As the East Coast deals with the aftermath of Sandy, so does the auto insurance industry as it contends with claims at extraordinary volumes.  Auto insurance claims have reached some of its steepest levels since Hurricanes Irene and Katrina, as the number of damaged vehicles is hovering around an estimated 230,000.

While a number of states were hit hard, it’s New York that experienced the most claims.  130,000 claims were processed in New York with New Jersey processing the second highest total with 60,000.¹

The remaining 40,000 claims were reported from Connecticut, Delaware, District of Columbia, Maine, Maryland, Massachusetts, New Hampshire, North Carolina, Ohio, Pennsylvania, Rhode Island, Vermont, Virginia and West Virginia.

Sandy and Katrina

In order to understand the full scope of Sandy’s damage, it helps to provide some context.  In 2005 the U.S. experienced its costliest catastrophe when Hurricane Katrina ravaged the Golf Coast.  It’s estimated that over 325,000 vehicles were damaged during Katrina, almost 100,000 more than during Sandy.

Interestingly, current year models damaged throughout Sandy outnumbered the same vehicles damaged during Katrina by almost 75%.  There were also increases in the number of Asian (40%) and European (110%) vehicles that had claims.  On the flip side, domestic vehicles experienced 30% more claims from Katrina than from Sandy.

Due to Sandy’s impact, used vehicle prices are expected to rise as the auto market deals with loss of supply and increase in replacement demand.

Other Concerns

The NMVTIS normally reports a high compliance rate with totaled vehicles.  However, it’s possible to expect that rate to drop due to the sheer volume of total losses as a result of the catastrophe.²

Another issue brought to light deals with unscrupulous towing companies removing cars off the street without permission, and submitting high towing and storage bills to insurance companies.  It’s feasible to conclude that some may be retaining the vehicles in an attempt to increase storage fees, or in some cases claim title to the vehicle after it’s kept for an extended period of time.³

What it Means

So what does Sandy’s outcome really mean for auto insurance carriers?  Expect to see a greater impact compared to Katrina due to a much higher number of new and luxury models sustaining total losses.

And while the overall number of vehicles damaged by Sandy is anticipated to be 100,000 fewer than those from Katrina, the end result may indicate higher costs for insurers.

Sources

¹Numbers according to the National Insurance Crime Bureau (NICB), which announced the revised estimates as provided by the Insurance Services Office Inc. (ISO), a subsidiary of Verisk Analytics.  

²Claims Journal (http://www.claimsjournal.com/news/national/2012/11/26/217959.htm)

³ Claims Journal (http://www.claimsjournal.com/news/national/2012/12/10/218855.htm)