Soaring Insurance Costs in Tornado Alley
The cost of homeowners insurance is skyrocketing in states prone to large tornado outbreaks. However, according to industry experts and analysts, it’s hail – not tornadoes – that’s the biggest concern for insurers in the middle of the country. Insurance companies have been raising their rates as extreme weather disasters become more costly.
In Kentucky, where at least 19 people died after a recent tornado, premiums have increased by 35% compared to a few years ago, according to the Consumer Federation of America. Similar trends are observed throughout the region, with rate hikes of 34% in Arkansas, 32% in Minnesota, and 27% in Texas, Colorado, and Iowa.
“Even though tornadoes pose a significant threat to life, most insured damages from severe weather come from hail,” says Scott St. George, head of weather and climate research at insurance broker WTW. “Tornadoes are severe but affect relatively small areas, while hailstorms cause damage across much larger regions.”
Hailstones can break windows, tear off siding, and damage roofing materials, accounting for 50-80% of homeowner insurance claims from severe convective storms annually. Ben Keys, a real estate and finance professor at The Wharton School, notes that hail has become an increasing contributor to claims due to its frequency and severity, driving insurers to raise premiums.
This trend is part of a broader national pattern, with average insurance premiums rising 24% in recent years. Insurers attribute the increases to more expensive disasters, partly due to climate change and increased development in vulnerable areas. While the impact of climate change on tornadoes and hailstorms is still being researched, insurers are adapting by scaling back coverage and increasing rates.
“Insurers will follow the same playbook they’ve used for other threats,” says David Marlett, managing director of the Brantley Risk & Insurance Center. “They’ll scale back coverage, particularly on roofs, and attempt to increase rates to match the risk.”
Some states offer insurance discounts for homeowners who make their properties more resilient, such as installing fortified roofs. However, these discounts are often small, and the initial investment can be prohibitively expensive for many homeowners. Jeremy Porter, head of climate implications research at First Street, notes that while fortified roofs offer protection against hail, they may not be effective against large tornadoes.
As extreme weather events continue to intensify, insurance costs are likely to remain a significant concern for homeowners in Tornado Alley and beyond.
