Canadian Underwriter

State Farm’s lightning-related claims cost more than $200 million last year

June 26, 2013   by Canadian Underwriter

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With the start of peak lightning season, State Farm calls lightning one of nature’s most underestimated dangers, reporting that it paid more than $200 million in related insurance claims across North America last year.

State Farm paid out $200 million in lightning-related claims

Citing data compiled by Environment Canada, State Farm Canada notes in a statement that the country receives an annual average of 2.4 million lightning strikes, killing 10 people, injuring 164 – more than 94% of related deaths and 74% of injuries reported since 1986 have occurred between June and August – and igniting 4,000 forest fires that result in hundreds of millions of dollars in property damage.

State Farm paid more than $200 million in lightning-related insurance claims across North America in 2012, with the average claim being about $6,400. In Canada, the 131 lightning claims received cost approximately $1.3 million.

The Insurance Information Institute (III), based in New York, reports an analysis of homeowners insurance data in the United States by III and State Farm found there were 151,000 insurer-paid lightning claims in 2012, down almost 19% from 2011. The average lightning paid-claim of about $6,400 last year, however, was up 25% from 2011, the institute notes in a statement, issued in recognition of Lightning Safety Awareness Week, which runs from June 23-29.

“Taken together, these two factors resulted in $969 million in total paid lightning claims, up 1.7% from 2011,” the III statement adds.

In the U.S., State Farm reports the top five states ranked by the number of lightning claims paid by the insurer are as follows: Georgia with 3,844 claims costing approximately $21.5 million; Louisiana with 1,989 claims costing about $9.1 million; Texas with 1,825 claims costing around $17.7 million; Alabama with 1,713 claims costing about $11.5 million and Tennessee with 1,591 claims costing approximately $12.5 million.

State Farm Canada points out that as the number of electronics in homes and businesses rises, so does the risk of damage. “Plasma and high-definition television sets, home entertainment centres, multiple computers, smartphones, gaming systems and other expensive devices continue to have a significant impact on the number of claims,” notes the insurer.

“The average cost per claim continues to rise, in part because of the huge increase in the number and value of consumer electronics in homes,” Loretta Worters, vice president of the III, says in the III statement.

A whole-house surge protector is the best starting point for reducing the risk of damage or fire, State Farm Canada recommends. Localized surge protection for power cords to important or expensive electronic equipment and any telephone and cable/satellite TV lines connecting to that equipment can enhance protection.

While indoors, State Farm Canada advises disconnecting electrical appliances, including radios and television sets, before a storm and not touching them during a storm. In addition, do not handle electrical equipment or telephones since the electrical current from the lightning strike will travel through wires and cords.

III reports that the incidence of lightning claims in the U.S. in 2012 continued its downward trend. Paid lightning claims from 2004 to 2012 dropped 46%, a decline that may be attributed to increased use of lightning protection systems. Despite the drop, the average cost per claim rose 142% over the same timeframe.

The III suggests that investment in a lightning protection system will help protect property, belongings and equipment. Lightning protection systems are designed to provide a specified path to harness and safely ground the super-charged current of the lightning bolt. The system receives the strike and routes it harmlessly into the earth, thus discharging the dangerous electrical event.

Damage caused by lightning, such as fire, is covered by standard homeowners and business insurance policies, while some home and business policies provide coverage for power surges that are the direct result of a lightning strike, the institute adds.

An Environment Canada weather summary, issued at 4:46 am Wednesday, notes that for the third time in less than a week, thunderstorms have brought locally heavy rainfall over southwestern Manitoba resulting in further flooding problems in some areas.

“The storms moved east across southern Manitoba, including Winnipeg and the Red River Valley Tuesday night, bringing locally heavy rain, strong wind gusts up to 100 km/h and frequent lightning,” the statement adds.

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