(April 2020) – Kansas is known for its unique and turbulent weather. It is even memorialized in our literature in books such as The Wizard of Oz. Most of the country looks forward to spring with its warming weather, soft rains and colorful flowers. In Kansas, we hold our breath because our spring weather can include violent tornados, damaging hail and powerful winds. None of this is new, but many property insurance underwriters are experiencing increased claim activity. As a result, they are increasing prices and changing coverage terms.
First known photograph of a tornado.
Taken in Kansas in 1884
Second only to Texas, Kansas produces more tornados than any other state – even more than Oklahoma. On average, Kansas will experience about 96 tornadoes a year. A hailstone of 8 inches fell near Vivan, SD, in July of 2010, setting the record as the largest hailstone. However, Kansas is second, having produced a hailstone of 7.75 inchs.
KHA staff members holding
large Kansas hailstones.
To be fair, Kansas weather is not the sole reason for the disruption in our property insurance markets. Other forces also are contributing to this problem:
- Insurance companies buy insurance to spread their own risk. This type of insurance is known as reinsurance. Reinsurance companies have experienced greater than normal losses. The recent hurricanes Harvey, Irma and Maria appeared to be small. However together, they created more losses than the record Katrina hurricane of 2005.
- Wildfires in California and elsewhere have resulted in nearly $50 billion of insured losses.
- New computerized risk modeling technology has shown that Kansas storm activity is more volatile and damaging than was previously thought.
- Insurance companies must hold their investments in low risk bonds. Those returns have been at record lows. Insurance carriers have turned to higher premiums to make up for the lost revenue from their investment portfolios.
- When insurance carriers experience higher losses than expected, they will often withdraw from certain lines of business. This has certainly happened in Kansas, as we have seen long-term property writers simply leave the state. This creates a seller's market.
How might these changes be impacting your coverage? What pitfalls might you experience?
- Insurance underwriters are imposing larger wind/hail deductibles. These may come in the form of a percentage or dollar amount. Pay special attention to the percentage deductibles. They are based upon your property values, not your claim amount. They may be much larger than you think. Wind/hail deductible buyback policies are now commonplace. These policies are being made available from various underwriters at Lloyds of London. These policies can be structured to apply per building or across a schedule of buildings. Make sure your wind/hail deductible policy aligns with your primary coverage.
- Be aware of the age of your roof surface. Underwriters know that older roofs become brittle over time. If you have an older roof, you are likely to have some significant surcharges applied to your premium. Consider updating your roof and placing protective screening around your rooftop mechanical systems.
- As an organization, it has taken decades to build and equip your hospital. Your community relies on your facility's existence to meet their health care needs. View your insurance carrier as a partner in protecting your assets. Make sure this partner has expertise in handling the specialty needs of health care providers. It can be very frustrating to discover the adjuster assigned to your claim has no experience or understanding of a hospital's exposures. Ask around and find out which carriers have a good track record. A few dollars of savings on the premium can quickly be erased if you have a delayed or difficult claims experience. Ask your broker to demonstrate that they understand your industry and have placed your coverage with carriers that are prepared to meet your needs.
KHA members have enjoyed a special arrangement. KHSC and Chubb Insurance Group have been working together for a number of years. This agreement has brought group pricing and broader terms to the participating hospitals. If you have not taken advantage of this program, you should consider it. Contact Steve Poage at (785) 233-7436 to learn about the details and how you can benefit from it.