On July 2, 2024, Hurricane Beryl became the earliest Category 5 hurricane observed in the Atlantic Ocean on record, and only the second Category 5 hurricane to occur in July since 2005. Four hurricanes have now made landfall in the U.S. this year, including last week's devastating Hurricane Helene.
Weather has become more unpredictable in recent years, and weather events are affecting a much larger geographical footprint than they have historically. In our industry, preparations for these events, be they hurricanes, rain, heat, hail, etc., can be as nuanced as the events themselves.
Carriers and repair shops usually plan months, sometimes years, in advance of these events, analyzing historical storm data and predictive models to forecast potential impacts. Based on these insights, carriers may adjust underwriting guidelines and secure reinsurance, while repair facilities may collaborate with suppliers to ensure a steady supply of parts to minimize repair delays and staff up to manage the increased volume.
A Look Back - Hurricane Ian
To grasp the true impact of a hurricane, let’s dive into the impact of 2022's Hurricane Ian. CCC's monthly comprehensive estimate volumes were relatively consistent and predictable – at least until the hurricane made landfall in Florida, Georgia, and South Carolina in late September. Comprehensive estimates jumped 3X for the three states and almost 7X for Florida, alone.
With the mass influx of claims comes the immediate need to effectively triage, assign, appraise, and move vehicles. One of the most noticeable shifts is in who performs the initial appraisal. Because of the higher proportion of potential total losses and the sheer volume of inspections that need to be completed, carriers increase their reliance on staff appraisers – many of whom are part of a catastrophe team – and independent appraisers (IAs).
After Hurricane Ian, there was also a significant increase in the time it took for vehicles needing repairs to start the repair process after initial claims were assigned to a shop.
This clear spike indicates a delay or bottleneck in the repair process, which could be due to various factors such as increased demand for repairs, limited shop capacity, supply chain issues, or resource shortages. Shops in affected areas may have also been affected by the storm, contributing to even more demand among fewer shops.
Perhaps more important is the continued downstream impact catastrophic events have in the months following on turnaround times for unrelated and other future claims as the ecosystem works through the backlog of vehicles.
A spike in claims creates a spike in the need for replacement parts. Following Hurricane Ian, Florida, Georgia, and South Carolina saw huge increases in demand within numerous parts groups, including liftgates, trunk lids, rear lamps, quarter panels, rear bumpers, and doors.
In Florida, which bore the brunt of Hurricane Ian-related damages, demand for parts increased almost 20X for trunk lids and liftgates; many other parts saw demand increases above 10X.
The severity of weather-related damages can also lead to an increase in the number of vehicles being declared total losses by insurance carriers, which can create assessment backlogs for shops and replacement vehicle shortages for insurers.
CCC data shows that during Hurricane Ian’s peak impact days (Sept, 25-30, 2022), nearly 52% of vehicles were declared total losses for all three states, and 51% were declared total losses in Florida, alone.
This is a stark contrast to the days leading up to the hurricane (Sept. 20-24), where the percentage of total loss claims hovered between 16% and 18%. After the hurricane subsided (Oct. 1-5), the percentage of total loss claims decreased to more typical levels, around 20%.
Commercial and recreational vehicles (CRVs) also saw an influx of total losses following Hurricane Ian. In Florida, CRV valuation volume jumped across virtually all categories, especially for marine (boats) of various sizes, heavy equipment, all-terrain vehicles, travel trailers, and motor homes.
The specialized nature of many of these CRV categories adds to the expertise, time, and cost needed to appropriately evaluate these claims. Costs and mobility vary widely for these units.
Total loss claims often necessitate coordination with salvage, towing, and rental services. As such, post-storm salvage operations become critical, as insurers and salvage companies must efficiently process a higher volume of totaled vehicles. This not only includes determining the value and condition of these vehicles but also coordinating their removal and sale, which can be a logistical challenge during periods of widespread disaster recovery.
