In 2011, Kansas endured the most financially costly storm season the state has ever seen.
Hundreds of hailstorms and more than two dozen tornadoes struck that year, resulting in an estimated $1.1 billion worth of insurance claims on storm losses, according to figures provided by state agencies.
That’s a state record “by a bunch,” said Jim Newins, director of property and casualty division for the state’s insurance department.
It may take a while for homeowners, whose policies are responsible for the bulk of storm claims every year, to get over it financially. Many now face insurance rate increases.
Last year saw an estimated average increase of 9.9 percent across the more than 100 insurance companies doing business in Kansas. That was a dip from 10.9 percent in 2012, Newins said.
That followed an estimated 5.72 percent increase in 2010 and 5.5 percent in 2011, he added.
“We’ve been in an elevated storm loss period since 2008, culminating with the billion dollar loss in 2011,” Newins said. “We thought we rounded the corner in 2010 because the losses dropped to $370 million.
“But the light we thought we saw in the tunnel in 2011 was the train going the other way.”
May 21, 2011
Hail, wind and tornadoes tore the state apart in 2011.
Of the $1.1 billion in storm losses that year, $918 million occurred between April and June, state figures show.
Two days in April alone accounted for 11 tornadoes, said Mary Knapp, the state’s climatologist.
Twelve twisters struck on May 21 throughout the state, including an one that ripped tiny Reading in Lyon County. It killed one person and destroyed 56 of the town’s 110 homes and 14 of its 21 businesses.
That three-month stretch also saw 707 hailstorms, Knapp said. On April 3 alone, 28 thunderstorms with high winds tore through the state, including in Sedgwick and Butler counties.
April storms brought large hail, which must be at least three quarters of an inch before it’s officially logged in as a hailstorm, Knapp said. Rose Hill saw 5-inch hail on April 8.
Those kinds of storms sent homeowners scrambling to make expensive repairs.
“Since then we’ve been subsiding a bit,” Newins said, “but it’s going to take a while to work all those high storm-loss years out of (the costs) for the insurance companies.”
Jim Camoriano, a spokesman for State Farm, said, “It’s true that these significant catastrophes do put pressure on (rates). But we try to keep volatility out of rates.”
State Farm is Kansas’ largest property-casualty insurer with 310,000 policies.
Although there were almost 10,000 fewer storm-loss claims in 2013 than in 2012 statewide and the dollar loss dropped more than $115 million, Camoriano said Kansas ranked in the top third of the country for all wind and hail claims for State Farm customers. The company had 7,600 such claims filed last year.
He said his company tries to recover from a period of big losses by spreading it out over years.
“We don’t recoup, I can tell you that,” he said. “We try to look forward over the next 12 months on what it’s going to take to provide protection for our business.”
Newins said most companies take the long-term approach.
“A lot of this will depend on a company’s philosophy because some companies are more aggressive in their rate requests than others,” he said. “What you’ll find is they have to protect their competitive positioning.
“If they ask for too much at a time, they’ll price themselves out of the market and people will leave.”
Rate changes for individual companies in 2013 ranged from a negative 4.1 percent by Western Agricultural to 30.8 percent by National Farmers Union.
All figures are estimated, Newins said.
His office relies on insurance companies reporting their losses, but he noted that small storms may not trigger a call.
As for rate increases, Newins said, he doesn’t have all the information necessary for the required formula to make it completely accurate.
Part of his formula includes determining the number of homeowner policies written by a company that year.
“If there’s a housing boom going on that year, I can’t do that,” he said.
In addition, so many variations are involved in figuring an older home’s inflation factor for replacement costs that they can’t be put into the data, Newins said.
But based on the best information available, Newins comes up with an annual average rate change for the state. In 2006, the average was actually a negative 0.24 percent.
“More companies took rate reductions that year than rate increases,” Newins said.
Premium prices vary for a number of reasons, including what kind of house is being insured, location, coverage amount and deductibles.
Premiums are less for a brick house than a frame house, Newins said. Roofs with wood shingles will cost a homeowner more than one with asphalt shingles.
Houses in parts of the state where storms are more active can carry a higher premium. Generally, homeowners in urban areas pay more “because more can happen” there, Newins said.
“On the flip side, a very rural area can be more expensive because there’s not much fire protection,” he said. “If a house catches fire there, more than likely it’s going to be a total loss.”
More insurance claims are paid on fire losses than for storms, Newins said. He didn’t have figures available on fire claims.
Because of the different factors, homeowners doing business with the same company will see different rate increases from one part of the state to another. Where insurance companies do most of their business also can affect rates, Newins said.
“If one company has a high market concentration in an area where a large storm occurs,” he said, “these losses will impact its (rate) more significantly.”
There’s no limit on the number of rate increases a company can file, Newins said. But if a company’s cumulative filings exceed 12 percent in one year, it must get prior approval from the state’s insurance department.
Standard Guaranty, for example, had requests for two rate requests – 5.1 percent and 8.8 percent – in 2013. Since the total exceeded 12 percent, the company had to get approval.
The department’s staff reviews the requests and determines whether to grant them, Newins said.