Beyond Your Control: Will Colorado Floods Affect Car Insurance Premiums?

It’s difficult to get a read on how the recent floods in Colorado, and subsequent property damage, will affect automobile-related claims. Using 2012’s Superstorm Sandy as a guide, Colorado customers may need to ready themselves for a mixed bag.

With accurate auto-claim numbers currently so hard to come by in Colorado, it’s worth looking at the damages incurred during Sandy to get a sense of what may happen.

Determining What It Will Cost

Eqecat’s estimates are in, and it looks like Colorado’s flood damage will total $2 billion, with about half coming in residential property and half in commercial and government property.

While this is unfortunate news for Colorado customers–even more unfortunate considering most of the damage won’t be covered, due to the absence of flood insurance–the number falls far short of preliminary estimates for Sandy.

At that time, Eqecat estimated Sandy’s overall damages to be around $20 billion but later revised to $50 billion.

Auto insurers adopted different policies in the aftermath of Sandy, with some vowing not to raise insurance rates as a result of the extensive damage and others not so sure.

According to insurance-industry data supplier Property Claim Services, Sandy was estimated to cost auto insurers around $250 million, a relatively small portion of the overall damages that Eqecat identified. PCS also estimated that 60,000 claims would be filed with an average payout of $4,167 per claim.

(PCS has not conducted any similar study in the aftermath of the Colorado floods.)

How Natural Disasters Can Affect Your Policy

Companies like Plymouth Rock, who refused to hold Sandy against customers, admitted that under normal circumstances, claims made under comprehensive policies would be factored into their rating algorithm. This decision can typically affect the price of an insurance premium by a factor of 10 to 20 percent, the company admitted.

Again, that’s comprehensive coverage. If a driver carries liability or liability and collision only, then any damage incurred by the flood would not be covered, and the driver would be responsible for the full amount of the damage.

Using the standard Plymouth Rock model of a 10 to 20 percent increase, the comprehensive/collision/liability policy would go from $844.03 (2010 number) to between $928.43 and $1,012.83 upon renewal of the policy. Of course, that doesn’t factor in additional insurance products that are “stacked” with auto, nor does it consider any available discounts resulting therefrom, but it does give you an idea of how something beyond your control can affect what you’re paying.

In Summary

Ultimately, what ends up happening to auto insurance rates in the aftermath of the Colorado floods will depend on a variety of factors:

• Amount of the individual claim
• Customer’s existing coverage (liability, collision, comprehensive)
• Total claims/payout the insurance company will have to satisfy as a result of the floods
• Generosity of the insurance company

Do you think it’s fair for a customer’s insurance premium to go up when events, such as the Colorado floods, occur?

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