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Lightning strikes more costly for insurers.

Homeowners insurers are expected to pay nearly $1 billion this year for lightning-related claims, even as the number of incidents falls, according to a report released by the Insurance Information Institute.

The average cost per claim rose 30% between 2004 and 2006 even as the actual number of lightning-related claims fell by nearly 8%.

Loretta Worters, an institute spokeswoman, cited in the report the growing expansion and popularity of consumer electronics, including wide-screen televisions, personal computers, gaming systems and other devices for the rising cost of insured lightning loss claims.

Damage caused by lightning, such as fire, is covered by standard homeowners and business insurance policies, according to III. Some home and business insurance policies provide coverage for power surges, which arc a direct result of lightning strikes. Coverage also exists for lightning damage under the comprehensive portion of automobile insurance policies, the industry group said.

According to Hartford Financial Services Group Inc., the number of lightning-related claims declined 48% from January 2001 through July 2006. Meanwhile, the cost of repairing or replacing property increased 77%.

Lightning also wreaks havoc in parts of the United States by sparking wildfires that can threaten homes and property. According to statistics from the National Lightning Safety Institute in Louisville, Colo., ongoing research suggests realistic overall lightning costs and losses may reach between $4 billion and $5 billion per year.

In 2006, the top writers of homeowners multiperil in the United States, according to A.M. Best Co. state/line product information based on direct premiums written, were: State Farm Group, with a 21.7% market share: Allstate Insurance Group, with 11.9%; Farmers Insurance Group, with 6.9%; Nationwide Group, with 4.7%; and Travelers Insurance Cos., with 4.3%.

In 2006, the top writers of private-passenger auto in the United States, according to A.M. Best Co. state/line product information based on direct premiums written, were: State Farm Group, with a 17.6% market share; Allstate Insurance Group, with 11.3%; Progressive Insurance Group, with 7.5%: Berkshire Hathaway Insurance Group, with 6.9%; and Farmers Insurance Group, with 5%.

Preventing Lightning Losses

* Install a lightning protection system. A lightning protection system, or lightning rod, supplies structural protection by directing the destructive power of the lightning strike safely into the ground, leaving the structure and its contents undamaged. The system can be disguised to look like a weather vane; wires carry the current down to grounding rods at the bottom of the house. According to the Institute for Business & Home Safety, the lightning protection system needs to be securely anchored to the roof; otherwise it may whip around in a storm and damage the building. Have the system installed by a licensed electrician.

* Use surge protectors. Today's sensitive electronic equipment is particularly vulnerable to lightning. To assure the highest level of protection, surge arrestors should be installed on electrical service panels. Installations typically include surge arrestors for the main electric panel, as well as incoming phone, cable, satellite and data lines.

* Unplug expensive electronic equipment. As an added precaution, unplug expensive electronic equipment such as TVs and computers if you know a storm is approaching.

Source: Insurance Information Institute
Getting Struck
Homeowners insurance claims stemming from lightning are dropping, but
costs related to them are rising.

 2004 2005 2006 2004-2006

Number of paid claims $278,000 $265,700 $256,000 -7.9%
Insured losses ($ $735.5 $819.6 $882.2 20.0
Average cost per claim $2,646 $3,084 $3,446 30.3

All figures based on Insurance Information Institute estimates.

Source: Insurance Information institute
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Article Details
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Title Annotation:Property/Casualty: Loss/Risk Management Notes
Author:Green, Meg
Publication:Best's Review
Date:Aug 1, 2007
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