When flood insurance comes up in conversation, it’s usually about homes. However, Hurricane Harvey may have changed that. Harvey flooded an estimated one million cars in the Houston area. With Hurricane Irma on her way to Florida, protecting your car from flooding is top of mind for many commuters. In Texas, commuters that had comprehensive insurance are glad they did.
Flood Insurance for a Car?
Flood insurance that you buy for your home does not cover your car. However, there is insurance that does cover your car. This type of insurance is called comprehensive insurance. Comprehensive insurance can be added to your auto insurance. This type of insurance is optional, so many people don’t have it.
According to the insurance council of Texas, roughly 85% of drivers have auto insurance. Of the drivers with insurance, only 75% have comprehensive insurance. This means only 64% of drivers have comprehensive insurance. The remaining 36% of drivers with a flood damaged car in Houston are on their own to buy a new car or pay for the repairs to their car.
360,000 Drivers Without Comprehensive Insurance
Based on the estimates of one million flooded cars in the Houston area, 360,000 drivers had a flooded car and no insurance to cover the cost. Assuming an average value of $10,000, this equates to $3.6 billion in losses for motorists without comprehensive insurance to cover the damage.
Unfortunately, many of the people without insurance are also likely to be those least able to pay to buy a replacement vehicle. Clearly, the damage form Harvey is extensive and far reaching.
How Will Vehicle Owners With Comprehensive Insurance Fare?
Without doubt, vehicle owners that had comprehensive insurance will fare better than those without comprehensive insurance. Nevertheless, that doesn’t mean they’re in for an easy claims process. To estimate the insured losses we used an average value of $15,000 per vehicle. We used a larger number simply because cars that are worth more are more likely to be insured.
Again using the reported one million damaged vehicles, this translates into 640,000 vehicles with comprehensive insurance that were damaged. Multiplying this amount times an average value of $15,000 equates to losses of $9.6 billion. While these are losses the industry is certainly capable of withstanding, it’s a large enough number that some insurers will be working to minimize their losses. Particularly in light of a large number of insured homes that were damaged, and another catastrophic hurricane (Irma) about to make landfall in Florida. Irma will result in even more losses. All these factors have an effect on the service consumers can expect. Unfortunately, our forecast is that we expect some insurers to batten down the hatches on settlements.
Which Insurers Will Give Customers the Hardest Time?
At ValChoice, we closely monitor the auto and home insurance industries. Our analysis convincingly shows that publicly traded auto insurance companies provide less value, less protection and a more difficult claims experience than mutual companies.
Auto insurance in Texas is provided by publicly trade insurance companies for 57% of the people buying insurance. The mutual portion of the industry serves most of the remaining 33% of the market. This is a significantly higher percentage of the market being served by publicly traded companies than in most states. Therefore, more consumers should expect that a difficult claims process could be in store for them.
Consumers should watch for companies that aim to settle claims quickly for below the market value of the vehicle. Early settlements with below market value payouts and no recourse for consumers could become far too common.
Consumers Deserve to Know Which Insurers are the Best
At ValChoice we believe that when consumers are mandated by law to buy a product or service, they deserve to know the quality of that service they are buying. This much needed transparency has never been available for insurance. Therefore, we set out on a mission to provide the needed information to consumers.
Learn what to expect from your insurance company with our free report. Upgrade to the Premium version to get their score on claims handling. The claims handling score is a comparison of how the insurer performs compared to all other insurance companies. Click the button below to get a report card on your insurance company.