How Insurers Deal With Natural Disasters and Insurance Claims

employment-liabilityPrior to Hurricane Sandy’s arrival, property and casualty insurers had plenty of capital. In response to the devastation left behind by the hurricane, these insurers distributed considerable amounts of money to affected families and individuals. However, research shows that the increase in severity of weather-related disasters in the past few years has given American insurers cause for concern.

After the first nine months in 2012, catastrophe-related claim payouts dropped from almost $33 billion to around $16 billion. While this time period gave insurers time to build a surplus, Hurricane Sandy alone cost them more than $20 billion in auto, home and business claims payouts. Overall, the industry responds efficiently after natural disasters. When Hurricane Ike struck Texas in 2009, nearly all claims were closed by the end of the same year. That hurricane yielded more than $12 billion in claims payouts. However, insurers are still considering the possibility of worse natural disasters in the future. From their perspective, Hurricane Sandy spotlighted the issue that all insurance companies must find a way to form a preparedness plan. Many scientists are predicting worse hurricanes, tornadoes and earthquakes in the future.

During the past decade, insurers have earned an average after-tax profit of about four percent each year. While profits may not cover capital costs, they are not considered to be at a disastrous point just yet. Due to how well most insurance companies handled the aftereffects of Hurricane Sandy, experts say that the industry is not seeing a significant rating movement. Insurance companies have succeeded at diversification, which has prevented the likelihood of devastating effects. Experts also expect that some insurance companies will change their portfolios to combat any significant losses they may have suffered. However, it will likely not include risk, strength or aspects of a similar nature.

Experts say that claims came in quickly following the Hurricane Sandy disaster, and the amount of claims coming in during such a short amount of time was much larger than the amounts of claims following other disasters in history. Another issue insurers are concerned about is the new laws. With recent laws passed that affect insurance companies, policymakers will see that the changes may make it more difficult for insurers to continue doing business. Despite the worsening natural disasters, the insurance industry remains hopeful. Capital-fed resilience is fueling their hope, and consumers can expect to see insurers continuing their efforts to make the claims process smooth. Studies show that insurance activities are not risky in a systemic way. Insurers know that consumers have questions and concerns following any natural disaster, so discuss any concerns with an agent today.

About Brian Hendricks

Brian Hendricks is the President of Fidelity Insurance Group. Brian started Fidelity in 2003 with 0 clients. Today Fidelity Insurance Group is a Premier Independent Insurance Agency in Florida with over 3,000 families and businesses insured. Brian currently serves on advisory boards for 2 of the largest property insurance companies in Florida. Knowlege, Integrity, and Committment are his and his agency's guiding principles.
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