Lightning Claim Costs Continue to Rise; Surging Electronics Prices, Product Shortages, Partly to Blame

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NEW YORK, June 21, 2012 — While deadly tornadoes have already caused destruction in several states this year, intense lightning storms have also taken their toll throughout the United States. In fact, lightning strikes cost nearly $1 billion in insured losses in 2011, according to the Insurance Information Institute (I.I.I.). 

An analysis of homeowners insurance data by the I.I.I. and State Farm ® found there were more than 186,000 lightning claims in 2011, down nearly 13 percent from 2010. The I.I.I. puts the average lightning claim at $5,112 in 2011, up 5.5 percent from 2010. The average cost per claim rose 93 percent from 2004-2011, even as the actual number of paid claims fell by over 33 percent over the seven-year period. This decline may be due to increased use of lightning protection systems.
 
“The number of paid claims is down, but the average cost per claim continues to rise, in part because of the huge increase in the number and value of consumer electronics in homes,” said Loretta Worters, vice president of the I.I.I. “Plasma and high-definition television sets, home entertainment centers, multiple computer households, smart phones, gaming systems and other expensive devices—which can all be destroyed by power surges—continue to have a significant impact on claims losses.”

Another reason behind the increased claim costs may be due to a spike in consumer electronics prices. Product shortages in 2011 through the first quarter of 2012 from places such as Thailand and Japan, which were affected by supply chain issues, may have also contributed to the increased claim costs.

HOMEOWNERS INSURANCE CLAIMS AND PAYOUT FOR LIGHTNING LOSSES, 2004-2011

  Number of paid claims Insured losses ($ millions) Average cost per claim
2004 278,000 $735.5 $2,646.0
2005 265,700 $819.6 $3,084.0
2006 256,000 $882.2 $3,446.0
2007 177,100 $942.4 $5,321
2008 246,200 $1,065.5 $4,329
2009 185,789 $798.0 $4,296
2010 213,278 $1,033.5 $4,846
2011 186,307 $952.5 $5,112
Percent change
2010-2011		 -12.6% -7.8% 5.5%
Percent change
2004-2011		 -33.0% 29.5% 93.2%

Source: Insurance Information Institute, State Farm.

View Archived Tables

 

According to the I.I.I., insured catastrophe losses in the United States for 2011 totaled $32.3 billion, greatly surpassing the average of $23.8 billion for the years 2000 to 2010. The federal government issued 99 disaster declarations in 2011, a record and an indication of the increased number of catastrophes, as well as a greater propensity to issue federal disaster declarations. According to Munich Re, a major reinsurance company, losses due to thunderstorms (including tornadoes, large hail and lightning) exceeded $25 billion last year, more than double previous records.
 
Worters noted that given last year’s record tornado activity and the fact that tornadoes are usually accompanied by severe thunderstorms, it was not surprising that the number of lightning claims remained close to $1 billion.

Insurance Coverage

Damage caused by lightning, such as fire, 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 a lightning strike. There is also coverage for lightning damage under the optional comprehensive portion of an auto insurance policy.
 

Reducing the Risk of Lightning Damage

In recognition of Lightning Safety Awareness Week (June 24-30), consider the following tips from the Insurance Institute for Business & Home Safety (IBHS) to protect your home or business against lightning.

  • Have a lightning protection system installed for your home or business.
  • Be sure the lightning protection system is designed and installed in accordance with accepted industry standards and with National Fire Protection Association, Lightning Protection Institute and UL requirements.
  • Include protection for electrical, telephone, cable or satellite TV lines entering the structure.
  • Make sure all equipment is UL-listed and properly labeled.

Lightning protection systems are designed to protect a structure and provide a specified path to harness and safely ground the super-charged current of the lightning bolt. The system neither attracts nor repels a strike, but receives the stroke and routes it harmlessly into the earth, thus discharging the dangerous electrical event. Investment in a lightning protection system will protect your personal or organization’s investment in its property and equipment.
 

Do’s and Don’ts for Lightning Safety

The Lightning Protection Institute also advises the following:
  • Treat lightning with proper caution. If you are outside and a thunderstorm approaches, immediately seek shelter inside, in a home, large building or substantial, fully enclosed building, all preferably protected with a lightning protection system.
  • If a building is not available, take shelter in a car with a metal top and keep doors and windows closed.
  • If caught outdoors, try to minimize your risk by going to a place of lower elevation.
  • Certain locations are extremely hazardous during thunderstorms. Avoid lakes, beaches or open water; fishing from a boat or dock; and riding on golf carts, farm equipment, motorcycles or bicycles. Take shelter in tunnels, subways, even ditches or caves if necessary—never under a tree!
  • To avoid side flashes (voltage from a nearby struck object) stay clear of fences or isolated trees. Keep away from telephone poles, power lines, pipelines or other electrically conductive objects.
  • Stay off the telephone. In your home, do not stand near open windows, doorways or metal piping. Stay away from the TV, plumbing, sinks, tubs, radiators and stoves. Avoid contact with small electric appliances such as radios, toasters and hairdryers.
 
 
For more information on lightning safety, visit the National Weather Service.
 
For more information on protecting your home or business from lightning, visit IBHS or the Lightning Protection Institute.
 
NOAA’s lightning safety page: http://www.lightningsafety.noaa.gov/

 

 

RELATED LINKS

 

Issues Update: Catastrophes
Facts and Statistics: Lightning
 
 

THE I.I.I. IS A NONPROFIT, COMMUNICATIONS ORGANIZATION SUPPORTED BY THE INSURANCE INDUSTRY.
 
Insurance Information Institute, 110 William Street, New York, NY 10038; (212) 346-5500; www.iii.org

 

 

 

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