Homeowners hit by Wednesday’s summer storm — the latest case of violent weather in Ohio — may be in for more bad news: Some insurance companies are now requiring separate deductibles for claims from wind and hail damage.
In some cases, the extra deductible might be $1,500 on top of the normal $1,000 deductible. In other cases, the additional deductible could be a percentage of the value of the home — say $3,000 plus $1,000 for a $300,000 home.
“This is really new in Ohio,” said Mary Bonelli, senior vice president at the Ohio Insurance Institute, which represents insurance companies in the state.
She noted that separate wind/ hail deductibles exist in at least 19 states and Washington D.C. And now it’s here.
“It is a fact that the industry is turning its focus to Ohio and the Midwest,” Bonelli said. “It used to be the coastal states. Now it’s like, ‘Oh my gosh, look at all of the storms happening here.’ “
Indeed, Ohio’s insured losses from storms in the last five years are more than 2-1/2 times higher than during the previous five years. The estimate for 2008-2012 is about $3.4 billion (in 2012 dollars), compared with $1.3 billion (also in 2012 dollars) for 2003-2007. Department of Insurance wasn’t immediately able to disclose which companies have filed rate requests and are requiring separate deductibles for wind or hail damage.
In fact, two of the three most expensive storms in Ohio history have occurred in the last five years. No. 1 was the Hurricane Ike-related windstorm that hit in 2008 and caused $1.26 billion in insured losses. And the straightline windstorm and hail storms last June and July caused $440 million in losses, placing them at No. 3.
“There is a new normal out there regarding disaster risk, especially wind and hail,” Bonelli said. “Insurers are looking at ways to reduce risk but still keep insurance affordable.”
That’s the reason some companies are adopting higher wind/ hail deductibles. These would apply only to people filing that kind of claim. And this way, premiums can remain lower than they would be otherwise.
Bonelli said she knows companies in Ohio are doing this now but could not say how many. Her office plans to survey insurers this year to find out.
At the Ohio Department of Insurance, which must approve all rate increases, including mandatory separate deductibles, a spokesman didn’t immediately know how widespread the practice is.
Most companies that aren’t adopting mandatory storm deductibles here are raising rates in Ohio more than in years past because of the increased risk, Bonelli said. This is true even if you haven’t filed a storm claim. “It’s not necessarily your fault that you’re going to see an increase.”
While insurers can’t increase home insurance rates simply to recoup past losses, they can raise rates if they think storms are becoming more frequent in Ohio and that this trend will continue. They can also raise rates if they’ve sustained huge losses here or elsewhere and that has caused their reinsurance rates to go up.
Most homeowners affected by new storm deductibles or higher rates would see them when they renew their policy or change companies — not randomly in the middle of the year.
“The thing that’s changing is other companies are mandating them,” Olsen said.
Fewer than 1 percent of customers choose a separate wind/ hail deductible, he said, because the premium savings is “not that significant.”
Nationwide Insurance, a large insurer in Ohio, did not return a message. Neither did Motorists Insurance, one of the few companies that is requiring separate deductibles for at least some customers.
The new separate deductibles wouldn’t apply to other kinds of storm damage, such as from rain or a fire caused by lightning. Flood damage could be a whole separate issue.
Another change coming to Ohio, Bonelli said: New limits on roof claims. Companies are expected to move to determining the “actual cash value” of a roof. So a homeowner whose 20-year-old roof was damaged by a storm wouldn’t get a brand new roof paid in full after the deductible. He might get only the value of his existing roof toward the total cost — maybe $1,000 toward a $7,000 job.
“This curtails the roofing fraud,” she said, noting that some contractors will offer to pay a homeowner’s deductible and add it to the cost of replacing a roof that maybe wasn’t damaged at all. “Insurance companies can’t continue to replace roofs at the pace they do now,” she said.
Any changes in a homeowner’s coverage or deductibles would be disclosed in a cover letter with his renewal. “These are not done without full transparency,” Bonelli said.
For a list of insurance guides and consumer tips, go to the Ohio Department of Insurance’s Consumer Affairs section.