‘THE STORM IS HERE’

MORE TORNADOES, WEATHER EVENTS EQUATE TO HIGHER INSURANCE PREMIUMS

By Becky Gillette

Arkansas is already above the average for the number of tornadoes this year with 12 — possibly even 13 — by mid-March in a season where the average is 37.

“I think it will be an active year for tornadoes for a couple of reasons,” said Todd Yakoubian, KATV meteorologist. “We continue to see a very active storm track and above average sea temperatures in the Gulf of Mexico, which means there will be plenty of moisture to track northward. There is a threat for heavy rain and severe weather this spring.”

While Gulf of Mexico sea-surface temperatures can vary quite a bit, they have been above average for a while now. Yakoubian said when that happens, there is more water vapor in the air that can create the instability needed to fuel thunderstorms and heavy rainfalls.

“Getting severe weather in Arkansas in the spring is very normal,” he said. “We get it all year round, but especially in the spring. Never, ever panic when severe weather is in the forecast. Stay up to date and have a plan. If you do that, you will be OK.”

Jeff Hood, a meteorologist and forecaster with the National Weather Service Little Rock office, said Arkansas can experience tornadoes and other severe weather 12 months of the year.

“We’re definitely getting under way as far as the typically severe weather months of March through May,” Hood said. “That is typically when we have the greatest number of tornadoes across Arkansas. We have some idea on a monthly, seasonal or annual scale what we are going to experience as far as above or below rainfall and temperatures. A lot of it is influenced by large scale climate processes such as El Niño and La Niña.”

In recent decades, the areas of the country most likely to experience tornadoes have shifted to the southeast. There are fewer tornadoes in states like Oklahoma, Texas and Nebraska, typically known as Tornado Alley, and more tornadoes in Arkansas, Louisiana, Mississippi, Alabama and Georgia.

“A lot of people refer to that as Dixie Alley, not the central Tornado Alley,” Hood said.

The seasonal patterns across the country are troubling thus far in 2023 for another reason — their impact on the insurance industry.

“California flooding and mudslides and major storms elsewhere in the country are unsettling to insurance markets,” said Andrew Meadors, CEO, Sunstar Insurance of Arkansas. “Weather patterns all over the country are unsettling. This is bad timing. It is a toxic mix of increased storms and a hardening property insurance market all at the same time. It has been years and years since I have seen so much upheaval in property insurance rates. Many insurance carriers who used to freely write property coverage are now very shy about writing any coverage.”

For the insurance-buying public, it is a major hit to the pocketbook. Meadors said the industry is seeing deductibles and premiums increasing dramatically. Depending on the type of construction and loss history, it is not unusual to see premium increases of 10 percent to 40 percent.

“We are seeing wind and hail deductibles as a percentage of coverage increasing,” Meadors said. “What could have been a 1 percent wind/hail deductible could now be 2, 3 and sometimes 5 percent. Then some people have to go out and get wind/hail deductible buy-down coverage to make a plausible scenario to be able to afford a claim. It adds to consumers’ total premium cost outlay.”

Many Arkansans own vacation condos along the coasts of Florida, Alabama, Georgia and South Carolina. Meadors said some of those owners are getting sticker shock with much higher costs not only for insurance, but homeowners’ association fees or assessments.

“For Americans on a fixed income who are retired, this is a major problem,” he said. “With the hurricanes down there, insurance companies are getting really tired of the game of taking in premium dollars and giving them all back, plus some. Insurance companies’ costs for reinsurance are increasing dramatically. That in turn causes increases in premiums for the buyer. That is mainly on the commercial side, but homeowners’ insurance is going up as well. The cost of materials and labor is increasing substantially, and insured values have to go up to match today’s construction costs and the increased frequency and severity of claims. The storm is not coming; it’s already here.”

This is bad timing in particular for commercial real estate, he said, because Americans are not returning to the office post-pandemic as quickly as was expected. When commercial occupancy goes down, building costs go up.

“It is not good for commercial real-estate owners,” Meadors said. “That is a national phenomenon.”

It is a good idea to check with an insurance agent at least once a year to make sure you are getting the right coverage needed for your risk at the best premium dollar, said Kelley Erstine, CEO of Independent Insurance Agents of Arkansas, a professional trade associa- tion representing more than 300 independent member agencies in Arkansas.

“In this day and time, you have to become an educated insurance buyer and understand your deductibles so you can budget accordingly,” Erstine said. “The rates are definitely trending upwards for property coverage. I am told that in the fourth quarter of 2022, homeowners’ insurance went up an average 7 percent and commercial property rates exceeded a 9 percent increase.”

Erstine said the beauty of working with a local independent agent is being able to shop different companies for the best coverage.

“It is always good to reach out to your agent to have a policy review and know exactly what your policy covers, rather than having a major claim and finding out that you didn’t have as much coverage as you thought,” he said. “One difference we are seeing now because of higher rates is increasing the amount of deductibles from damage from windstorms, which include tornadoes. Deductibles for a homeowner policy that used to be between $500 to $1,000 now be can equal 1 to 2 percent of the coverage amount. If you have a policy covering a $300,000 home, that could mean a $6,000 payout before the insurance kicks in.”

There is no insurance specific to tornado damage. Rather, it is covered under standard auto, home or commercial insurance policies.

Erstine recommends people take precautions to protect their families and property, such as making a list of things like patio umbrellas and other lightweight items to bring in before a storm. Make trees more wind-resistant by removing diseased or damaged limbs, and remove limbs near or hanging over buildings, he said.

Editor’s note: On March 31, EF3 tornadoes with winds of up to 165 miles per hour killed four people in Wynne and one person in Little Rock. The latter was confirmed as the strongest tornado to hit the Little Rock area since 1999. The National Weather Service in Little Rock reported there were more than 922 reports of tornadoes, hail and damaging winds across 15 states on March 31, just a week after storms that moved across Arkansas spawned a deadly EF4 tornado causing mass destruction in Rolling Fork, Miss.