The season’s first hail storm on Friday, May 18, didn’t do a lot of damage, but the next one could be much worse.
Just two years ago, on July 28, 2016, a severe storm lobbed tennis ball-sized hailstones onto parts of Colorado Springs, triggering $352.8 million in insurance claims. The storm caused half a million dollars’ worth of damage at the Colorado Springs Airport and marred 40 Colorado Springs police cars.
That storm paled in comparison to a tempest over the Denver metro area on May 8, 2017, which caused $2.3 billion in damage, making it the most expensive event in the state’s history. According to insurance professionals, cars damaged by the egg-sized hail that day were still being repaired this spring.
“Colorado’s Front Range is smack dab in the middle of Hail Alley,” which receives the highest frequency of large hail in North America, said Carole Walker, executive director of the Rocky Mountain Insurance Information Association. “Damaging storms are not unusual, and in recent years, the volatility of these storms has increased. We have not only seen an increase in the number of insurance claims, but in the value of claims.”
The storm on May 18 may not have been that severe, but it was a wake-up call, Walker said.
“The threat of severe weather is one that you should be financially prepared for and anticipate,” Walker said. “Those of us who are stakeholders in the catastrophe business know it’s a matter of not if, but when.”
Storms grow some businesses
When hail damages buildings, property owners turn to businesses like Peak View Roofing Co. of Colorado Springs.
Light to moderate hail scuffs up shingles, Peak View President Jeff Pierce said. In most cases, bigger storms mean roofs need to be replaced, because hail damage is difficult to repair.
“If we get a big storm with 2-inch hail, everything’s going to get damaged,” said Pierce, who’s been in business 18 years. Pierce said his company averages 800 to 1,000 jobs a year, counting new roofs, reroofing and hail damage.
In the early years of his business, “we had some big hail storms that helped the company grow,” he said. “When we get a large hail storm, we have 30 to 40 calls a day coming in. We do eight to 10 roofs a day in hail storms.”
In the past, the company’s biggest problem was managing large volumes of work in a timely manner. The firm had started working with subcontractors to assist customers with hail damage to other areas of structures, such as windows and siding.
“Now during hail storms we act as a general contractor, and we’re going more with employees than subcontractors,” Pierce said. In addition, the company developed a customer management database to track leads from initial contact through production and maintain a higher level of communication with customers. The company also works with insurance companies on behalf of customers.
Like other long-time, local roofing businesses, Peak View Roofing faces competition from companies that come into the area and offer reroofing services after hail storms.
Some of them are storm chasers that demand a down payment and make off with the money without doing the work, but “there are plenty of good companies that go around and just do hail,” Pierce said.
The problem is that “they pull money out of our economy,” he said. “A lot of roofers will pop into town after a storm and get licensed. I wouldn’t sign up with anybody that comes directly to your door.”
Brian Moore, owner of Autohail Zone Paintless Dent Repair, said he hasn’t yet seen any business from the May 18 storm.
“We are a catastrophe business,” Moore said. “We specialize in hail; we’re geared up to do that kind of work. Pretty much, we’re a seasonal business.”
Moore said a couple of small hail storms each summer are common. In the 28 years he’s been in business, he hasn’t seen an increase in the number of storms, but “in more recent years, versus in the 1990s, the hail tends to be a little more severe and a little larger. It’s more like it is on the plains, where the hail gets quite large.”
The business used to be open year-round, repairing door dings and small dents, but now concentrates on hail season.
“The industry has changed a lot, and we’ve changed our philosophy in how we operate,” Moore said. “We’ve had to adapt to big corporations getting into big agreements with insurance companies. We have to market ourselves differently. We offer concierge service — we pick up and deliver cars, and we’re aggressive on social media.”
Hail damage to vehicles can be shockingly expensive because of the replacement costs of high-tech parts, said Roger Morris, chief communications officer at the National Insurance Crime Bureau.
“On a 2016 Camry, the top 15 parts cost $12,000 — almost the full value of the car,” Morris said. “It doesn’t take much to add up quickly or to be declared a total loss.”
