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Insurers still dealing with deluge of claims: Good Friday storms among costliest in state history

August 7, 2006

Property and casualty insurers are taking a financial beating over the spring hailstorm that pounded homes and vehicles in central Indiana.

Damage from the Good Friday deluge resulted in a flood of Hoosier insurance claims: 177,000 so far totaling $560 million, making it one of the costliest weather catastrophes in state history, according to the New Jerseybased Insurance Services Office.

Overall, Indiana topped the nation in

the total amount of insured losses-$658.5 million-during the second quarter, according to the ISO.

"That is a very big deal," said Charles Hamilton, an insurance analyst at FTN Midwest Research in Nashville, Tenn. "It has been one of the worst quarters for catastrophic losses in the Midwest."

Indeed, many insurance carriers experienced record losses during the second quarter. Among them was Columbus, Ohio-based State Auto Financial Corp., which purchased the local Meridian Insurance Group Inc. in 2000.

The publicly traded company's secondquarter catastrophe losses of $59.8 million, including $24 million in Indianapolis, beat its old record of $57.6 million during the third quarter of 2004, when four hurricanes drove up claims, according to State Auto's July 27 earnings report. The insurer operates in 27 states.

Its losses related to the storms that swept through the Midwest in early April have months to accumulate the number of claims resulting from one storm, he said.

The insurance carrier recruited independent adjusters from across the country and brought in employees from other locations within the state to keep pace with demand. The company hired temporary help and processed a slew of overtime as well.

The claims department used flip charts to keep a running tab of what procedures they believed to be successes or failures. Staff members have not had time yet to review the recommendations, Huey said.

Following the storm, many insurers set up drive-in claim centers enabling appraisers to inspect large numbers of damaged vehicles and issue a check right on the spot. Indiana Farm Bureau processed 120 cars a day for eight weeks, for instance.

Roof replacements have been brisk, too. Steve Stidham, owner of the local Complete Restoration Service, said his company is unable to keep pace with the amount of repairs and mostly likely will be fixing roofs into next year.

The Dunaway Insurance Agency in New Palestine, which offers products from Indiana Farmers, State Auto and Indiana Insurance among others, doled out more than $5 million in claims. The agency normally might pay $1 million during the same period, President Doug Todd said.

"We've turned away a lot of new business opportunities just to serve our clients," he said. "I know that sounds bad, but you take care of what you have."

Despite the losses, industry experts doubt they are enough to warrant rate increases for customers.

"For Midwest carriers, we haven't been plagued with a lot of losses, so it shouldn't have a whole lot of effect on short-term pricing," Huey said. "Most carriers were probably making pretty good profits."

Moreover, the unusual weather cannot be compared to what occurs in Florida, where hurricanes can cause millions of dollars in annual damages, said Marty Wood, spokesman for the Insurance Institute of Indiana.

Insurance carriers are referring to the burst of storms as a once-in-20-year occurrence.

Nationally, second-quarter catastrophe claims totaled $3.7 billion, according to the ISO. The amount was good enough to only rank fourth-highest for that particular quarter during the past 10 years. The office defines a catastrophe as an event causing at least $25 million in property losses.
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