According to an article from PropertyCasualty360 from April 2017, environmental liability claims have increased significantly in the past five years, specifically in the construction and mining sectors of Latin America. But if Hurricane Harvey and Hurricane Irma were any indication, it’s clear that the effects of climate change are becoming more severe and wide spread each year.
How will climate change affect small and medium business owners? Depending on the industry, the affects could be widespread. Among one of the top concerns should be for those utilizing commercial automotive insurance, since the industry is likely to be severely affected.
In this article, we’ll discuss the following:
- How climate change is affecting the commercial automotive industry
- How climate change might affect small business automotive insurance claims and coverage
- How small businesses can mitigate the costs of climate change-related insurance claims
Climate Change & the Commercial Auto Insurance Industry
A recent article from Insurance Journal suggests that Hurricane Harvey was a significant event in the commercial auto insurance industry for the affected areas. Comparing the effects to those of Hurricane Sandy in 2012, the journal states, “commercial insurance claims are expected to comprise an outsized portion of overall covered losses from the storm, as flood—rather than wind—has been a driver of damage.”
According to the article, the only redeeming factor for the local commercial industry throughout Hurricane Harvey recovery has been the size and scope of the commercial automotive insurance underwriting companies in Texas. In a later article from the same publication
, Kenneth Tolson of Crawford & Co. stated that, “the one-two punch of Harvey and Irma is no question challenging to the industry.”
While many called Hurricane Harvey a “500-year storm,” meaning that nothing like it has been seen for 500 years, hurricanes of this magnitude are becoming more frequent. The cause of rising global temperature may still be up for debate among the scientific community, but data shows that the destruction of tropical cyclones globally is likely to increase as a result of anthropogenic (human caused) climate change.
How Climate Change Could Affect Commercial Auto Claims
In terms of the commercial automotive industry, increased destruction from tropical cyclones (or hurricanes) seem likely to cause a significant increase in the quantity and cost of hurricane-related insurance claims. It only takes a quick look at the news to see the number of stranded vehicles on the roads, in flooded car dealership lots, and in commercial parking lots, to imagine the scope of damage from a single storm.
After Hurricane Katrina in 2005, and Hurricane Sandy in 2012, property owners in the affected areas didn’t see payouts for months. While some homeowners may be able to find temporary housing while waiting for an insurance claim, many business owners couldn’t run their business without their commercial vehicles.
Commercial automotive insurance is an especially difficult sector of the insurance industry, because, as one article states, “few adjustors can immediately authorize payments, especially if policyholders are insured through state agencies or the National Flood Insurance Program.”
How to Mitigate the Costs of Climate Change-Related Claims
There’s no way to “stop” climate change at this point, and there’s no way to completely protect commercial vehicles from the damaging effects of hurricanes. If a small business doesn’t have the ability or means to move to a non-hurricane-affected area, the only option is to increase insurance coverage to make sure the business can survive another hurricane.
That’s where flood and hurricane insurance come into play. Flood Insurance and Hurricane Insurance are add-on features that can be added to commercial insurance coverage. These two policies are different, in that one covers flooding damage generally, and the other covers hurricane-related flooding and damage.
To determine which is best for a specific business, it’s important to read through the policies carefully. Understanding what is and what is not covered is important, and sometimes speaking to an expert is the best way to go. Commercial insurance agents have the experience and knowledge to guide business owners through the process of choosing the best policy for their risk and exposure, and finding the most affordable options available.
Read On to Learn More
Not sure if your small business needs commercial auto insurance? Last week we covered that topic in “Top 3 Industries in Need of Commercial Auto Coverage.”