Payouts have helped drivers in across the country recover from natural disasters, raising auto sales throughout the country in the process.The recent hurricanes that ravaged Texas and Florida have boosted new auto sales as drivers race to replace their damaged vehicles. As insurers continue to settle claims, many buyers are using their payouts to purchase those new cars.
A spokesperson for State Farm told Bloomberg that it had reimbursed policyholders in the Houston area with more than $345 million as of late September after receiving nearly 37,000 auto claims following Hurricane Harvey. It’s processed another $35 million in payouts to auto clients since Hurricane Irma struck Florida.
Statistics from auto sales tracker Autodata Corp. strongly suggests that these payouts are related to the uptick in new vehicle sales. According to Reuters, the firm estimates that the seasonally adjusted annualized rate of U.S. car and light truck sales in September climbed to nearly 18.6 million units, a significant increase from the 17.7 million posted in the same month last year.
Most analysts and auto manufacturers attribute the rise to drivers needing immediate replacement vehicles after their cars were destroyed by the storms. During a conference call, Ford’s U.S. Sales Chief Mark LaNeve said demand was “particularly strong” in Houston and beginning to pick up in Florida.
Houston Depends on Cars
The impact of Hurricane Harvey was particularly acute in car-dependent Houston. Cox Automotive Chief Economist Jonathan Smoke places the overall value of the 300,000 to 500,000 cars in the Houston area lost in the wake of the hurricane at $2.7 billion to $4.9 billion. By comparison, cars destroyed after Hurricanes Sandy and Katrina numbered 250,000 and 200,000, respectively.
The higher number of vehicles destroyed or damaged in the Houston area reflects the region’s heavy reliance on cars. Nearly 95% of people in the city and its surrounding counties own a car, well above the U.S. rate of 91% and second only to the 94.9% rate in Dallas. As a result, Hurricane Harvey may have destroyed more vehicles than any other storm in U. S. history.
Smoke points out that auto sales in the New York area increased by nearly 50% in the month after Hurricane Sandy. Since only 71% of the region’s households owned a car before the hurricane, it’s likely that Houston will soon see an even greater spike in auto sales.
And They’ll Need Insurance
In the immediate days and weeks following Hurricane Harvey, auto insurers operating in the Houston market temporarily halted sales of policies to new customers. Long-standing policyholders, however, were able to get a coverage for a replacement vehicle.
Although Texas mandates that car owners buy liability insurance, roughly 15% of the state’s drivers are uninsured, according to Mark Hanna, spokesman for the Insurance Council of Texas. Unfortunately, Texas drivers require a comprehensive policy to ensure protection from flooding, since liability insurance doesn’t cover damages caused by it. Hanna notes that only three-quarters of Texas’ insured drivers carry that coverage.
In the aftermath of a natural disaster, insurance agents must speed up the claim process to help their auto insurance clients back on the road with a new car — and a comprehensive policy that protects them in the event of another storm. Even if you don’t work in an area frequently hit by floods and hurricanes, now is a good time to revisit your clients’ auto insurance policy to ensure that they have sufficient coverage in the event of a natural disaster. For your auto insurance clients, getting a new car is the first step in returning to work and restoring their lives.