  3. Increased claims will affect personal insurance rates. “Given the wide geographic spread of the event, a large number of individual carriers are likely exposed to losses from these events,” credit rater Fitch Ratings reported on February 24. Insured losses in Texas are likely heavily weighted toward personal lines coverage from homeowners losses and, to a lesser extent, automobile claims relative to commercial lines coverage.”

So while the market for personal insurance is relatively stable compared to the Property and Casualty Insurance marketplace as a whole, it isn’t immune to the series of natural disasters that have been a major cause of market hardening. Texas’ winter storm was just the latest such disaster – and the biggest of 2021.

The Outlook Entering 2021

Here’s the outlook on Personal Insurance as described in Alera Group’s Property & Casualty 2021 Market Outlook whitepaper, released in December 2020:

► Overall, the market remains stable for many personal insurance buyers. There is a wide range of companies offering auto and home insurance.

► Increases on Automobile Insurance will be moderate if at all. Pricing will reflect insurers’ positive 2020 results, mainly due to a dramatic reduction in claims because of the COVID-19 stay-at-home era. Regulators will discourage rate increases in 2021.

Homeowners Insurance is a “tale of two cities.” In non-catastrophe-prone areas, buyers will have ample access to markets and see modest price increases primarily due to inflationary construction costs.

► The market will be very different for high-value homeowners living in wildfire, windstorm and hurricane-prone areas. Even clients with favorable loss histories can expect to see price increases in the range of 20%, higher deductibles, fewer companies from which to choose and more underwriting scrutiny.

We foresaw an increase of about 9% on personal insurance rates, while availability, capacity, and underwriting scrutiny and selectivity all looked generally stable, allowing for variation depending on location.

To obtain the entire Property & Casualty 2021 Market Outlook whitepaper, click the link below.

GET THE WHITEPAPER

What You Can Do

While you may not be able to control events and circumstances that shape the Property and Casualty market, you can take steps to a cost-effective, performance-based personal insurance program.

Start by working with a knowledgeable, experienced agent or broker you know will look out for you and ask the right questions, such as:

  • Have you experienced any recent claims?
  • Are you getting all available discounts for which you’re eligible?
  • Is your home over-insured, and do you have any other coverage you don’t really need?

An agent or broker looking out for your best interests also will explore all options to provide you with the right coverage. And if that agent or broker is a member of an Alera Group firm, the number of options will be greater than those of an agency without Alera Group’s national reach and scope.

If you’re someone who appreciates the value of working with an agent or broker to manager your insurance program, you’re probably also someone who actively manages your investments. Robert Johnson, Senior Portfolio Manager, Alera Investment Advisors, regularly conducts a quarterly state-of-the-markets review webinar. His next webinar, an in-depth analysis of the key drivers of economic activity in the United States during the first quarter, will take place on Wednesday, April 28, from 11 a.m.-noon CDT. We invite you to join us for what’s sure to be an insightful look at the results and trends in the markets and the economy, with a focus on interest rates and the stock and bond markets.

                   REGISTER FOR THE QUARTER 1 STATE OF THE MARKETS REVIEW


About the Author                             

Deanna Blanch
Personal Lines Supervisor
Avon Dixon

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