In addition to tornadoes and damaging winds, Oklahoma has experienced record heat and cold, ridiculously large hail, drought, wildfires, earthquakes, ice storms and deep snow that has not only wreaked havoc on property, but also driven up home insurance costs.

The state Insurance Department counted more than $870 million in catastrophic losses in 2011, and that amount doesn’t even include wildfires.

The bad news for consumers is that more rate hikes are likely to come, according to Oklahoma Insurance Commissioner John Doak.

When insurance companies have too many losses, it’s categorized as catastrophic, or in the industry what is known as “cat loss.” Increases often aren’t felt by policyholders immediately, but when the losses work through the intricate system of domestic and international insurance companies and re-insurers, they begin to trickle down.

“It may take 12-18 months for all these things to work through the system,” Doak says. “Then the re-insurance market comes back and says, ‘Wow, we paid a lot of losses in Oklahoma on specific types of loss,’ and then they may raise the pricing.”

Oklahoma is a file-and-use state, where insurance companies can file their rates with the state Insurance that participate are required to provide and offer a policy to one in every five accounts referred to them. And business is booming.

“Our business is growing as companies have started to non-renew policies,” Ramsey says.

Department and then begin charging consumers those rates. In the wake of the sometimes violent and unpredictable weather, rates for some have gone up, or companies have simply dropped policies. With many options, consumers are encouraged to shop around. As a last stop, there is the Oklahoma Market Assistance Program.

Dan Ramsey, president and CEO of the Independent Insurance Agents of Oklahoma, works with the program to help those who are struggling to find or afford insurance. The OK MAP program is for single-family, owner-occupied dwellings. It is not an insurance company, but helps consumers find affordable insurance options.

DROP ZONE

Cynthia Reid was one of the fortunate ones. Her northwest Oklahoma City home was battered by several storms last year. The surprise came when her insurance company notified her that it would no longer offer home coverage in Oklahoma.

Despite that, the claim was paid in a timely manner. The home, a little more than 6 years old, needed a new roof, fence, gutters and exterior painting.

“We just found out we would need to find a new insurer,” Reid says. “It was a bit of a shock.”

Nevertheless, the process to find another company proved to be easier than she initially thought. And with the house being a catastrophic loss, she was not docked by a new insurer. Her rate now is similar to the rate she was previously paying.

“We didn’t have any trouble getting coverage,” she says. “It was just an unexpected inconvenience to switch everything.”

Doak says losses fall into two categories: frequency of claims filed and the severity of claims filed. Claims for several smaller things on a home can amount to a cancelation or increase in fees. He recommends saving claims for large events and losses.

“People either have a lot of little losses, or they’ve had a severe loss,” he says. “Insurance companies can’t hold catastrophe losses against you on your loss-ratio record.”

But the fact that Oklahoma has unpredictable weather comes as no surprise to the global re-insurance market. Doak says the entities that provide re-insurance must determine their level of risk.

“Folks who do business here know that we have tornadoes and these other events,” he says. “They have to build into their actuarial analysis the ability to withstand those losses and stay in the market.”

Companies staying in the market is what Doak wants to see. He says companies prosper with the more policies they write. In Oklahoma, that amounts to about $15 billion per year for everything from home and business insurance to automobile and life insurance. But to stay here, companies often must raise rates to stay afloat. At the same time, they must pay up when claims are filed.

“Our two jobs are consumer protection and financial solvency,” Doak says. “We want to make sure these companies are paying claims in a timely manner.”

NOT YET RATED
No one knows how much rates may increase. The rates from re-insurers will work their way through the system. If Oklahoma experiences more destructive weather, those rates could continue to climb in coming years. Doak says for consumers, it is important to read the fine print in their policies.

“Consumers need to be very cautious because the contract language between companies can be very different,” he says. “They need to ask, ‘What is (my) appetite for risk?’” As long as companies are forthcoming and abiding by the law, Doak has no gripe with them. But Ramsey warns that in a free market, consumers must be savvy and ask a lot of questions.

“We are seeing more companies either changing terms, increasing pricing, or they’re letting people know they can’t renew them because of the number of claims,” he says. “It is a free market out there, and people need to shop around.”

Photos by Shannon Cornman