A handle on hail: Measuring a volatile risk

April 4, 2018 / 3 min read

The frequency of damaging hail events can swing wildly from year to year, making it challenging to get insurance coverage right for exposed properties. For example, in the past five years, the number of U.S. properties affected by damaging hail events (generally hail more than an inch in diameter) ranged from about 8 million to 12 million.

A new Verisk white paper, Hail: The Hidden Risk, examines some key topics:

Hail (002)

properties damaged by hail in the past five years
why hail damage often goes undetected
what makes hail so hard to predict
factors that may affect the spread of hailstorms outside “Hail Alley”

The paper also explores ways that insurers can make more informed decisions about hail when underwriting properties.

Traditionally, U.S. hailstorms have been most common in Hail Alley, a region where Colorado, Nebraska, and Wyoming meet. Parts of that region average between seven and nine hail days a year, according to NOAA’s National Severe Storms Laboratory. However, Verisk data shows significant incidents of hail in other regions, as indicated in the map below. In fact, high volatility in hail exposure is emerging most prominently outside Hail Alley, especially in the West and Northeast.

Areas of volatility in hail activity

Areas of volatility in hail activiilty (002)

Adding to the uncertainty for insurers, Verisk research found that about 30 percent of hail claims show significant inconsistency between the date of damaging hail events at the property and the reported date of loss. About half of such hail claims were made a year or more after a hailstorm passed over the property, often because homeowners weren’t aware of damage until their roof leaked or was professionally inspected.

Addressing hail risk

Given that claims activity tends to lag actual hail events by a few months to several years, timely information on historical hail exposure can help avoid binding properties with the potential for preexisting damage and prevent underwriting another insurer’s claims.

There’s data insurers can use to manage hail risk more effectively. Verisk’s proprietary hail history data can help uncover properties that may be more susceptible to a roof loss. Insurers are using this hail data in conjunction with Verisk’s Roof Age to segment risk beyond a home’s age.

Verisk tools can also help insurers predict future hail risk and make more informed underwriting decisions. The Verisk Hail Risk Score™ gives a measure of short- to medium-term hail risk to help identify areas of emerging hail risk based on recent hail activity.

Verisk incorporates insights from industrywide claims data and from weather and climate observation networks and models to create analytics that can answer key business questions, such as:

How likely is a property to have preexisting damage?
Which properties are at higher risk from hail damage?
How consistent is the hail activity?
What’s the effect on (nonmodeled) loss costs?

The key to answering those questions is high-quality, reliable data and analytics. Verisk uses historical data to model and analyze past exposures to predict future risk—essential for understanding the long-term effects of hail—and provides tools to uncover existing hidden hail damage.