P&C insurers brace for wave of Texas deep-freeze claims

One of the biggest headline-grabbing natural disasters in recent memory is the cold snap that gripped Texas for the better part of a week, leaving millions without power, heat or water. This was certainly a trying time for the state and it will likely take months or more for the full scope of the disaster to be fully understood, even as dozens of deaths have already been reported.

An area that could be of particular concern for property and casualty insurers is just how costly the claims associated with the deep freeze will be in the weeks and months ahead. Dallas-Fort Worth CBS affiliate KTVT reported in the midst of the weather event that local experts were already projecting that this would be the costliest natural disaster in the Lone Star State's history.

The Insurance Council of Texas told the station there are a few reasons for this expectation: Most notably, it's that frozen pipes had already burst in a many properties, causing extremely costly water damage to large numbers of homes and businesses. Just as concerning for P&C companies is that many of those burst pipes were reported while temperatures were extremely low; as the temperature thawed — with some parts of Texas seeing 80-degree weather shortly after those well below freezing — more evidence of and damage from burst pipes was likely to be discovered.

As such, insurers are preparing to be inundated with claims from around Texas, and it may take those companies quite a long time to even begin processing all of them.

Texas was battered by freezing weather and ice.

Widespread understanding
Obviously, the impact of the low temperatures across the state has been well-publicized, but it's worth noting that many property owners did have advance warning that extreme low temperatures were in the forecast. As such, many of those people at least started taking preliminary steps to protect their homes or businesses from the fallout, according to Houston NBC affiliate KPRC.

That included not only doing what they could to keep their homes in good shape, but also their gardens, sprinkler systems and pools. In the latter case, experts recommended running pool equipment 24/7 during the freeze, though extremely high energy prices that coincided with the weather event might have precluded many from following through on that advice.

Potential challenges
One thing many homeowners and entrepreneurs across the Lone Star State may find out as they start filing their P&C claims in the weeks to come is that their policies might not cover everything they expect.

The Wall Street Journal notes that while things like damage caused by long-term exposure to freezing temperatures, ice damage, living expenses when people have to leave their homes and so on will be covered, many people may be surprised to learn what their insurers won't pay for. Obviously, these specifics vary from one home to the next based on the unique policy covering the property, but for instance, experts are already warning that the cost of roof repairs might not be as simple to claim as some might expect.

“What should be straightforward — 'fix my roof' — is often an adversarial war between roofing pros and insurance adjusters, with consumers caught in the middle,” Amy Bach, executive director with consumer advocacy group United Policyholders, told the Journal.

Projecting the final total
Already, tens of thousands of claims have been filed across the state, and many more are expected to come as the full extent of the damage from the cold snap is realized.

While Texas was certainly hit hardest, a number of neighboring states — 20 in total — saw some amount of damage stemming from the event, the Journal reported separately. Between snow, ice, freezing and related conditions, it's currently projected that the total payout by P&C insurers could be in the range of $18 billion. That would make it one of the most expensive natural disasters in U.S. history, ahead of many highly damaging hurricanes, earthquakes and wildfires.

Again, insurers have already received tens of thousands of claims, and it's highly irregular for this part of the country to be hit so hard by cold weather. One major insurer only processed 75 claims related to frozen pipes in Texas last year. Part of the problem is that some of the most populous regions not only across Texas, but in the entire U.S. — Dallas, Houston and San Antonio — were among those most affected by the prolonged low temperatures.

With all of these issues at front of mind, P&C insurers would be wise to make sure their communication efforts with policyholders are as strong as possible in the near future. Without clarity around when, how and why decisions are made, homeowners already having a hard time could have even more reason to be concerned about their financial future.