Mounting insurance claims are remnants of a savage winter
Storm damage in Northeast is leading loss-report volume
Remember winter? Insurance companies would like to forget it, too, but the bills for all those ice dams, roof leaks, and waterlogged plaster continue to come in. Nationwide, claims for winter storm damage have totaled $2.3 billion in the first quarter of this year, according to the Insurance Information Institute, a New York-based industry association.
“This is the worst first quarter of winter weather claim experience I’ve ever seen,” said Kevin Meskell, executive vice president at Quincy Mutual Fire Insurance Co., which through April had three times the claims it got for all of 2014 in Massachusetts.
The $2.3 billion in claims is slightly below what the insurance industry experienced in the first quarter of 2014. But most of the claims this year were concentrated in the Northeast, where winter storms dumped some 9 feet of snow in Greater Boston and residents by the thousands learned how vulnerable their houses were to the elements.
That volume of claims is still above longtime historic averages, and coupled with the recent more severe winters could prompt many insurance companies to eventually pass the costs on to consumers through higher rates.
Meskell said that Quincy Mutual had millions of dollars of losses due to the weather, but declined to provide a specific number. He said it is too early to determine if the company will ask state regulators to let it recoup some of the losses from policyholders.
Connecticut-based Travelers Cos. reported winter catastrophe-related claims of $162 million for the first quarter of 2015, or 9 percent higher than the $149 million it received for the same time period last year.
The state Division of Insurance has not received any applications from insurance companies yet for rate increases tied to winter weather, said spokesman Pete Fullerton.
“Rates cannot be increased to make up for previous losses,” he said. “If rates were to be increased, it would have to be based upon comprehensive data and not just the result of one extreme winter.”
But repeated weather losses and high claims activity do affect rates, said Robert Hartwig, president of the Insurance Information Institute. In the upper Eastern United States, where severe weather has had a greater impact in recent years, homeowner insurance rates have increased 4 to 6 percent annually, he said.
Some insurance officials believe they are seeing more than just one unusual winter.
“Unfortunately, it has now become all too common for us to have significant [catastrophe] losses from what we traditionally thought were the lower severity frequency events like tornado, hail, and winter storms,” Brian MacLean, president of Travelers Insurance, said in a conference call with investors last week.
“So weather patterns are changing and, accordingly, we are continuing to reassess and manage our property exposure and pricing in a thoughtful way.”
Travelers officials said the company’s rates are based on long-term trends.
For now, though, insurers are pushing policyholders who have experienced repeated damage in certain areas of their homes because of poor insulation or leaky roofs to get the problems fixed before next winter, said Tom Skelly, a vice president of Deland, Gibson Insurance Associates in Wellesley Hills.
“The threat is that they’re going to drop you from the company,” Skelly said.