"What is the quantity and cost of residential insurance claims in the
last 5 years in the United States due to damage from leaky and/or
frozen pipes?"
Answer:
What I have for you are national numbers extrapolated from a detailed
regional sample. Actual national numbers are hard to find, for the
most part because they’re collected by the Insurance Industry
Institute, which does not make the data public (and in fact doesn't
even verify what data they have). While insurance companies are
required to report claims data, they have a lot of latitude about how
they report it. A look at the 10-K filings of public insurance
companies will demonstrate that. Private or mutual companies in
particular can skimp on the disclosure with no real penalties.
The III may have better data, because insurers may be willing to be
more detailed if they know that the public can't easily access
information. Some, of course, will never say more than they have to,
no matter who asks. I’ve requested the information you seek from the
III, and if they give it to me, I’ll come back and relay their
numbers. I do not expect to hear from them, of course, as proprietary
data is only valuable if it remains proprietary. Even if they gave it
to me, it's unlikely they would allow me to publish more than one or
two numbers. I'm actually a member of the media in a roundabout way,
and even a media inquiry netted nothing.
As such, a truly representative national number is going to be almost
impossible to get, and may not actually exist in the first place.
However, I came up with a way to calculate water damage claims on a
national basis. The calculations are based on the following data:
· The IINC published data saying that Californians filed 91,019
water-damage claims in 2001, or 32% of all claims. That percentage has
risen in four of the last five years. Total water damage claims paid
in 2001 amounted to $430,551,042, or 31% of the total paid out. This
information comes from a table found at
http://www.iinc.org/pdf/waterlossclaimsdata.pdf . The table reflects
63% of the California homeowner’s insurance market.
· State Farm, which writes 21.8% of all homeowners insurance policies
in the country ( http://iiisrv.thing.net/yy_obj_data/binary/578241_1_0/Homeowners.pdf
), suffered noncatastrophe claims losses of $5.201 billion for its
property insurance lines last year. (
http://www.statefarm.com/media/release/FinResults.pdf ). That number
includes commercial insurance, which is a small but measurable portion
of the business, perhaps 20%.
I’ve extrapolated national numbers using this data.
The California numbers are far more detailed, so let’s start with
them.
According to U.S. Census Bureau estimates (
http://quickfacts.census.gov/qfd/states/06000.html ), the U.S.
population was 284.8 million in 2001, and California’s population was
34.5 million, or 12% of the total. The California survey covered 63%
of the market, so it represented a sample that covered about 7.6% of
the U.S. population. Any survey with a sample size that large should
offer valuable statistical information.
So let’s calculate national estimates based on the California data:
1997 1998 1999 2000 2001
Water claims 1,068,671 1,383,026 1,129,289 1,357,539 1,197,618
Water payout $2,711,434,158 $3,638,298,039 $3,770,359,526 $5,049,149,487 $5,665,145,289
For a rougher estimate that backchecks the California data for 2001,
we can extrapolate using the State Farm data.
Assuming 30% of State Farm’s property claims were water claims (on a
par with Calif. and a few other states), and commercial insurance
represented 20% of the business, total 2001 residential water-related
claims were $1.25 billion. $1.25 billion is 21.8% of $5.7 billion,
which is mighty close to the Calif. number. My estimate of the
percentage of commercial business is far from firm. Assuming a range
of 10% of the business to 30% of the business, residential water
claims could range from $5.0 billion to $6.4 billion, within 11% of
the California number.
Water-damage claims, most from leaky or burst pipes, are the primary
cause of rising property-insurance costs. According to the North
County Times story (
http://www.nctimes.net/news/2002/20021002/55707.html ), in California,
water damage represented 32% of all claims in 2001, up from 24% in
1997. The story goes on to say, “The average claim in California
increased to $4,730 last year from $2,537.”
According to the trade organization Insurance Institute Network of
California ( http://www.iinc.org/cons_issues/home/frozen.html ,
http://www.iinc.org/news/home/waterdamage.html ), “frozen and broken
water pipes rank No. 2 behind hurricanes in terms of both the number
of homes damaged and the amount of claim costs in the U.S.” The
average cost of a water claim in California has nearly doubled in the
last five years, reaching $4,730 in 2001.
The number of claims and amount paid will probably rise dramatically
going forward, however. Your question about leaky pipes touches on a
very sensitive issue. Mold damage. Most of the growth in claims and
costs in the last couple of years can be traced to skyrocketing mold
claims. Mold normally occurs as a result of leaky pipes, but not all
states cover mold damage. In Texas, the law allows for coverage of any
condition caused by a covered peril, such as leaky pipes. Other states
are debating the issue, and mold really isn’t a big deal in many
areas. That, however, is likely to change.
There is big money at stake. According to a story at nc.indymedia.org
( http://chapelhill.indymedia.org/news/2002/07/312.php ), Texas mold
claims jumped to $843 million in 2001 from $153 million in 2000. The
story cites insurance industry officials saying that Texas’ claims
represent 70% of all complaints, which would put the country’s total
mold claims at $1.2 billion. A State Farm media backgrounders (
http://www.statefarm.com/media/risecost.htm ) confirms that it was
more than $1 billion.
Mold claims are on the rise in Florida, California, and other states,
and the 2002 number is likely to be much higher than in past years. A
story published by the National Association of Mutual Insurance
Companies ( http://www.namic.org/topnews/021106_3.asp ) said that in
Texas, mold claims are up 72% this year over last year’s numbers. If
last year’s proportions hold true, total mold claims could top $2
billion this year, though that’s a rough estimate at best.
An article published by NAMIC (
http://www.moldupdate.com/articles/0602i.htm ) said the following,
“The San Diego Tribune says a pipe or faucet that leaks over a period
of time leading to mold buildup, however, is considered a maintenance
problem, like termites, to be dealt with by the owner.” The same
article argues that leaky pipes are a maintenance issue, and the
resulting mold is not covered by traditional policies.
This is an issue almost certain to remain divisive and continue to
drive up premiums.
Other related sites
Good overall insurance site.
http://www.namic.org/index.asp
One useful link at the above site is the III chief’s testimony on mold
dangers
http://www.namic.org/topnews/020722%5F1.asp (Available from archives
after free registration to the site.)
A plethora of insurance-industry statistics put together by the
Insurance Industry Institute (one cited above, but still worth a
separate mention).
http://iiisrv.thing.net/yy_obj_data/binary/578241_1_0/Homeowners.pdf
and http://iiisrv.thing.net/yy_obj_data/binary/603782_1_0/liability.pdf
Search terms
insurance claims pipes leak industry |
