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Hurricane Harvey Makes Car Insurance Harder to Get

Jerry Hagins from the Texas Department of Insurance said one thing about Hurricane Harvey: it’s going to change the way the auto insurance companies approach coverage. Hurricane Harvey left nearly one million vehicles totally destroyed, which will certainly raise the premiums for comprehensive coverage. Even nearly two weeks after Houston’s skies cleared, insurance companies remain unsure about who to sell new policies to.

At the time of this writing, Allstate wasn’t offering new coverage anywhere in Harris County. State Farm is equally hesitant until they can review the cost of handling 33,000 auto claims in Harvey’s wake. American Access Casualty Company, a small insurer from Illinois, handled 300 claims in Texas in 2016—their largest market. In 2017, they anticipate handling 2,200 claims in this state.

In total, insurance companies are handling more than 100,000 auto claims—with 3 in 4 being claims for totaled vehicles.

The company’s president, Dan Cummings, is afraid that this level of flooding damage is the new normal for Harris County. After all, this is the third massive flood the region has seen in the last 10 years. Many small carriers don’t have the funds to handle catastrophes like this on a regular basis—not without hiking up the premiums.

Experts expect that insurance companies, even large ones, will do exactly that. The problem with that? Insurance companies might be pricing lower-income drivers out of the market. Independent car dealers are having a hard time selling their inventory—not from lack of buyers, but from lack of insurers willing to sell policies to mid-to-low income buyers. Rick Maroney, the president of the Houston Independent Automobile Dealers Association, says “There is a large community of people in Houston who can’t really afford the major carriers.”

Those people who were insured before Harvey have a better chance of getting their car claims handled as planned, but rising premiums will haunt the region in the coming months. Over the last couple years, the Office of Public Insurance Counsel has observed a 20 to 30 percent hike in premiums. “There is a likelihood that the Houston area will see a large increase in the next year or two,” said Joe Matetich, deputy public counsel for the OPI.

With 1 in 5 residents in the greater Houston area living under the poverty line, the rising cost of insurance might make living in the area impossible—or at least owning a car in the area impossible. For a driving-dependent economy, that could spell disaster for families and businesses in South Texas.

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