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Hurricane Harvey Makes Car Insurance Harder to Get

Earlier, we discussed whether car insurance covers hurricane damage. Now, we’re looking at how Hurricane Harvey impacted the cost of car insurance in the areas it hit.

Early Predictions for Hurricane Harvey & Car Insurance

Immediately after Harvey hit, Jerry Hagins from the Texas Department of Insurance made a prediction about the storm: it’s going to change the way the auto insurance companies approach coverage. Hurricane Harvey left nearly one million vehicles destroyed or damaged, and industry analysts predicted increased car insurance rates in the area. Even nearly two weeks after Houston’s skies cleared, insurance companies remained unsure about who to sell new policies to.

In the weeks following Hurricane Harvey, Allstate wasn’t offering new coverage anywhere in Harris County. State Farm was equally hesitant until they reviewed the cost of handling 33,000 auto insurance 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 anticipated handling 2,200 claims in the state.

In total, insurance companies handled approximately 100,000 auto claims immediately after Harvey— with 3 in 4 being claims for totaled vehicles. After the damage had been assessed, Harvey was credited with the destruction of more vehicles than any other event in U.S. history.

American Access Casualty Company’s president, Dan Cummings, expressed concern that this level of flooding would be the new normal for Harris County. It was the third massive flood the region had 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 premiums.

Experts anticipated that insurance companies, even large ones, would 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 tough 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, said, “There is a large community of people in Houston who can’t really afford the major carriers.”

After the storm, those people who were insured before Harvey had a better chance of getting their claims handled as expected, but rising premiums haunted the region in the coming months. Over the last couple of years, the Office of Public Insurance Counsel 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 below the poverty line, the rising cost of insurance might make living—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.

How Much Did Harvey Increase Car Insurance?

In 2018, reports indicated that insurance rates for Houston-area drivers—even those who didn’t make a claim related to Harvey—increased. One driver told reporters that their rates increased 8 percent despite not making a claim because of the powerful hurricane.

“Insurance companies base their rates on the losses that they experience in a year and then they average those in overtime,” said Jerry Hagins, spokesperson for the Texas Department of Insurance. “Hurricane Harvey caused immense flooding in the Houston area and insurance companies saw a lot of claims from people.”

Texas is ranked first in the nation for severe natural disasters. It leads the nation for both the variety and frequency of natural disasters, enduring events such as wildfires, flooding, hurricanes, hailstorms, and tornados. Each event presents a unique chance for vehicles to suffer catastrophic damage.

As experts predict the continuing occurrence of severe storms, it’s a matter of if, not when, owning a car in the area will become more expensive once again.