Insurers strive to keep up
The July 28, 2016, hail storm spawned more than 84,500 auto and homeowner insurance claims, and the number of claims filed after the May 8, 2017 storm in Denver topped 260,000.
While that pumped a huge amount of activity into the local economy, “it’s problematic for the insurance industry along the Front Range,” said John Schaefer, president of the independent Schaefer Agency, which represents more than 20 insurers. “These companies can’t keep up with the hemorrhaging.”
Considering the rising costs of building materials and replacement costs of contents, carriers are exposed for $500,000 to $600,000 on a $300,000 home, he said.
Insurers’ risks are compounded by natural disasters like hail storms, wildfire and flooding that have plagued the Pikes Peak region for the past several years.
All of those elements are forcing insurers to raise rates and deductibles for both residential and commercial customers.
“I think that trend will continue,” Schaefer said.
Standard residential and commercial policies do not cover flooding — another consequence of severe storms.
The federal government is the only agency that offers flood insurance on properties within designated flood plains, but “anyone can have a need for a flood policy,” Schaefer said. “Private insurance companies are starting to offer flood insurance in some limited situations.”
Those private policies may have broader and deeper coverage and are less expensive than the federal program, but they are available only to people who are not in a designated high-risk area.
Insurance coverage in fire-prone areas is shrinking. After the 2012 Waldo Canyon wildfire, Lloyd’s of London and other insurers stopped writing policies in Manitou Springs, Schaefer said.
The Schaefer Agency has been in business since 1952. Schaefer bought it from his father, Jack Schaefer, in 1994.
Season’s weather outlook
This year, the Front Range is behind schedule in terms of severe weather, said Brian Bledsoe, chief meteorologist at KKTV-11.
“Usually during drought years, it’s hard to get thunderstorms cranked up,” Bledsoe said. “Recently we’ve had more rain and a little more typical pattern for this time of year, but our season is probably not going to be what it typically is in May and June. I’m a little more concerned about the monsoon season kicking into gear. But I always worry about hail here.”
Bledsoe said he expects the monsoon season to begin in late June or early July, bringing heavy rain and hail. He’s especially concerned about severe storms over the Waldo Canyon burn scar and the threat of flash flooding.
“I worry because we’re on year six after Waldo,” he said. “There’s never been a bad storm to hit that scar — 8 inches of rain in two hours,” Bledsoe said. “People have gotten complacent.”
Citing severe storms that date back to 1935, Bledsoe said he does not think the local storms have gotten worse, but that “there are more targets that cost money.”
Preparation is key
There are limited steps business owners can take to prevent damage from hail and other natural events, but they can make sure their insurance coverage is adequate and that they have disaster plans in place.
“Now is the time to get with your insurance professional and talk about your coverage,” Walker of Rocky Mountain Insurance Information Association said.
Business owners should review the amount of coverage and deductibles they have and discuss details such as a separate wind-hail deductible on the roof.
“We always recommend that people consider separate flood coverage” and whether they need coverage for geological hazards, which are not covered under standard policies, she said.
On vehicles, owners should consider whether they have optional comprehensive coverage for hail and flood damage.
Small to medium-sized businesses are most vulnerable, because they may not have the right policy in place.
“One in four small businesses doesn’t reopen after a disaster,” Walker said. “Smaller businesses especially need to be looking at a business owner’s policy that gives comprehensive coverage and covers business interruptions. If the business sustains damage but is unable to do business, it would be able to meet payroll.”
Owners also need to review their disaster plan — or put one in place.
Larger companies usually have a well-developed risk management strategy and disaster plan, but small businesses may not have thought through what they would do if their building becomes unusable.
Walker cites the case of a mile-wide tornado and hail storm that struck in northern Colorado in May 2008.
The State Farm regional office in Greeley took a direct hit from the tornado.
“Heading into severe weather season, they had had a drill the week before, and the employees knew what to do,” Walker said. “Although there was a multimillion-dollar loss on the building, they were able to offsite some of their operations and continue to do business.
“You can’t control Mother Nature, but you can control how prepared you are.”