1Tornado & Storm Research Organisation (TORRO), WeatherNet Limited - U.K.
2Tornado & Storm Research Organisation (TORRO), Geography Department - U.K.
Over 90,000 weather-related domestic insurance claims were analysed for the United Kingdom for the 5-year period, 1 January 1997 to the 31 December 2001. The insurance claims related to damage caused by high winds, tornadoes, lightning, hail, torrential rain and weight of snow, collectively referred to by insurers as 'storm damage', and low temperatures/freeze covered by insurers as a separate peril under 'escape of water'.
Each claim was validated using information from an urban-based network of manned and automatic meteorological stations, all publicly available sources and weather press clippings. A claim was normally accepted if a nearby meteorological station had recorded potentially damaging conditions around the time specified by the claimant. There is no uniformly accepted definition of what constitutes storm, and different insurers employ different thresholds of maximum wind gust in order to accept a claim as valid. The claims history of the policy holder, the exposure location of the buildings (e.g. on a coast or hilltop) and its age are among the factors also taken into account when assessing the validity of a claim. Temperatures below -5 °C are considered the threshold for freeze damage to occur.
Approximately 22.9% of the 90,980 claims were repudiated, 12.5% were referred for a visit by a loss adjuster or engineer in order to assess the damage by sight, 64.0% were accepted, and 0.6% of claims could not be processed through lack of meteorological data, being referred for a site visit. Approximately, 1 in 4 storm claims were repudiated but only 1 in 10 lightning claims.
The cost of all 90,980 weather-related insurance claims amounted to £36.9 million (57.9 million €) with an average amount per claim of £620 (973 €). During the 5-year period, high winds accounted for 94.5% of all weather-related insurance claims at an average value of £622 (977 €), lightning 4.4% at an average value of £556 (873 €), freeze 1.1% at an average value of £737 (1,157 €) and flood less than 0.1% at the significantly higher average value of £1,503 (2,360 €). The average cost of storm claims has risen from around £480 (754 €) in 1997 to £760 (1,193 €) in 2001.
Extreme large-scale weather events accounted for high numbers of claims. For example, seven storm events (25 December 1997, 4 January 1998, 27 February 1998, 24 October 1998, 3 December 1999, 24 December 1999 and 29 October 2000) each accounted for more than 500 claims. On average, approximately 25% of all claims were received within the first two weeks of the storm event, 50% within six weeks and 90% within three months. The proportion of claims repudiated decreased slightly after about six months and the average claim cost increased over time. Reasons for these trends are explored together with the implications for insurers of validating and actioning claims as soon as possible after a storm event.
Four widespread lightning events (27 May 1999, 2 June 1999, 4 July 1999, and 4 July 2001), each responsible for more than 80 claims, were examined. Analysis of the time lag between the lightning event and the insurance claim indicated that lightning claims tend to be notified and validated sooner after the event than storm claims. This is probably because the lightning damage was to electrical equipment, whose failure is soon noticed and which the policyholder wants replaced or repaired quickly.
Analysis of the 58, 221 validated claims by postcode indicated that the geographical
distribution is strongly influenced by insurance policy exposure (related to population density and the
market areas of the loss-adjusting companies contracting the claim validation service provided by
WeatherNet), regional variation in property vulnerability (e.g. some areas have old, weak and poorly
maintained stock), propensity of policyholders to claim, and the regional variation in the frequency and
severity of severe weather during the 5-year period under study. An analysis of the number of claims
per 1000 addresses per year provided a relative index based upon a population of all addresses and,
to
some extent, eliminated the influence of policy exposure. It is an index of claims ratio, and is
highest where severe weather is common (e.g. exposed coastal locations), properties most vulnerable,
where policy holders show a high propensity to claim, and where the cost of repair work is high due to,
say, the high cost of labour and transport of materials.