How analytics can tackle evolving hail risk for insurers

When you think of damaging weather in events in Southern California, your mind probably reaches for droughts, high winds, or lightning strikes that spark wildfires. Hail typically isn’t top of mind.

And yet in mid-February, portions of Southern California were battered by storms that dropped up to 4-inches of hail, just days after record-setting high temperatures that spawned several brush fires. Temperatures in the greater Los Angeles area plunged by nearly 30 degrees and there were even reports of an unorthodox meteorological event: ‘thundersnow.’

While a hailstorm in this region of Southern California isn’t unheard of, it’s still a fairly rare occurrence. Our hail data for 2021 and 2020 revealed no significant percentage of California counties being affected by hail. According to the National Oceanic and Atmospheric Administration, there haven’t been any reports of large hailstorms in the area of the recent storm since 2018.

While unusual, the hailstorm in Los Angeles is consistent with an emerging trend we’ve seen with hail: It’s spreading out into new regions of the country that aren’t traditionally exposed to hail risk.

For insurers, sophisticated analytics can help manage what is becoming a more dynamic peril.

The geography of hail risk is changing
The hail peril is typically associated with the Midwestern ‘hail alley’ states of Colorado, Nebraska and Wyoming. However, in recent years, address-level data shows hail’s reach has widened far beyond these states. While hailstorms still batter the Midwest, they’ve also become all-too-common in more populous eastern states like Maryland, Pennsylvania and New York, with occasional events in California. 

The upshot of this trend is that even if there are fewer hailstorms in a given year, more properties could be at risk of hail damage. We saw this clearly last year when, despite a year-over-year decrease in the number of hailstorms, nearly 10% more U.S. properties were affected by hail because states like Maryland and Pennsylvania experienced elevated hail activity.

As hail’s reach spreads, a warming climate may also be contributing to more destructive storms. The number of days where large hail (over 2-inches in diameter) falls has been increasing, particularly in the Midwest and Northeastern United States. Severe thunderstorm paths are also getting longer, creating larger swaths of damage.

Roof watch
For many insurers, larger hailstones and the movement of hail beyond hail alley represents a serious concern. Hail is a costly peril. In 2021 alone, it accounted for $16.5 billion in claims—up from $14.2 billion in 2020, according to Verisk data. 

In regions that are unaccustomed to airborne ice, roof damage could be acute, particularly since they may not be outfitted with the kind of impact-resistant roofing shingles that are more prevalent in states facing regular hailstorms. Even if a hailstorm doesn’t cause acute damage that’s obvious to the property owner, these storms may still degrade the integrity of the roof, making it more vulnerable to future storm damage. 

As the geography of hail risk evolves, many insurers may find themselves confronting the specter of hail damage and rising hail claims in regions of the country where they may not be anticipating it. Understanding roof risk across roofing material, condition, and replacement costs is a key component of managing this peril.

A robust suite of data may also be needed to help fully analyze the potential for hailstorms or hail damage. That data could come from advancements in the science of hail identification, dual-polarization radar data processing, as well as full-resolution weather radar data that can produce granular information, such as gradients along the edge of hailstorms.

A head start on hail risk
As we see the incidents of damaging hail spread into regions, like Southern California, that are less accustomed to hailstorms, understanding other emerging regions for hail risk can help insurers make more informed underwriting decisions and manage risk more effectively.

Given hail’s unpredictability and variability, there’s a very real possibility that hail damage may already be in your portfolio. You just may not have found it yet. A good place to start your search is with the past year’s hail activity. With county-level analytics on properties affected, you can zero in on potential trouble spots.