Hail to Pay
Meeting the rising challenge of resolving claims from severe storms.
For the past several years, the insurance industry has experienced below-average natural catastrophe claims. A quiet Atlantic hurricane season gave the Eastern Seaboard a break from high winds and storm surges. However, severe thunderstorms, which include hail, tornado, and straight-line winds, were not so quiet. Rather, many authorities in the insurance industry report an increase in storm severity.
In fact, property claims resulting from hail damage have been on the rise. According to Verisk’s Property Hail Claims in the United States: 2000-2013 report, there were $54 billion in claims for hail losses from 2000 to 2013. The last six years of that period account for nearly 70 percent of those losses. The National Oceanic and Atmospheric Administration (NOAA) reported that, in 2014 alone, the U.S. experienced 5,536 major hailstorms. During a single week in May 2014, storms caused $2.9 million in insured losses, according to Impact Forecasting. That severe thunderstorm outbreak was the costliest insured loss event of the year in the U.S.
According to a report from Xactware, hail damage estimates increased by more than 15 percent from 2013 to 2014. Risk Management Solutions (RMS) found that the average size of a residential claim from severe thunderstorms increased by nine percent each year from 1998 to 2012. Part of this increase can be attributed to hail hitting areas that do not typically experience hailstorms.
States with the highest hail risk are Colorado, Iowa, Kansas, Minnesota, Missouri, Nebraska, Oklahoma, South Dakota, Texas, and Wyoming, according to NOAA. However, over the past several years, there have been an increasing number of claims in the Southeast, including Georgia, North Carolina, and South Carolina.
Given this severe thunderstorm claims climate, the U.S. will need more claims professionals who are skilled in recognizing and evaluating hail damage to private and commercial properties. Below, we will discuss common challenges the claims professionals handling these claims can expect to face as well as important protocols for evaluating these claims fairly and accurately.
Hail Claims Challenges
In hail-related property claims, those resolving these cases can face problems with basic data as compared to other types of claims. When an insured files a claim after a car accident or fire, establishing the date of loss is relatively easy to determine. Not only is the damage immediately apparent, but also there often are corroborating police and news reports.
When evaluating hail damage, there often is a long period of time between when the damage occurred and when a claim is made. Many policies allow up to a year to report hail damage; some allow as long as 18 months to make the report. As a result, damage to a roof may not be discovered until well after the offending storm. And when hail claims are reported a year to a year and a half after the damage occurred, establishing the exact date of loss can be difficult. The date of loss reported at that time may be incorrect, which creates a coverage issue if the property owner changed insurers during the period in question.
When assessing damage to roofs, claims professionals also may be challenged by damage that is not obviously hail related. Hail destruction often occurs in conjunction with other weather damage, particularly wind, which can raise questions about the source of a particular crack or dent.
Furthermore, the reported damage may be due to a manufacturer’s defect or mechanical damage totally unrelated to hail. For example, during the manufacturing process for composite roofing shingles, sometimes granules do not properly adhere to the shingles. As a result, a property owner may mistakenly attribute displaced granules to a hailstone strike. There also may have been a problem earlier in the manufacturing process. Asphalt, which is a byproduct of petroleum refining, is used to make shingles. If all impurities are not removed, the shingles may blister and rupture, and this result mimics hail damage.
This great uncertainty in the timing of hail claims and the nature of the damage creates a need to pinpoint exactly when the loss occurred. Claims professionals can use weather reports to determine if there was a storm, registered wind speeds, and the size of hail at the property address on the reported date of loss.
Finally, keep in mind that a hail storm may very well have been in the vicinity of an insured’s property, but it does not mean that the hail was large enough or the wind speed high enough to cause functional damage to a property. Researchers are currently studying how hailstone size and density affect the destruction caused by a storm. So there are many variables—from wind speed to shingle condition to the density of the hailstone—that determine how damaging a hailstone is to a roof. However, hail that is one inch or larger in diameter (often described as golf ball-sized hail) is commonly involved when there is damage to a composite shingle roof in good condition.
Recognizing Hail Damage
Hail causes a few distinctive types of damage that sets it apart from other types of weather damage. Perhaps it is most obvious in the damage it does to vehicle windows and the dings it leaves on cars, but the most costly hail-related claims are for roof replacement. When scoping a property with reported hail damage to a roof, look for harm to adjacent fences, air conditioning units, windows, screens, and older, UV-degraded vinyl siding. These structures are usually damaged before a roof. If a shingle roof is functionally damaged, the shingles will show “bruising,” which looks like hail’s characteristic divots and dents. The fiberglass mat within the shingle also may be fractured.
In handling hail claims, it is important to document both the damaged and undamaged areas of a property. This is best accomplished with photographs by evaluating and documenting a 10’x10’ test area of the roof. The damaged roofing materials within that square are considered representative of the entire slope of the roof. Depending on the size of the building and shape of the roof, a claims professional may repeat this process for each major face of the roof.
Pay special attention not only to the aforementioned bruising and fiberglass fractures, but also look for damage to other structures on the roof. Soft metal ventilation fans, for example, are more easily damaged than a composite shingle. Plus, flashing may be dented or paint may be chipped from rooftop structures.
Preparing Claims Professionals for Hail
When you are training claims professionals to handle these types of cases, your program should cover both the general characteristics of a hailstorm and the effects of hail on building materials. Through this training, participants should come away with an understanding of how different types of materials may be damaged by hail and learn to recognize the signs. Some roofing materials are damaged by hail more easily than others. For instance, metal roofs show significant cosmetic damage that does not represent functional damage. Plus, the extent of the damage is affected by the age and condition of the roof, wind speed, and size of the hailstones.
But most importantly for these types of cases, claims professionals must be trained to document carefully a variety of observations. On a composite shingle roof, this includes marking damage, taking photographs, and measuring the square footage of the roof, pitch of the roof, and length of the gutters as well as noting the material composition of valleys.
Ultimately, every claim stands on its own merit. The Insurance Institute for Business & Home Safety (IBHS) reports that hail is now better researched and measured than ever before. We can hope that a better understanding of this weather phenomenon will make it easier for claims professionals to handle hail claims.