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.

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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