Car owners flooded insurers with claims after hurricane Harvey
Auto insurers were already bracing for another bad year when the downpour started in Texas, producing potentially hundreds of thousands of new claims.
“We do know that approximately 100,000 claims have come in” as of Thursday, said Matt Stillwell, manager of governmental and regulatory communications at the Insurance Council of Texas, a trade association. He said the number was expected to climb as high as 500,000. “It is looking to be a huge impact on the auto insurance market,” he said.
While homeowners’ insurance policies almost always exclude flood damage, comprehensive auto policies do cover flooding. The typical household in Houston has two cars, and Mayor Sylvester Turner urged residents to “hunker down” as Hurricane Harvey made landfall, hoping to avoid a replay of the tie-ups and crashes that killed about 100 people fleeing Hurricane Rita in 2005.
That means few people moved their cars out of harm’s way before the flooding started. Texas drivers are not required to have comprehensive auto insurance —the type that covers flood and other types of damage. People holding only the legally required insurance — liability coverage for damage done to other people’s cars - will not have valid claims, Stillwell said.
Those who have comprehensive insurance should get a payment based on replacement value minus depreciation, if their car is a total loss.
For insurers, the losses will affect some more than others. The big, household-name auto insurers “have sufficient geographic and product diversification to absorb the losses,” Standard & Poor’s said in a report on the impact of the storm and flooding on various parts of the insurance industry.
But, “some of the regional and local players could face significant hits to their earnings, and possibly their capital,” the ratings firm added.