The Cost Of Disasters

By Author: Marcus Stalder
Total Articles: 491
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Last week, A M Best which monitors the financial health of the insurance industry issued a warning. This has been one of the worst years for natural disasters since records began and the insurers are running out of cash to meet all the claims. If cash reserves are exhausted, this drives up debt and hits the capital base. Were the stock exchange running with high confidence, the insurers could simply sell more shares. Unfortunately, there's a real sign the economy could be moving toward a double dip and the stock exchanges are losing value as panic sets in. This means the only way the cash reserves can to topped up is through increasing the premium rates.

Now don't be deceived by the latest headline-grabbing Hurricane Irene and all those television images of battered property, there are thousands of vehicles caught in floods and resting under fallen trees. It's at times like this that vehicle owners say prayers of thanks they paid out for comprehensive cover. It should mean they can be back on the road as soon as the sewers drain the waters away and the wreckage is cleared out of the way. Unfortunately, the consequences ...
... are going to be long-lasting. This has been one of the worst years on record for natural disasters. It all began with seriously bad winter storms which made avoiding collisions a challenge. Then came the tornadoes and hailstorms. The current estimates are this year's claims for tornado damage are more than $18 billion with four more months to go. It might surprise you to know $7 billion of losses came from April 25 through 28. You do remember Tuscaloosa, Ala which leveled homes and threw vehicles around like they were toys.

Now think about the flooding when the Mississippi decided it preferred the scenic route to the sea. Every time a home is flooded, the odds suggest vehicles will be damaged. This might be because they are caught in the garage or, more likely, because they are driven though the water. If you are lucky, this is relatively clean water and, even if it comes inside, the smell will not be too bad when it dries out. Should you fail to keep the revs high and the water passes up the exhaust pipe and into the engine, it can be a big job to clean out all the grit and dirt. Now suppose you live near the sea. There are winds to drive salty water on to the land. This both wrecks the farmland and starts a process of rusting in your vehicle.

So whether you are a private insurer or insure through a business, next year's auto insurance quotes are going to come in with higher premium rates. It's the only way in which the insurers will be able to stay in business. Now you could react by increasing the deductible to keep down the cost. But ask yourself, can you afford to pay out should there be more disasters next year? The scientists keep telling us global warming is causing all these tornadoes and storms. If weather-related disasters do become more common, can you afford each new set of auto insurance quotes? And before the knee-jerk response, can you afford uninsured losses as the alternative?