The storms that hit Oklahoma in May produced two EF-5 tornadoes that caused 46 deaths and resulted in damage estimates that were above the $5 billion mark. These devastating storms are examples of a pattern of storms that has left the insurance industry wondering what’s next.
CEO of the Independent Insurance Agents of Oklahoma, Dave Ramsey, confirmed that the past five years have been very difficult for insurance companies writing policies in Oklahoma. He said, “The thing is, the lesson it is still being learned. This is the fifth year in a row that portions of Oklahoma have been devastated. It’s a disturbing trend.”
According to data from the state insurance commissioner’s office, more than 36,000 claims (both of businesses and residences) were filed following both tornadoes.
Ramsey said that those numbers are hitting the industry hard. He discussed loss ratios over the past five years and the difficulty insurance companies have faced. He said, “Since 2007, the loss ratios for homeowners insurance in Oklahoma are at 133 percent.”
In 2010, loss ratios for homeowners insurance was at 163.3 percent. And these numbers don’t include the hail storms that happened in 2012. Ramsey said, “It’s a picture that is disturbing. When you’re paying out .14 more than every dollar collected, that’s a problem. Insurance companies can’t survive that way.”
Ramsey said that the problem has gotten so bad that at least three insurance companies recently announced that they would no longer be writing policies in Oklahoma due to the high losses. He said, “If the trend continues, it could be a problem. You have to have a stable insurance market to encourage economic development. If the insurance industry isn’t there, things stop.”
In August industry officials will hold a summit to discuss options on how to serve their customers, provide quality insurance, and mitigate big losses. Ramsey said, “I think we’re going to have to be creative. We’re looking at everything – from wind and hail pools to market assistance to reinsurance. We’re going to have to open our imaginations and see what is out there.”
Regulators in the state support the efforts to improve the market and increase safety for Oklahomans. John Doak, Oklahoma’s insurance Commissioner said that preparedness should also be included in the discussion. He said they modeled their new response system after states that deal with hurricanes and other disasters.
Stokes said that aligning with agencies and groups across the industry helps to protect lives and speed recovery. He said, “We keep learning. We saw the best practices outcome. We learned from Joplin, from Tuscaloosa, from others. We now have brought partnerships. It’s all part of a bigger lesson.”
Doak said that the state’s efforts, such as the insurance village and agreements with federal officials confirm that the state continues to learn and improve its disaster recovery efforts. He said, “The insurance village was a great example. It was staged at the first Baptist Church of Moore because of the church’s high visibility from the interstate. Everything was there, together. There were disaster teams to help residents, industry representatives and state agencies, all in one place. That had never been done before.”
He said that the village was so well thought out, that people could charge cell phones, rent a car, and in some instances have their claims paid on the spot. He said, “We even used satellite imagery. Companies were able to pull satellite photos of the neighborhood from before and after the storm. When an agent saw the home was completely gone, it was easy to process the claim for a total loss.”