Another “Sharknado” could take the insurance industry by storm

Carbone-WilliamAccording to forecasts by the basic-cable network SyFy, a storm similar to the sharknado that hit Los Angeles last year is making its way toward the New York area. While AIR Worldwide estimated the losses from last year’s event at $100 billion, estimates for the impact on New York would heavily depend on the storm’s path. Let’s take a look at what impact the anticipated storm could have on the tristate area’s insurance market.

Is my property covered?
New York area homeowners should know that, much like the Los Angeles area residents, their policies will cover damage from windstorms, including tornados and hurricanes, subject to a windstorm deductible. These deductibles vary by policy and, more importantly, by region. Insureds in Tornado Alley will likely be subject to more significant windstorm restrictions, often needing a policy extension to ensure adequate coverage, while New Yorkers are more likely to have manageable windstorm deductibles since they are not as prone to these losses. The impact of windstorm deductibles on both an insured’s wallet and the insurer’s bottom line can be significant, depending on how a given storm is classified. In 2012, the use of executive orders and press releases to waive hurricane deductibles after Superstorm Sandy shifted a portion of the claim costs from the insureds to the insurer.

Fortunately for New York area residents, flying debris caused by windstorms is generally covered by homeowners policies. Similarly, comprehensive auto coverage would also cover physical damage that is due to debris from a windstorm. In this paragraph, “debris” can be read to mean “flying sharks.”  These coverages are important as a significant portion of the loss caused by tornadoes is due to flying debris damaging property that narrowly missed a direct hit, but was close enough to suffer the consequences.

Who pays the bills for shark attacks?
Health insurance policies cover attacks by animals, so New Yorkers can rest easy knowing their stitches will be covered. However, the tourist population should ensure that they have adequate visitors’ health insurance, as other countries’ universal healthcare policies do not apply here. Similarly, U.S. residents should check their health insurance policies before traveling abroad. Many health insurance policies operate differently for travelers abroad, and knowing what is covered in the case of a shark attack, or other medical emergency, could have a major financial impact.

For anyone keeping sharks as pets, you would be liable if a twister lifted your shark from your property and it were to bite a neighbor. Luckily your homeowners policy would cover this liability, assuming your specific shark was not an excluded breed. Many providers will deny coverage or alter policies for dog breeds considered “dangerous,” while other insurers will review dogs on a case-by-case basis. It can be assumed the same review would go into sharks kept as pets, so you may be covered for both your hammerhead and Labradoodle but not for your great white or Doberman.

Any new considerations
After seeing how the Los Angeles event ended, there are other possible implications in the New York insurance market that may come into play. It would be wise to review the intended uses on all recently purchased chainsaws, as many product warranty policies do not cover unintended uses, such as extraction from a shark torso. Additionally, the soft aviation market may need to harden a bit if helicopter pilots plan to help end a sharknado in the area. Last year’s storms ended when homemade bombs made out of kerosene containers were thrown from a helicopter into the twister, with the explosions equalizing the pressure. Without reviewing the underwriting, these types of flights are likely riskier than those anticipated in the standard policy.

With great white sightings on the rise in Cape Cod and a relatively rare Boston area tornado this week, a sharknado in the region appears possible. Luckily, it seems that most potential sources of loss for the average resident would be covered. Policy deductibles and exclusions may increase the final cost to insureds, but they likely won’t be footing the whole bill. It helps to know that the impact of a potential sharknado won’t take too big of a bite out of your wallet.

Will Carbone - Sharknado Picture

Will Carbone conducting research for this blog.

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