See also: Preparing for a Rough Hurricane Season
Top Six Recommended Adaptations for Hurricane Season
1. Staff Up
As the 2024 hurricane season deepens, auto claims management teams must ensure they are adequately prepared to handle the potential surge in claims. This can include using third-party personnel and specialty vehicle valuation teams to supplement existing staff.
2. Form CAT Teams
CAT teams are composed of adjusters who specifically respond to catastrophe claims. As staffing challenges persist, carriers may sometimes resort to redirecting non-catastrophic adjusters to focus on major storm-related claims. This is where digital claims management tools can be most effective, enabling less experienced adjusters and increasing claims teams’ capacity to ensure they meet policyholders’ needs during peak times.
3. Use Claims Management Technologies
Claims management technologies can help reduce the need for carriers to put personnel physically on the ground and streamline repeatable processes so as not to burden their already overworked adjusters. This approach can vastly improve the employee experience while also ensuring storm-related claims are settled accurately and efficiently.
4. Prepare for Downstream Impacts
As economic challenges persist for consumers, the potential for vehicle damage to go unrepaired continues to rise, especially as motor vehicle costs rise. As of April, the consumer price index for motor vehicle insurance was up 23% year-over-year and up 42% since April 2022.
In efforts to decrease insurance costs, consumers may elect to drop first-party coverages (collision and comprehensive) on older vehicles and vehicles without lienholders. Another method to decrease insurance premiums is to increase deductibles.
CCC continues to see gradual shifts in claims toward higher deductibles. $1,000 comprehensive deductibles have increased by three points in the past 24 months (ending in March 2024), while less comprehensive claims include $100, $250, and $500 deductibles.
If vehicles don't have adequate first-party coverage or have a high deductible that a policyholder is unable to meet, the likelihood of damages getting repaired surely decreases – especially superficial or aesthetic ones. As a result, the potential for unreported and unrepaired prior damage increases, which can complicate future claims and decrease the value of the vehicle.
Another growing concern is the impact of undiagnosed or unrepaired electrical and safety systems, which could be damaged during weather events, including hurricanes and severe convective storms.
See also: Climate and Catastrophe Risk Strategies
5. Assess Repair Inventory
Hurricanes and other severe storms may affect supply chains, potentially halting or delaying parts deliveries to shops, which can hurt productivity. While the unpredictable nature of weather events can make planning ahead difficult, there are two ways shops can prepare for this possibility:
- Review current parts inventory, assess stock levels, and identify critical components that are likely to be in high demand.
- Create a shortlist of essential items that may become scarce in the aftermath of a catastrophe.
- Order and stockpile parts in advance, reducing the risk of shortages and ensuring continued service to customers during and after hurricane season.
- Maintain strong relationships with suppliers to secure priority access to parts when supply chains are disrupted.
- Communicate needs and plans with suppliers early on for more timely deliveries of essential parts to maintain smooth operations.
6. Communicate Clearly and Regularly
Given the unpredictability of storms, carriers need to engage with policyholders by maintaining open communication throughout the hurricane season and providing timely updates on storm forecasts, evacuation orders, and claims procedures to help mitigate losses and get people out of harm’s way.
Repair shops, which benefit from clear customer communication throughout the year, can consider leveraging existing digital communication tools, and even social media, to provide updates on repair timelines, temporary operation hours, rental car availability, alternative transportation routes, and more.
While major hurricanes garner significantly more attention, even smaller storms can critically strain auto claims and repair industry resources. Preparing with robust strategies and technologies is crucial to weathering the storm ahead, as is adjusting strategies based on new intelligence.
Leveraging advanced AI-powered technologies that analyze historical data and produce predictive analytics can help businesses better forecast the severity and the probable impact areas of coming storms, allowing insurers and repair facilities to allocate resources more effectively and prepare for a surge in claims and repairs. Automated claims processing can also help speed initial assessment, helping to reduce bottlenecks and improve customer satisfaction.
