Canadian Underwriter

How to reduce hail damage costs

March 28, 2022   by Alyssa DiSabatino

Rain and hail flows down from a black roof.

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One way homeowners and insurers can reduce annual hail damage is to use impact-resistant asphalt shingle roofs instead of standard shingles, finds a new report.    

A new Institute for Catastrophic Loss Reduction benefit-cost analysis report shows annual hail damage in Canada has amounted to $400 million each year, on average, since 2013. To help reduce hail claims costs in the future, impact-resistant asphalt roof shingles — made of material that makes them resistant to hail damage — will save more than they cost in many places, including in hailstorm alleys.  

ICLR finds a 170 m² impact-resistant roof in Calgary adds $3,400 to the cost of a roof. But factoring in claims costs for hail damage, the benefits amount to $10,000  a 3:1 benefit-cost ratio.  

Elsewhere, ICLR finds the benefit-cost ratio reaches 8:1. 

“The shingles are cost-effective wherever it hails almost once a year or more,” the report reads. “In Calgary, impact-resistant shingles reduce the chance of damage by 15 times. If the roof is damaged, average repair cost drops by half.” 

Figure 3. Average annual number of days with hail, across Canada. Figure shows B.C. and AB experience the most hail, followed by SK, MB and ON.

Image by ICLR

OSFI’s 2021 Q4 results show a stark loss ratio in hail insurance at 213.8% (Federally-regulated P&C insurers had $150 million in incurred hail damage claims last year, and $47.8 million net hail premiums earned.)  

This has only worsened since 2020 – OSFI’s Q4 results for hail in the previous year amounted to a 386.5% claims ratio, and in 2019, a 73.3% claims ratio, although OSFI’s figures are relevant to crop hail damage. 

In the face of rising loss ratios for hail insurance, ICLR says impact-resistant shingles will become more valuable and their need will increase, because climate change will worsen future hailstorms. 

Most Canadian roofs are covered with asphalt shingles (85% of single-family homes) and replacing an asphalt shingle roof on a 200 m² roof costs about CAD$5,000. 

While impact-resistant shingles cost between 2% and 9% more than non-impact-resistant shingles, the shingles pay for themselves in five years, on average (assuming the roof gets repaired every time it’s damaged), ICLR reports.  

But if damage does occur, impact-resistant asphalt shingles reduce the repair cost of damage by half, finds ICLR — from $2,400 on average to $1,200 for the average-sized roof. 

Since 2013, Canadian insurers have paid 26,000 hail claims totaling an average of $370 million annually in insured loss for personal property damage in hailstorms. Hailstorms “may be inevitable, but the economic catastrophe is not,” the report reads. 

ICLR says impact-resistant asphalt shingles make financial sense for insurers and homeowners, and roofs should be built beyond the code minimum by including impact-resistant shingles. “For an average-sized house in Calgary, benefit-cost analysis suggests that it can make financial sense for an insurer to pay to replace non-rated shingles with class-4 impact-resistant shingles,” the report concludes.