HomeNewsSevere weather should not spike insurance premiums

Severe weather should not spike insurance premiums

Your inner cynic can take a breath.

As costly as this winter has been, and it has been, the good news is it’s not likely to cause an icy spike in home insurance premiums.

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What is more probable is that three years of lousy weather already have.

All insurers factor in the costs of winter, said Bob Hartwig, an economist and president of the Insurance Information Institute.

“Winter storm losses happen every year,” Hartwig said in a Feb. 18 phone interview. Insurers assume there will be those cold weather-related bites, he said.

There are ups and downs, he added, and things balance out so that just one bad winter isn’t going to have a big impact on rates.

This year “is likely to become one of the top five costliest winters since 1980,” said Loretta Worters, III vice president. The tab for January alone is about $1.5 billion, she stated in a Feb. 18 email.

But that alone doesn’t mean it will be a bad year for insurers. Winter storms are a distant third, she said, in categories of losses, representing 7.1 percent of total losses covered by insurers. Tropical event account for 40 percent, and tornadoes are 36 percent, she said.

When figuring out rates, insurers, however, look at year-after-year trends of all weather-related losses, Hartwig said. This winter is part of a multiyear stretch of bad weather.

We’ve had a couple of mild winters before this one, but we’ve also had Irene and Sandy whipping through our lives, and, yes, they anted up enough mayhem to create that trend that insurers see when they look at the big picture.

Those bad years already are reflected in rates, Hartwig said.

Since 1980, according to the III, there have been 10 winter storms in which insured losses have topped $1 billion in the United States and Canada. The costliest was March 11–14, 1993, which in 2013 dollars cost $3.22 billion. Two storms in early 1994 each caused $1.25 billion in losses. Just last year, an easy winter in the Philadelphia area, losses throughout the United States and Canada totaled $1.2 billion, according to the III. This February’s tally has yet to be calculated.

Another business that yearly figures in costs of bad weather is the utility industry. PECO spokesman Ben Armstrong said the electric company budgets for storm damages.

“As part of our business planning and budgeting process, we account for storms,” Armstrong stated in a Feb. 19 email to the Northeast Times. “If the company required additional funding, this would be presented to the Public Utility Commission for review and approval as part of the rate-case process.”

PECO has not had a rate increase since January 2011 — before Irene, before Sandy and before this winter.

Sandy cost the power company $72 million, Armstrong stated. PECO could wind up paying about $120 million to cover the tab for this winter. ••

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