Lightning Sparks Concern For Insurance Industry; Homeowners Claims Rise Sharply Over Last Five Years

March 31, 2010

I.I.I. Study Finds Insured Losses Overall Continue To Trend Upward, Despite ’09 Respite

INSURANCE INFORMATION INSTITUTE
New York Press Office: (212) 346-5500; media@iii.org

NEW YORK, March 31, 2010— They say that lightning never strikes in the same place twice, but for insurers it strikes hundreds of thousands of times annually, causing millions of dollars in damages. In fact, the average cost of homeowners claims for damage due to lightning strikes has increased significantly over the last five years, according to the Insurance Information Institute (I.I.I.).

An analysis of homeowners insurance data by the I.I.I. found there were 185,789 lightning claims in 2009 costing $798 million, with an average claim totaling $4,296. These losses ranged from damage to expensive electronic equipment to structural fires that destroyed entire homes.
 
Insured losses related to damage from lightning strikes topped more than $1 billion in the U.S. for the first time in 2008. The number of lightning claims and the dollar amount of those losses fell 25 percent from 2008 to 2009, reflecting fewer storms in 2009. The overall trend, however, shows insured losses continue to climb, with the average cost per claim up 39 percent over the past five years.

“Make no mistake, lightning plays a substantial role in the damage done to homes and businesses every year,” said Loretta Worters, vice president with the I.I.I. “But some losses are preventable when using the proper building protection systems such as surge protectors, lightning rods, conductors and ground rods.”Lightning not only damages properties, but can cause injury or death. According to the National Oceanic and Atmospheric Administration (NOAA), there were 34 lightning fatalities in 22 states and Puerto Rico in 2009. Florida, considered the “capital” of lightning strikes, had five deaths; Texas and North Carolina had three each.

HOMEOWNERS INSURANCE CLAIMS AND PAYOUT FOR LIGHTNING LOSSES, 2005-2009
 
  2005 2006 2007 2008 2009 Percent change 2005-2009
Number of paid claims
265,700
256,000
177,100
246,200
185,789
-30.1%
Insured losses
($ millions)
$819.6
$882.2
$942.4
$1,065.5
$798.2
-2.6
Average cost per claim
$3,084
$3,446
$5,321
$4,329
$4,296
39.3
Source: Insurance Information Institute.
 
Damage caused by lightning, including fire following, is covered by standard homeowners and business insurance policies. Some home and business insurance policies provide coverage for power surges that are the direct result of lightning striking a home or business. There is also coverage for lightning damage under the comprehensive portion of an auto insurance policy.
 
The Lightning Protection Institute (LPI) says that lightning protection is a specialty discipline and expertise is required for system design and installation. Systems for homes and businesses should be installed by trained and experienced LPI-certified and UL-listed specialists. LIP offers these safeguards for property owners seeking a qualified lightning protection specialist:
 
  • Make sure materials and methods comply with nationally-recognized safety standards of the LPI, National Fire Protection Association (NFPA) and Underwriters Laboratories (UL).
  • Only experienced and reputable UL-listed and LPI-certified lightning protection contractors are qualified to install lightning protection systems.
  • Check references. A qualified specialist should provide a list of references and affiliation with industry groups such as NFPA, the United Lightning Protection Association (ULPA), the Lightning Safety Alliance (LSA) and LPI. 
  • Ask about surge protection. Lightning-induced surges can damage electronics and appliances. A qualified lightning protection contractor can provide options for service entrance arresters and surge protection devices.
  • Experience counts. Be wary of start-up companies or contractors offering a “price deal” to install, fix or repair your lightning protection.
  • When in doubt, contact. www.bbb.org to locate your local Better Business Bureau to obtain reliability report information on a contractor before you hire them.
 
The LPI offers a list of certified contractors across the U.S. Visit the LPI Web site for more information about lightning protection.
 
The Institute for Business & Home Safety has these tips to reduce the risk of lightning damage:
 
  • Install a whole-house surge protector for your home or business.
  • Include protection for electrical, telephone, and cable or satellite TV lines entering the house.
  • It is important that all utilities (telephone, electrical, and cable or satellite TV) be bonded to the same grounding point. This will ensure proper operation of the surge protection system and will prevent ground potentials from developing on the electrical system.
  • All utilities (telephone, electrical, and cable or satellite TV lines) should enter the structure within 10 feet of electrical service entrance ground wire.
  • Install arc fault circuit interrupters on all electrical circuits.
 

For more information on lightning, go to the Lightning Protection Institute. For more information on protecting your home or business from lightning, go to IBHS.

 

The I.I.I. is a nonprofit, communications organization supported by the insurance industry.